John Pearce is Chief Customer Officer at CloudPay
Technology has arguably revolutionised payroll in recent years. Indeed, professionals in the industry will be well aware of the leaps and bounds there have already been in payroll technology and of the significant potential this has to evolve the function in the future. Yet, despite the advancements, many organisations still rely on outdated systems, missing out on the benefits of a more integrated and agile approach to payroll. As the tech continues to evolve, the question remains: how are companies that resist modernisation being affected by their reluctance to adapt?”
The proof is in the pudding
It’s not just speculation that payroll is benefitting from technology, there are clear results to support this theory. According to our Payroll Efficiency Index (PEI), organisations are gaining from modern systems in many ways. The report gauged performance in metrics such as first-time approvals (FTA), data input issues (DII) and issues per 1000 payslips (I/1000). It showed that FTAs have risen, and also found that there has been a continued global decline in I/1000 along with drops in DII. With the latter, the data highlighted that the global DII rate is now 8.4% lower than in 2019, showcasing the continued progress being made.
Analysing these metrics suggests that payroll is gaining from the broader and more effective adoption of modern, unified platforms. Fewer mistakes are being made in payroll processes, and where they are, these are being spotted earlier on at the validation stage. This means that teams are providing a better, and crucially, more accurate service. In fact, 91% of payroll respondents to the PEI report said ‘ensuring accurate and timely payroll processing’ was “important” or “extremely important” in their global payroll.
This is not necessarily surprising. Modern systems enable organisations to act in a much more strategic way. They offer real time analytics and seamless integration with human capital management (HCM) systems as well as providing globally standardised data formats, which remove much of the compliance burden from professionals’ roles. They also automate many of the core payroll processes from a central platform which reduces time and stress for professionals, providing them with more time to focus on strategic tasks.
But not everyone has joined the movement
However, there are still many employers that take a more manual and traditional approach to payroll. Ultimately, there’s nothing wrong with this, and we see pushback against technology in all walks of life, such as the rising demand for so-called ‘dumbphones’ as consumers resist more immersive and all-consuming modern smartphones. The difference here is that, in payroll technology, there is proof that it can add real value. Whether it’s a reluctance to change, or a lack of understanding of the benefits of technology that’s causing the inertia, is unclear.
While organisations relying on older systems may feel they are still able to match the high standards of those that have already innovated, the data suggests otherwise. As businesses grow and become more complex, many will be battling a new, hidden payroll implication; namely the cost of doing nothing
Many existing payroll systems are complex to navigate and heavily reliant on manual data inputs, which naturally increases the chance of making errors. These platforms can’t keep pace with operational expansion and the expectations of a global organisation, and are having a detrimental impact on their output and productivity. On the other hand, and as the PEI report showed, modern, unified solutions enable reductions in errors being made, which helps payroll teams achieve their core purpose. And another new study has shown there’s a time – and financial cost – of making these mistakes.
The Cost of Doing Nothing Report showed that one in five payrolls contains errors, and with each one costing around £223, they soon add up. On top of that, the average amount of time payroll professionals spends correcting common errors is a staggering 29 weeks, or over half the year. But it’s not only mistakes that cost – in fact, even accurate pay runs have a subsequent time and financial price attached to them. When completing manual, HR-related tasks the cost of a single point of data entry is £3.66, and one in three leaders say that this is the most time-consuming aspect of payroll. Not many employers can afford to have that much time and money taken up by errors and lengthy processes, particularly when there are alternative options.
Time is clearly key and one of the core benefits of opting for a more unified approach is to remove some of the administration burden on payroll. According to the data, each individual vendor can save 9.5-10 days per payroll run by innovating and modernising their systems. Ultimately, organisations that aren’t operating in this way are creating additional 10 days’ worth of work for themselves and their teams.
A reliance on manual systems also creates less obvious negative issues. The majority of people work to get paid, and if their pay is delayed or contains errors then it’s only going to impact job satisfaction. In such a tight and skill-short hiring market, these marginal differences can make or break whether someone chooses to remain with your organisation or leave for another. And with the cost of replacing a departing employee standing at around six to nine months’ worth of their salary, those minor pay errors can contribute to much larger costs further down the line. Equally, it can also impact productivity. If existing employees face issues getting paid accurately and on time, they’ll become disengaged, less motivated, and even distracted by personal financial concerns.
Modern payroll should add real value to a business, rather than slow things down. When done right, pay can be turned from an operational function into a strategic, competitive advantage. While transformation doesn’t have to happen overnight, the cost of doing nothing is clearly much higher than investing in pay platforms for the future.
