Payroll technology in the digital age

BLOG4th Feb 2021

Rapidly advancing technology in the Digital Age means organisations are increasingly moving their technology away from ERP based systems to cloud based solutions and the use of both API and AI technology is more commonly being utilised to bridge the gap when systems do not automatically integrate. Having a coherent technology strategy is critical to deal with the increased complexity of payroll operations and the increased compliance and regulatory environment.  

In the past, digital meant ecommerce. However, the rapid rise of social media, smart devices and cloud computing has opened up avenues for improvement. At the same time, employees are changing through demographic change, increased expectations and empowerment. Technology and social media are making employees better informed, more connected and more vocal – get their payroll wrong and with the power of social media you and the wider world will very quickly get to know about it!

For many organisations the payroll system (or interface with an outsource providers system) remains separate from the HR and finance systems which drive payroll inputs and manage the outputs. Very few organisations are operating cloud based payroll systems, interlinked with their other cloud platforms or have API or AI to bridge the gap. Confidential data may be passed via email or other non-secure data exchanges. With an increasing number of payroll systems and payroll bureau available, organisations are faced with difficult decisions in selecting the right fit for their business. Making the right decision based on the organisation’s risk appetite, understanding of the broader IT and business strategy is vitally important for payroll system selection.

Having good data is increasingly important to ensure good governance and control over systems and processes. At the same time, your employees expect you to act responsibly with their personal information and to respect their right to privacy. Failure to comply with the law can lead to serious legal and financial consequences and significant operational challenges, such as business disruption, financial loss and damage to brand and reputation.  

Digital technology trends and the expectations of Payroll 

  • Payslips sent to mobile devices 
  • Real time reporting – see it as it happens  
  • Data privacy issues – who can access data and from where? 
  • Ability to produce meaningful information from significant volumes of data 
  • How does payroll communicate with other systems?

Questions to ask 

  • Does your current payroll system or outsourced Bureau fit into your overall technology strategy? 
  • What interface do you have for your payroll process and how do the outputs link to your HR & finance system? 
  • Have you analysed the cost of running your global payroll systems and number of vendors? 
  • Do you have confidence that your outsource provider can deliver an end to end technology led payroll solution?  
  • Is your payroll data secure and have you performed penetration testing or tested ISO compliance with ISO 27001 (whether you operate the payroll internally or via an outsource provider)? 
  • How can you take advantage of technology to enable a more resilient and efficient payroll process?

Our View 

The objective for payroll has always been a relatively simple one – pay your employees accurately and on time. Payroll has historically been seen as a low risk function, generally automated (or outsourced) and where issues rarely trouble the higher levels of management. To that extent you probably haven’t given it a great deal of management time or attention.

That needs to change because employment taxes are now globally the largest source of government income. Tax authorities increasingly see the payroll function as their primary tax collection agent, transferring an ever greater burden of responsibility on employers particularly when set against the backdrop of continuous legislative and regulatory changes.

It is paramount for the payroll function to operate efficiently, to meet ALL legislative requirements and embracing the use of technology available will help employers keep onside with their employee population and meet the continuing changes bestowed by HMRC.  

If you would like to discuss any of the above further, please do not hesitate to contact Stuart Law, Payroll Director, or your usual AAB contact.

Find out more about AAB’s Payroll service.