Is your company evolving with the technology and payroll policies that support the way today’s employees want to be paid?
Payroll tech trends play a significant role in the employee experience, from payment-on-demand to GDPR compliance for the growing remote workforce.
The way people are paid and how companies keep deductions correct today is a far cry from the days of ledgers and handwritten checks. Automated payroll is changing with the times, reflecting the needs of workplaces where not all employees are on site, not all employees have bank accounts, and workers may even be located in other countries, making your business responsible for compliance to the payroll rules of foreign countries.
What employees want
With record low unemployment, employers must focus on company culture and the employee experience – what it’s like to work for you from date of hire to date of departure. Payroll – including bonuses, commission, loans and reimbursements – must be a positive experience for the employee. If not, it might push them to find greener grass somewhere else.
HR experts say the future of payroll is Rapid disbursement.
According to an Aite Group Study commissioned by Ingo Money in 2018, 65% of consumers said it’s important to be able to receive instant payments from businesses or government agencies that owe them money. And 70% reported they would select an instant payment option if available. Now compare that to the typical payroll cycle where employees work for two weeks and then wait a week to be paid for it.
Rapid disbursement is the instant digital delivery of funds with certainty of availability. The money earned could go to the employee’s account, including credit and debit cards, or online wallets and physical cash-out locations. The employee would control where they are paid without the cumbersome process of direct deposit, which requires an approved bank account in a process where the employer controls the timeline (and a new employee’s first and sometimes second pay is in check form). The money would also be available immediately, not stuck for a day in “pending” status.
The rideshare company Lyft improved its drivers’ experience by offering instant payroll with the option of Express Pay in 2018. Drivers were able to cash out as many as five times in a day, with 58% of drivers using Express Pay the first year.
Instant payment is especially important to gig workers, a growing percentage of the workforce. In a PYMNTS survey, 84% of gig workers said they would work more frequently if paid instantly. Gig workers are typically well-qualified in their field and able to weigh the benefits different employers offer when selecting work. Having instant payment can prioritize you over others offering work at the same time. That can be huge when big projects begin, or current employees are unavailable.
Another payroll trend is offering Paycards.
Did you know that as many as 10% of the employees in the U.S. are unbanked? For these folks, direct deposit is not a viable option and payroll still has to cut a paper check and deliver it. Offering Paycards, or debit cards that the employer funds with the employee’s net pay, is not only a desirable option for them, but also for employees who do have bank accounts but split their pay for financial management reasons.
Offering a paycard means avoiding the cumbersome check cutting for employees without direct deposit. The employees getting those paper checks often face fees to cash them – even at the bank they’re written on – which attaches an extra cost to getting paid.
Paycards can be used at the point of sale for purchases and can be used at an ATM for cash withdrawal.
By offering a paycard, the company reduces the costs associated with manual checks, lost or stolen checks, stop-payment orders, check cashing fraud and bank reconciliation fees.
For employees, their pay is eligible for electronic funds transfer without having a bank account, they cannot incur debt on a paycard (which helps with finance management and improving credit scores) and they do not have to ask relatives to cash their check or pay a fee to do so at a bank or check cashing business.
If your company is considering a paycard option, check legal and regulatory issues affecting paycards. In many states they are generally the same as those rules governing direct deposit (ACH transactions, employee privacy and escheatment).
What employers need
Aside from keeping employees happy, effective payroll solutions can help your company avoid IRS penalties for payroll errors, one of the costliest mistakes a company can make. According to HR Payroll Systems, 82 million U.S. employees are affected by payroll problems – that’s 54% of the American workforce.
The IRS issues fines totaling billions of dollars each year to business owners, primarily for payroll errors. Cutting edge payroll technology and trends can help a business owner handle these transactions in the right way.
When looking to upgrade, consider a system that is GDPR-compliant. For many industries today – small businesses included, there are no longer geographic restrictions on where employees are in proximity to the business. Where once a worker lived in the same town or a commutable distance, today’s worker doesn’t even have to live on the same continent to be a successful part of a team.
Remote workers from European Union countries working for you must be paid in a way that complies with the General Data Protection Regulation. This law makes sure all the personal data collected by an employer is protected. Employers without GDPR can face heavy fines for data carelessness.
With the proper GDPR-compliant payroll system all employee data entered will be protected by the highest security standards on the market, avoiding cyber catastrophes and large fines.
When you take ideas for payroll upgrades to the COO, CEO or board, it’s common to hear that new payroll tech is too expensive.
New payroll systems aren’t as expensive as perceived and can go a long way in avoiding costly mistakes. For example, new programs make time tracking and scheduling easier. Traditional time tracking has been highly susceptible to fraud, from co-workers “punching in” for another who is running late to employers paying for time not worked. The same technology can help manage vacation time and requests for days off, two typically time-consuming efforts for HR and payroll staff.
Payroll software can be part of an HR package that allows you to customize training courses for team members to develop talent, promote from within and boost morale.
New payroll programs are also cloud based, which increases efficiency and flexibility. Remote workers can manage payroll from one dashboard, and cloud-based systems provide room for growth. If the company grows or more gig workers are added, the existing payroll system doesn’t need replaced because your company outgrew it. Remote workers can also clock in and request time off remotely.
The first step to modernize your payroll process is to find a system that works for the employees and the business. And then, just as importantly, work with IT professionals so the system is properly implemented to maximize its potential.