5 of the latest trends in payroll management HR should know
Your workers want to be paid in the right amount and without delay. Learn why payroll management is changing, which trends are most important and how you should adapt.
Payroll is a critical function for companies of all sizes.
Managing taxes, 401(k)s and healthcare deductions is no trivial matter, especially when compounded with multistate or multinational payroll payout responsibilities. Even if the payroll function is in finance, HR must understand the latest trends in payroll management from both the worker perspective and the technology perspective. Both affect employee experience, as well as companies' ability to run smoothly and efficiently, as starkly illustrated by the collapse of MyPayrollHR.
Here are five of the latest trends in payroll management HR leaders and their teams should understand.
1. Stronger compliance and security
Managing HR data is rife with potential disasters, and compliance and security are only becoming more difficult.
You need a payroll provider you can trust. For example, it must have the expertise to ensure accuracy in the changing world of taxation regulations. It must also have a vault-tight security system to keep hackers from rerouting payouts to their own pockets.
This means choosing the right payroll provider is a must.
2. Increased payroll complexity
A list of the latest trends in payroll management would not be complete without discussing the so-called gig economy. How and when employees are paid is shifting as the composition of the workforce changes to one with more short-term and project-based workers. This setup requires more flexibility than many traditional payroll systems can provide, which, in turn, means more complexity on the back end. Payroll managers must promptly and accurately address payment and taxation rules for contractors.
What actually constitutes an independent contractor versus an employee differs by location, according to legislation, and employers must accommodate whatever that decision is. This is a very complex legal that companies and their HR teams -- among other departments -- should take seriously and must follow closely.
Misclassifying contractors cost Microsoft $97 million to settle a class-action lawsuit, for example. And a recent California law has disrupted companies such as Uber and Lyft with reclassifications of worker types.
Ten criteria for choosing a payroll system
- Mobile- in product development;
- Demonstrated ability to support the locales in which you will do business;
- Native support for alternative work arrangements, such as gig workers and contractors;
- Easy-to-use employee and managerial self-service;
- Support for unbanked employees;
- Pay cards or virtual cards;
- Off-cycle payouts for managers to give immediate spot bonuses or employees who seek daily pay for work accomplished;
- Chatbot self-help for users;
- Preexisting integration or integration tools; and
- Demonstrated system security.
3. Personalized payment options
As in the customer arena, choice is paramount to the employee experience -- and that goes for how workers are paid.
One demonstration of this is in the need for faster, easier payment. Traditional payment methods don't serve teen workers and other hourly employees and employees who don't have bank accounts. For example, people who typically work multiple jobs to make ends meet may be better served by a more frequent paycheck, rather than receiving one every two weeks. Direct payment to a pay card is one way employers are giving employees quicker, easier access to their paychecks.
4. Improved user experience for HR tech
More human capital management (HCM) systems today are available in the cloud, and payroll is no exception. This means more next-gen HR tech is becoming available. For example, HR teams can look for software providers that develop mobile-native apps. HR teams can also look for AI or chatbot technology that can help users answer questions on the fly, make suggestions on savings and spending patterns or help managers identify compliance rules for bonuses.
With all that said, the payroll administrator requires a more sophisticated interface that reflects the more complicated areas of payroll to which they need access, such as the total bonus pool allotted. This can make for some tricky HR tech decisions.
The employee of the future: A scenario
Say an employee called Chris clocks in and out of work with a virtual card, a secure cellphone app to which earnings of the day are downloaded at clock-out. As an unbanked worker with multiple jobs, Chris' employers have systems through which money designated for rent and utilities is automatically deducted and paid out to those creditors monthly, with healthcare and saving options available.
Use of the app in a grocery store is much like the airport boarding pass of yesteryear and automatically deducts the purchase from the amount on the virtual card. Because of widely adopted industry standards in virtual pay cards, one application can synthesize the pay, taxes and time on the job. It can also show Chris when money comes in and goes out from the multiple employers on the same app in real time.
5. Required integration with other applications
Payroll services also require integration with finance and HCM applications, in order to offer total rewards, performance management and bonus or quota management and payouts. Multiapplication integration is complex and difficult to do well, so you should look for suites that are designed for integration, as well as products that come with connectors to other applications used within your organization. No matter how new and innovative the software may be, it must communicate with the rest of the enterprise.
The world of work is changing, and the way companies compensate workers has to change with it. Companies and their HR teams must not only understand the latest trends in payroll management, but also how best to apply them to their own changing workforces.