The Future of Payroll: 7 Trends to Watch
The IRS estimates 40 percent of small and medium-sized U.S. companies end up paying a payroll penalty every year. Most of these penalties are due to filing errors or not depositing withholdings on time.
This isn’t shocking since calculating payroll is no simple task. When you’re juggling factors like employees’ wages and salaries, employee benefits and incentives, tax deductions, and much more, things get complicated quickly. Plus, every state has its own tax regulations, so it’s easy to miss details if you are not careful. Running a business is expensive enough—you don’t want to add payroll penalties to your expense list. But thanks to advances in technology, it’s easy to optimize and smoothly carry out your payroll process.
With technological advancements in the HR sector, the future of payroll seems more focused. It is essential to stay up-to-date with the latest trends in the payroll industry to remain one step ahead.
Here are seven trends to expect in the future of payroll.
1. Increased Use of Cloud Technology
The cloud-based payroll software market is expected to grow over $13.3 million by 2026.
Cloud-based computing allows you to access your data from anywhere on any device. As working from home becomes more popular, this is particularly useful for HR departments who manage payroll remotely. It saves these employees the trouble of coming to the physical office to process this task.
Furthermore, cloud-based software allows HR, managers, and employees to access their payroll information in real-time, including their pending leaves and PTO requests.
Besides, protecting on-premise payroll software from computer hacks and cybercrime can be a costly affair that not everyone can afford. But cloud-based computing includes various protective services like cybersecurity and software updates so you can be sure your data is safe.
It also allows you to easily scale your business. When your organization begins growing, you don’t have to worry about replacing your existing system. Your cloud-based payroll software can scale with you.
2. Embracing Artificial Intelligence
Films featuring artificial intelligence (AI) will have you thinking robots will take over humans someday. Though that idea may be far from reality, you can’t ignore that in some industries, machines actually are replacing humans.
Artificial intelligence has become more popular in various fields, including payroll, which has some great advantages. Previously, payroll service was limited to calculating employees’ wages, paying them, and generating a simple report. But now, things are changing, and the future is going to demand more. In short, AI is revolutionizing the way people get paid. For instance, it can help automatically classify employees and ensure that they are in the correct tax brackets.
Furthermore, in this data-driven world, it has become crucial to analyze the vast amount of payroll data collected. This analysis can provide actionable insights, help shape the company’s budget, identify unnecessary expenses, and contribute to the overall success and growth of the organization.
In fact, AI-based chatbots can be used to help employees with non-urgent requests. So now instead of running from one department to another, employees can get their queries answered using an automated chatbot.
3. Integration of HR Technology
Even though payroll and HR management are two different disciplines, they are connected.
There are numerous benefits associated with integrating payroll and HR software. For starters, an integrated system will enable managers or staff members to access all essential information from a single dashboard.
Combining the payroll process with the best of HR functionality can increase efficiency in managing employee data.
Some small and medium-sized businesses assume investing in HR technology is too expensive, but this isn’t true. An HRIS is accessible to everyone at affordable prices and the ROI will easily outweigh the cost.
HR software enables you with functions like time tracking and scheduling. And if your payroll software integrates with your HR software, you can easily share this data across systems. This ensures that no payroll fraud occurs by accurately tracking employee working hours of employees, so no one gets underpaid or overpaid for hours worked.
Besides, when you have all your data within a single solution, the system can pool together relevant data to generate actionable insights. With the help of the HR and payroll system integration, it will enable organizations to create personalized reports that will include details on employees and their packages.
4. Increased Demand from the Gig Economy
Technology enables people to work from anywhere, and this has given rise to a steadily growing number of freelancers and gig workers.
This economic shift from traditional and full-time employment to the mixture of third-party workers has made the situation complex. Old, legacy systems aren’t well-equipped to handle a diverse and dynamic workforce.
Payroll software makes it easy to efficiently handle and manage the perfect blend of full-time employees and gig workers.
Payroll software can help you effectively manage these temporary workers. Plus, if you integrate with your project management software, you can further keep track of their work progress and issue their payment on time on the completion of the project.
5. Financial Wellness Included in Your Package
The employee retention rate is directly proportional to employee satisfaction. If you want to increase productivity at work, you need to keep your employees engaged and motivated. Many employees are unable to concentrate on their work because they are worried about their financial well-being. Additionally, having too much stress can contribute to both physical and mental illness.
The idea is to reduce employees’ financial stress and boost their morale to make them more productive. That’s why many payroll providers are starting to include a financial wellness program in their system.
A financial wellness program may include financial counseling for employees, and guidance on topics like the importance of retirement planning and how employees can properly allocate their money. This can help ensure your workforce spends less time stressing over the dollars in their bank account and more time focused at the office and enjoying time at home.
6. Pay Transparency
Many businesses are moving towards making salary and wage information more accessible. This includes the salaries of employees from executive ranks to part-time workers. And many of them are explaining how their organization’s pay structure is devised. Helping employees understand your methodology behind compensation and why they get paid what they get paid helps promote fairness and equality within the organization.
Moreover, pay transparency motivates employees to work hard as they know their raises will be heavily influenced by their performance. It removes the chances of any unbiased treatments amongst employees.
It communicates the value of company culture in terms of fair treatment and pay, which directly impacts your good employer brand image.
7. Improved Data Security
In the past few years, new laws have required payroll software to be GDPR-compliant. This means that any sensitive information you enter into the system will be automatically protected by the highest cyber-security standards on the market.
Every company has a large chunk of employee information to protect. They hold sensitive data, such as wages, addresses, account numbers, and social security numbers.
Advances like dual authentication to access highly confidential information help support more traditional measures like security questions to keep your data safe.
So the question is: Is your company ready to adopt payroll technology?
It’s evident that technology is revolutionizing the way we conduct business. While we might agree that implementing a new technology looks like a challenging task, once you select the right payroll software, you will quickly see the benefits it brings to your organization.