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Payroll has become a core part of how businesses operate, especially in a business landscape that is increasingly globalized and flexible. Every day, more and more organizations are understanding that payroll is a complex undertaking that needs their focus - and the use of technology - to make it efficient and supportive to the wider enterprise.
How is this shift influencing trends in the payroll technologies that businesses are interested in? And how are vendors responding to those trends?
To explore buyer and vendor behavior alike, the Payday Global Payroll Podcast spoke to Pete Tiliakos, Principal Analyst at NelsonHall. On the back of his recent report, “Payroll Services: Globalization & Digitalization”, he has uncovered several key insights on how payroll and its use within businesses is being reshaped.
Transformation is on the rise
In his research, Pete found that 85% of businesses had either already started their payroll transformation programs, or had plans to begin one within the next few years. Part of this drive is down to businesses wanting to accelerate the digitalization of their payroll, while many multinational companies in particular want to consolidate and rationalize their data and reporting.
Pete explains that no firm is the same in the nature of its transformation, which is opening up opportunities for vendors who can provide more flexible solutions. “Every one of these firms is often on a different transformation journey,” he says. “None of them are in the same place and none of them are going to move at the same pace. I think there’s a lot of support out there for managed service providers and a lot of flexibility that’s coming into play to really help buyers achieve the transformation they need.”
Constant evolution is a necessity
Pete has uncovered a sense of frustration among businesses that managed service providers in payroll aren’t innovating as much as they would like to see. Much of this is being driven by a mentality among vendors that if SLAs are being met and everything seems to be working properly, then there’s nothing else that needs to be done.
Instead, businesses are increasingly looking for more proactive relationships with their providers, and for their providers to draw on their experience to help them innovate and evolve continuously.
“The expectation of buyers now is that they’re looking to the managed service providers as the experts who can show them what they don’t know,” Pete explains. Buyers are saying: ‘Here’s my problem. How have you solved this problem before for others, as you must have seen it before? How can you take this forward?’. And this transformation has to continue - it can’t just be ‘set it and forget it’.”
Employees are more aware
Increasingly, employees are becoming more engaged and involved in how payroll is run. This applies in two areas, the first of which is technological: employees are expecting more self-service functions such as earned wage access, so that their work life experiences more closely mirror their personal lives.
The second of these, however, concerns information and transparency, where Pete feels easy access to payroll information is critical: “Employees are smarter today. They ask better questions, they understand their data better, they want to own their data, and I think there’s a certain transparency needed with payroll. You need to give people access to information, so that they can make decisions for themselves, but also to be fully compliant and open about what you’re doing with their pay and what’s happening. They need to be able to access these things readily: they shouldn’t have to ask HR and wait two days for a payslip. They should be able to pull out their mobile phone and just get it.
Help is at hand
Pete noticed a surge of interest from businesses in enlisting the services of a managed payroll provider. This has come from a realization by companies that while transformation and digitalization is essential, it may be too big and complex of an undertaking for them to achieve themselves.
However, instead of just outsourcing all things payroll to a provider at once, many businesses are taking a more gradual approach, taking advantage of the ‘pick and choose’ options afforded by some providers in the marketplace. “Providers are getting a little more relaxed in how they let companies come onto their solutions,” Pete explains.” They’re giving more partial options to incrementally add and grow. I think that’s great because not everybody is always ready to fully outsource, and every company is different, so where they can, they can just adopt portions.”
Three types of vendor
Pete feels that three different types of vendors are emerging: HCM technology providers that typically operate in a single country or region, payroll providers who focus on payroll but also provide some other integrated functionalities, and HRO providers where payroll comes as one part of an overall package.
He goes on to say that all three types have valid places within the marketplace, and that it gives businesses more choice in finding a provider who can best support their payroll needs. “It really depends on the firm and where they are within the transformation journey, the investments they’ve made, and what they want to leverage,” he says. “This gives buyers a lot of options in how they want to solve the problem of payroll, both regionally and globally.”
Key Takeaways
It’s clear from Pete’s findings that payroll is undergoing a time of great change, from the perspectives of buyers and vendors alike.
Businesses are more and more receptive to outsourcing their payroll to a managed service provider, as they recognize the importance of getting it right. And while some are happy to fully outsource, others are taking a more gradual approach with providers who are more flexible. From the viewpoint of providers, that flexibility is proving to be a real differentiator in the marketplace, as businesses aim to meet increased employee expectations and support workforces that are increasingly distributed.
To get more detailed insights on these and many other findings, you can listen to the full Payday Global Payroll Podcast with Pete Tiliakos here.
