What do you think of when someone mentions payroll? Does your mind immediately conjure up an employee asking you for help regarding incorrect calculations and missed deadlines? Or do you imagine payroll as a strategic partner sitting beside HR at the boardroom table offering up valuable insights?
If you think of payroll as nothing more than a routine function, then you’d be forgiven for not being the first. For a long time, payroll hasn’t taken center stage. Regarded as an administrative back-office function, payroll was often forgotten about. And it certainly wasn’t part of the bigger strategic picture. Unless there was an issue with payment or incorrect calculations, payroll carried on as usual. But the recent events of the pandemic transformed payroll’s hierarchy, boosting its importance. Payroll and HR evolved together over the last year. Forward-thinking business leaders need to take note.
Payroll and the Pandemic
In March 2020, the COVID-19 pandemic first started to disrupt businesses around the globe. The first lockdown began, and as part of the restrictions in the UK, many companies closed their premises. Employees were suddenly furloughed and talent was sent to work from their homes to abide by the local lockdown laws. With that, payroll was thrust into the limelight.
In the beginning, there was panic. Smaller in-house payroll teams didn’t have adequate staff to process payroll if their team members were absent from work due to sickness. In addition, companies relying on legacy technology or on-premises equipment struggled with the switch to remote working. Without this critical business function and the skilled payroll workers delivering it, people didn’t get paid, and businesses came to a halt.
As time went on, new and different challenges arose. Most other business functions had adapted to new ways of working at home, but payroll professionals were constantly battling complex legislation iterations. For example, in the UK, there were weekly changes to policy regarding furlough, statutory sick pay, holiday pay, and salary sacrifice. This became a challenge for even the most knowledgeable payroll professional and HR specialist. Without specialist knowledge or support, businesses were shooting in the dark. So payroll and HR evolved.
The Rise of HR
We talk about payroll’s rise to the top, but we can’t forget about HR. When organizations faced their most challenging time during the pandemic, HR teams led the way. Worried employees were desperate to understand the impact on their livelihoods, and it was HR that provided clarity. Business leaders were requesting workforce data and analytics to help steer their people through unchartered disruption, and it was HR that delivered it.
Payroll and HR are indeed very different functions that come from very different places. Yet when the two parts work together, they can help businesses gain a complete overview of the workforce. For instance, during the pandemic, many organizations needed to know how many of their staff members were absent from work due to sickness from COVID-19. They also needed to calculate if it was financially viable to keep workplaces open, or if they needed to claim employee wages through the UK government’s coronavirus job retention scheme. All answers to such questions can be found within payroll and HR together.
Payroll information touches so many HR elements, whether it’s attracting, on-boarding, developing, rewarding, or retaining talent. As a result, it’s become hard to separate the technology supporting both functions. This hasn’t always been the case, though.
Turning Crisis into Opportunity
Resilient businesses have robust payroll operations at the heart of their HR transformation strategies.
According to The Future of Work survey by SD Worx, ensuring smooth, efficient payroll calculations and payment is, by far, the biggest concern for HR professionals. This topped the list of 19 possible HR priorities in eight of the 11 countries surveyed–including the UK. Less than one in five said they were happy with their current function. And 70 percent are actively trying to set up a more efficient process. This is clearly an area of concern, particularly when you consider that HR will always struggle to perform more strategic functions without the solid foundation that payroll provides.
Often, payroll isn’t the trigger for change but comes about as part of a broader transformation. For example, businesses implementing a new global HR solution may need to change their approach to payroll to comply with local laws and ensure both functions are integrated seamlessly.
Paying people accurately and on time are only the basics of payroll. Savvy organizations arrange their payroll function to be more efficient, strategic, and fluid with other departments. Sharing data through HR, payroll, and finance departments creates one single source of truth to aid business decisions and drive value.
In addition, payroll plays a more significant role in employee experience and brand reputation than you might think. An incorrectly paid employee may air their grievances on social media, providing long-lasting damage to your company’s reputation. Payroll can also impact new talent. Younger generations may prefer to receive dynamic payslips that they can access through an app, rather than paper or PDF payslips. Payroll and HR evolved during the pandemic to become even more aware of these factors.
The Future of Payroll and HR
While nobody can predict what the next five years will bring, we can be sure that payroll and HR evolved during the pandemic. Digitalization will accelerate the need for more real-time data for employers to review. Also, employees will continue to crave the same level of instant access they get with their personal technology, within their work technology.
Employees will demand more flexibility in working hours, work locations, and payroll. For instance, many organizations let employees choose how much of their monthly salary they receive and when. They don’t stick to rigid dates and complete payments.
Expectations of what HR can and should offer are now much higher. However, without strong processes and technology, it will be impossible for HR teams to keep everyone happy. It’s clear that any digital infrastructure that supports HR should build on the payroll function. Payroll remains the common denominator that touches everyone and influences almost everything in HR. With this solid foundation, HR has the strength required to flex to the needs of its workforce. And to enable new ways of working and embracing change.
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