A report by cloud-based provider of human capital and business solutions Alight Solutions, says companies are increasingly replacing their antiquated payroll systems with technology that moves them toward more rapid calculation and payment methods.
According to Alight’s 2021 Global Payroll Complexity Index, for the first time, cloud-based payroll systems (61 per cent) exceeded on-premise (39 per cent) as the dominant payroll delivery platform. Furthermore, a quarter of companies (26 per cent) have accelerated digital payroll projects in the past year, and another two-thirds (62 per cent) expect to go through a digital transformation in the next two years.
“The payroll function is becoming increasingly complex as companies struggle to keep pace with shifting workforce demographics brought on by the pandemic,” said Luca Saracino, senior vice president, International Sales and Strategy at Alight. “It was a major achievement for companies to keep payroll running at times when business continuity was challenged, but it was far from ideal. Clearly HR and payroll leaders are eager to realise the benefits of digital payroll.”
According to respondents, the primary drivers for accelerated digital payroll projects include regulatory risk (42 per cent), corporate strategy for outsourced business processes (39 per cent), cost controls (27 per cent), payroll talent shortages (19 per cent), and M&A and business divestment activities (15 per cent).
Respondents also reported challenges associated with payroll accuracy, as frequent legislative updates and changes to furlough and job retention programs often required manual updates to payroll systems, which increased the risk of costly payroll errors. For example, the report revealed that 27 per cent of data breaches in the payroll processes since 2019 were result of human error. In Europe, companies that don’t comply with General Data Protection Regulation (GDPR) may be fined up to 4 per cent of annual revenue or €20 million, whichever is higher. In addition, payroll leakage, resulting from poor payroll process management, may cost companies 2 per cent of their total salary bill.
“It’s possible companies are haemorrhaging millions of dollars annually through basic payroll process failures,” said Wilson Silva, vice president of outsourcing at Alight. “Luckily, they can turn those losses around quickly by simply examining the payroll processes and correcting the basic payroll errors commonly made by companies that lack visibility into and governance of their payroll processes.”
