Stuart Law: Payroll technology in the digital age
Stuart Law, payroll director at Anderson Anderson & Brown (AAB), discusses the importance of payroll technology in a business.
Rapidly advancing technology in the digital age means organisations are increasingly moving their technology away from Enterprise Resource Planning (ERP)-based systems to cloud-based solutions and both Application Programming Interface (API) and Artificial Intelligence (AI) technology are more commonly being used 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.
The rise of social media, smart devices and cloud computing has opened up new avenues. At the same time, employees demographics are changing, most noticeably in terms of 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 their payroll system (or interface with an outsourced provider’s system) remains separate from the Human Resources (HR) and finance systems which drive payroll inputs and manage the outputs.
Very few organisations are operating cloud-based payroll systems that are interlinked with their other cloud platforms, or have API or AI to bridge the gap. Consequently, confidential data is sometimes 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 decision of selecting the right fit for their business. Making the right decision based on the organisation’s risk appetite and an 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 reputational damage.
Questions for businesses
Digital technology trends and higher expectations have led to features such as payslips being sent to mobile devices, real time reporting, the production of meaningful information from significant volumes of data, and payroll communicating with other systems, transforming the payroll landscape.
Managers and business owners looking to re-evaluate their payroll system should begin by asking:
- Does our current payroll system or outsourced bureau fit into the overall technology strategy?
- What interface do we have for the payroll process and how do the outputs link to our HR and finance systems?
- Have we analysed the cost of running the global payroll systems and number of vendors?
- Are we confident that our outsource provider can deliver an end-to-end technology led payroll solution?
- Is our payroll data secure and have we performed penetration testing or tested compliance with ISO 27001?
- How can we take advantage of technology for a more resilient and efficient payroll process?
The expert view
The objective for payroll has always relatively been a simple one – to 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 it probably has not been given it a great deal of management time or attention. That needs to change because employment taxes are now the largest source of government income globally. 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 and to meet all legislative requirements. Embracing technology will help employers keep onside with their employee population and meet the continuing changes handed down by HMRC.