Professional Magazine – Issue 99
Lara Smart ChFCIPPdip, BA (Hons), consulting director, LSC Group, discusses the opportunities technology
opens up for the payroll industry but also advises where caution should be exercised, encouraging strong
governance in this space.
When was the last time you worked on your tech rather than in it? Technology doesn’t just enhance payroll, it’s a key enabler of the wider human resource (HR) and financial ecosystem (when done right).
It’s also expensive, and requires the right service, support and safeguarding.
It must be implemented properly (and maintained) and subject to vigorous risk assessments (more on that further down). Payroll technology has come a long way in 70 years, with ample benefits to an industry in a constant flux of legislative and business policy change. Payroll can, at times, be a labour-intensive practice but is often upgraded by the use of technology and tools which allow automation.
Payroll must deliver a compliant function, carefully balanced with positive employee experiences.
Technology not only enables the payroll function, but also drives the essential service towards employee satisfaction. After all, employees don’t work for free, and payroll is an emotive and trust-based service. When addressing the foundations of payroll, reviewing the key functional pillars is essential to ensure efficiency for interdependencies on each other.
Technology works in harmony with all pillars – it’s both an enabler and a dependent. See the pillars in the diagram to the right. It isn’t enough to implement a solution and outsource application management services, so technology must be constantly and consistently assessed, maintained and reconfigured, to ensure optimum effectiveness and automation. It must have an accountable business owner, driving efficiencies and vendor partnership to deliver roadmap improvements. This is the necessity of payroll strategy; to drive a vision and roadmap to create a team of collaborative, iterative improvement mindsets generating positive productivity, skills and enjoyable work.
Employee experience
As payroll evolves and becomes positioned for strategic influence (for those able to take it to that level),
payroll technology focus is where the consumer is the employee – and this offers businesses an easy way to boost retention.
For a business driving customer experience for higher profitability, they know they need to approach employee experience in the same way, resulting in strong talent retention and acquisition. Payroll technologists and vendors alike who drive a strong customer loyalty base listen to business feedback and
industry / economic demand. They’re supporting the drive of payroll to consider how the department impacts overall business strategy. According to Harvard Business Review, businesses which focus on employee experience can increase revenue by up to 50%.
Reviewing vendor technology products and services, such as data validation, analytics, on demand pay, mature integrations and payment platforms contributes to better service and flexible offerings. Employees trust that payroll will get their pay right each month. Trust goes a long way in retaining employees as does quick service, query resolution and accurate / timely payments, along with ease of updating personal data and accessing relevant documentation. For the first time in decades (Bacs was introduced in 1968), employees want the freedom to get paid anywhere and they’re not bothered how – payroll technology is
addressing this.
Automation
Payroll, at its core, is an aggregation of mass data and workflow. We put data in, it’s processed and then output. Robotic process automation (RPA) and vendors working on / developing this technology go further to reconcile your data for you, saving more time and flagging errors and risks. The result?
Faster decision making, faster processing, better service, transparency and efficiency gains, allowing payroll to spend more time on value-add activities.
Those who understand their enterprise and solution architecture landscape will reap the rewards of using available integrations and automation.
Artificial intelligence (AI), robotics and automation
Brankica Malic of Luna Technology GmbH advises us that RPA is designed to automate repetitive, rule-based tasks, while AI aims to replicate human intelligence and decision-making capabilities.
RPA is effective at structured processes, while AI excels at handling complex, unstructured tasks. Both technologies have their strengths and applications, and companies can benefit from using them according to their specific needs and goals.
RPA and AI technologies offer businesses huge potential, and each technology has its unique benefits and challenges. By understanding the differences and providing appropriate solutions, companies can harness
the power of technology to increase efficiency, improve decision-making and stay ahead in an increasingly competitive environment.
Recommended approach to RPA
Clear process documentation and standardisation can improve the compatibility and efficiency of RPA
implementation, and so can collaboration between IT and other departments. To reduce potential risks, strong security measures such as user authentication and data encryption should be in place.
Recommended approach to AI
Develop clear ethical guidelines and regulations to address the potential social impacts of AI and ensure responsible implementation. Organisations should invest in data management processes and technologies to ensure data quality and availability for AI systems. Implement explainable AI models to increase transparency / build trust with stakeholders and upskill the workforce through training programmes to close skills gaps and effectively use AI technology.
Cybersecurity
Technology has pros and cons, like everything in life. With cloud-based software as a service (SAAS) evolution, cybersecurity attacks are on the rise.
Will Jackson, chief executive officer at C2 Risk, warns of the impact breaches have and stresses the importance of mitigating financial and legal risk, safeguarding business reputation, ensuring personal data security and minimising errors / oversight.
How is this approached?
Strong governance. Below are some key areas payroll must consider from a technology perspective:
– General Data Protection Regulation (GDPR) Consider whether: ls your data protection impact assessment is up to date
– you can map all payroll data forensically – this means you know where it comes from and how, and then where it goes
– your data workflows map to your processes; they should l a solution architecture map is available, noting key data flows and integrations. If not available, it should be.
Vendor risk management
You could request the following evidence:
– System and Organisation Controls (SOC) 2 type 2 audit report
– International Organisation for Standardisation (ISO) accreditations
– disaster recovery policy, plan, last test date and results
– business continuity plan and last test date
– external penetration test – summary results
– HR policy – pre-employment background checks
– third-party management policy
– if development is outsourced, details regarding where if support is outsourced, details regarding where.
Governance, risk and controls
The success of technology depends on the strength of its underlying core processes. A management and
governance framework helps businesses to assess strengths and weaknesses, understand best practices and improve each core process.
By prioritising key processes, payroll can build an improvement roadmap and good vendors will typically want to go on this journey with you. Consider whether there’s clear ownership of the core processes, roles and responsibilities within your organisation. Also, see if there are service level agreements (SLAs) and key
performance indicators (KPIs) placed on your payroll to measure your core internal audit risk areas.
IT security is a business-critical function, there to ensure technology is as protected as possible. Data breaches which originate in the supply chain are more commonplace than businesses may be aware. According to a 2022 data breach investigation report, 62% of system intrusions happened through a business partner. If your payroll uses middleware or third-party software, it’s important this is fully assessed and not just a core payroll platform.
Detailed due diligence of what you have and what to invest in should always be at the forefront. Remember that automating inefficiencies only serves to magnify them.
A parting thought
Technology is a key enabler and provides a surmountable level of benefits to payroll with future possibilities, but it isn’t a driver. At the centre is leadership and culture – this is the force and influence payroll professionals need to drive the change.