Payroll management entails carrying out a set series of steps in the same order each month to create a payroll cycle. While it sounds simple, the process is complicated by the need to ensure compliance with employment and tax laws, along with challenges wrought by the pandemic and a tight labor market.
To help keep business owners in the know about how payroll management is evolving, we’ve compiled the 9 payroll trends below.
1. Almost 7 in 10 businesses now have a formal payroll strategy
For organizations to reduce risk, stay compliant and build a strong business model, creating a formal payroll strategy is essential. More businesses are now recognizing the importance of having an effective payroll operation. Some 67% of organizations had created a formal payroll strategy as of 2021 versus 61% in 2019, according to EY.
2. Nearly 1 in 3 businesses deem inaccurate source data their No. 1 compliance hurdle
Poor source data and keeping pace with challenges arising from regulatory compliance requirements are the No. 1 and No. 2 challenges, respectively, faced by payroll functions operating globally, EY reports.
Some 32% of businesses cite inaccurate employee source data that is imported into their payroll system as their top payroll compliance challenge, and 30% say “keeping up with regulatory compliance changes impacted by new ways of working” is their top compliance challenge.
Businesses can overcome these challenges by building a process that brings together professionals from payroll, HR and finance to improve data flow. You can also obtain assistance from a payroll provider, or adviser, to track regulatory changes that influence payroll functions.
3. Only 14% of employers’ payroll strategies integrate with HR and finance systems
According to ADP , 86% of businesses don’t have a payroll strategy that fully integrates with their HR and finance systems, although doing so would reduce complexity and optimize costs.
Businesses with a unified platform and streamlined payroll processes can minimize errors and prepare more accurate forecasting and reporting.
4. Just 27% of employees have never experienced a paycheck error
A Harris Poll study found that a whopping 73% of employee respondents had experienced a problem with their paycheck at least one time.
The most-frequent problems were miscalculated overtime at 35%; failed direct deposits at 27%; past due expense reimbursements at 22%; and incorrect tax deductions at 21%.
| Talk to us about how our outsourced business services can help your startup develop strategic HR solutions and bring long-lasting value. |
Meanwhile, in a Paycom study, 91% of employees agreed that payroll mistakes break their trust in their employer. In turn, this can hamper a team’s engagement, productivity and morale.
5. Workers want access to on-demand pay
Today’s employees seek a different payment cadence altogether. Many would like the right to access pay as they earn it via on-demand pay options.
Some 78% of respondents to the Harris Poll survey said having free access to on-demand pay would increase loyalty toward their employer. And 81% said they’d consider taking a job with a different employer if they offered on-demand pay.
6. Almost three-fourths of businesses outsource payroll
According to Deloitte, 73% of businesses now outsource at least some aspects of their payroll management. Outsourcing saves them money and time versus hiring someone in-house.
A payroll service provider also ensures compliance and frees up business owners to focus on more strategic activities.
7. “Manual processes and workarounds” for payroll present a challenge
According to an ELMO survey, businesses deem cumbersome manual interventions and workarounds as their biggest payroll challenge. Respondents said “gathering required data input” was their most time-consuming payroll-related activity, accounting for 7 hours monthly on average.
8. A single payroll error takes 15 minutes to fix
On average, a payroll mistake requires 15 minutes to correct, according to Immedis. This time could be better spent on more meaningful tasks.
“If you can’t get [payroll] right, really nothing else matters,” said Mollie Lombardi, co-founder and CEO of Aptitude Research Partners. “And you have to get it right for compliance reasons, as well as for your employees. Nobody likes surprises, particularly when it comes to their money.”
9. Over 95% of employees get paid via direct deposit
According to the Getting Paid in America 2021 survey, 95.88% of workers receive their pay through direct deposit. Just 2.64% receive a paper paycheck.
Paying employees through direct deposit diminishes the risk of fraud, theft and lost paychecks. Businesses that aren’t paying employees with direct deposit may see complaints and even attrition for those who don’t want to deal with the hassle of a paper check.
