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Date: 27th Jul 2022

Author: LACE Partners

Topic: Payroll

Format: Blog

Unsung heroes? Challenges in the payroll industry

Jul 27, 2022 | payroll, Podcast

Our community of senior payroll professionals is growing and recently got our members together to talk about challenges facing the sector. It was a fascinating debate covering everything from the comparative benefits of global vs. local systems to the impact hybrid working is having on Payroll. Read today’s blog for a summary of key takeaways. If you’d like to be part of the community, you can reach out to either Chris Kirby or Adam Morris from our team. 

 

 

Payroll is often the unsung hero of a business, flying under the radar while performing arguably the most important function for the workforce. Despite its vital role in the business, payroll’s voice can be lost even when it comes to systemic transformation. Here are the key challenges facing payroll from those who understand it best: 

Bigger isn’t necessarily better when it comes to payroll providers 

Finding the perfect payroll provider partnership is of vital importance, and it’s not always easy. Attendees felt a disconnect with some payroll providers, citing a lack of communication and trust as key issues. Transparency from your provider is key; will a provider admit if a system isn’t the right fit for you?  

Interestingly, our discussion concluded that cost is not the most important factor when it comes to selecting a payroll provider. Instead, HMRC compliance and reporting vie with cost as defining factors when choosing a payroll partner, suggesting peace of mind is invaluable for businesses in this sector. 

One system to rule them all?  

Many of the bigger providers (and some mid-tier) appear to be shifting focus away from pure payroll and more towards HR. But does this really work or are the requirements of payroll and HR simply too different to comfortably come under a single infrastructure?  

While HR functionality must incorporate concepts such as diversity and the employee experience, payroll focuses more on compliance at a local and global level. In light of this, is there a single system that truly delivers both?  

General consensus in the room suggested that the answer is ‘no’. If a hybrid system is presented, it appears in many cases that one function is forced to take a back seat. Furthermore, while the provider may point to open API configurations as a ‘fix’ for this problem, the consensus remains that there are few (if any) systems that deliver what payroll needs.  

An unbiased overview 

The value of accessing an impartial, unbiased view of providers was discussed. Concerns included the risks of being oversold a system and also lack of clarity over who should drive the agenda when switching to a new provider.  

For example, if the choice is made based on a slick sales team rather than the system itself, will it actually be a good fit for the customer?  

Establishing an honest, two-way relationship between customer and vendor is vital for the smooth implementation of any new tech. Without this, the inevitable issues pre, during and post-launch could cause immeasurable damage for the business.  

Adding up the real cost of system ownership  

The true cost of purchasing a new tool is far more than selecting, embedding and delivering a system. Training, development, updates, changes, new configurations, the comms plan to ensure everyone knows what’s happening, the impact assessment… all of these contribute to the overall cost of a new system.  

For example, while the initial set-up cost for a new payroll system might be relatively low, if the licensing costs are high the final total will eventually outweigh a higher set-up cost for the tech.  

How global is it really?  

Does a truly global payroll system really exist? Discussion centred on the complexities involved and whether this is another reason why a single HR and payroll system is yet to be developed.  

How many systems marketing themselves as ‘global’ are actually outsourcing locally? This appears to be particularly common with companies that operate across a number of countries but have few people in each country.  

To centralise or localise: that is the question! 

Businesses considering new systems should take the time to thoroughly assess the real benefits of centralisation over the assumed benefits.  

What’s driving the need for centralisation? Would it really be more efficient? How would reporting work? Before making any strategic decision on changing the payroll model, businesses should answer these questions.  

Is anybody out there? Who’s listening to payroll challenges anyway?  

Discussion underlined a frustration that payroll teams are not being heard. How often, for example, is payroll automatically assumed to be part of HR when it comes to new tech and systems?  

Large scale transformations often begin within finance or HR, but payroll’s significance should ensure the function is a key part of any new system implementation. However, if payroll is considered as a purely transactional functionality, it will never be able to properly contribute to significant transformation. 

This connects to the issues of perception of payroll within the business. Too often the ‘if it ain’t broke, don’t fix it’ approach is taken when it comes to payroll. Is the team only noticed when something breaks, for example? And if so, does this need to change?  

Payroll is often seen as a background function, when in actual fact, it’s of central importance to a company’s people. A business’ biggest asset is its people, after all, and if they’re not paid on time their goodwill can dry up very quickly.  

Hybrid working and its impact on payroll 

While hybrid working is viewed largely as a positive, there are challenges for payroll:  

  • What are the tax implications of an employee working overseas for a period of time?  
  • The risks associated with the lack of communication between employees and the payroll team.  
  • Brexit has made moving to the EU more complex and employees are looking at other regions, including Asia.  
  • Significant shifts in employee work patterns can cause significant problems for payroll if they are not informed with time to alter processes.  

Largely, the implications of the above aren’t being recognised by businesses, which leads to a disconnect between emerging policy and process and requirements in the payroll space. In conclusion, we’ve covered several core themes but communication and clarity in this area is keen to cohesion between payroll and the wider business.  

If you’d like to discuss some of the challenges raised above, or if you’d like to talk to us about the payroll community, please feel free to reach out using the form below. 


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