Rising demand for operational efficiency, increasingly intricate employment legislation and progressively more complex working patterns are all bringing about changes to the payroll function.
For instance, more flexible working arrangements, hours and locations – which includes gig work and ‘workcations’ – is leading to the emergence of new employee payment approaches.
And earned wage access, where staff can receive some of their income prior to payday, is becoming more common, particularly in sectors such as retail and hospitality.
Read more: Earned Wage Access could calm money worries, CIPP says
David Deacon, chief people officer at payroll software provider, Activpayroll, explains: “The growing need for flexibility is creating very different requirements for how employees’ time is recorded, how their value is monitored and, therefore, how renumeration is delivered.” This results in a requirement for higher levels of automation.
“Payroll is already quite automated in many companies,” Deacon says. Most teams these days have a system in place for payroll processing, whether standalone or integrated with equivalent HR applications. Many processes and workflows, including the reporting of information to HMRC, are likewise digital.
Is the trend of increasingly automated payroll services set to continue? Deacon suggests that businesses’ future focus will be on getting the best out the technology they have, rather than acquiring more. “I think we’ll see more integration in the future, and organisations using functionality more effectively, rather than adding lots more technology,” he adds.
The implications of AI
Businesses already use artificial intelligence (AI) to automate routine tasks, such as data entry and time tracking. Chatbots that answer simple queries without requiring human intervention are also becoming more common, and 78% of millennial (25-to-34-year-old) HR professionals in the UK and Ireland use AI at work, according to HR tech firm Personio.
Perhaps unsurprisingly, the adoption and use of AI is predicted to expand in the coming years. This could bring huge benefits to payroll professionals, according to Sirsha Haldar, general manager for the UK, Ireland and South Africa at payroll software and services provider, ADP.
“It’ll help with compliance by continuously monitoring for any changes in labour laws, tax regulations and other statutory requirements,” he explains.
“AI can also analyse large volumes of payroll data to extract actionable insights and trends, enabling HR and finance professionals to make data-driven decisions related to workforce management, compensation strategies and organisational performance.”
Listen now: AI: The Human Impact with Tomas Chamorro-Premuzic
But the implementation of such technology will have implications for what the payroll function looks like, and how it operates too. Could it put payroll professionals out of a job? Vickie Graham, business development director of the Chartered Institute of Payroll Professionals, thinks not: “I don’t see that AI will eradicate payroll teams, but it will change them.
“Technology is the future of payroll, but it means that the shape and makeup of skills required will shift.”
How roles will evolve
The consensus among HR leaders is that, while technology is set to take over the more transactional, administrative aspects of payroll professionals’ current jobs, the human touch will still be required. As a result, according to both Deacon and Graham, headcount is likely to remain roughly the same as it is now.
But payroll professionals will need to upskill, and even reskill, to take advantage of the new, more strategic opportunities available to them. Two significant roles are predicted to be data analysts and customer advisory or relationship managers.
Read more: Four ways to get people to care about HR data
Higher levels of payroll automation will produce more invaluable employee data. The opportunity for payroll analytics specialists will be in using it to gain insights into trends, such as absence and financial wellbeing. These insights can be used to make recommendations to key stakeholders for potential actions that could improve the bottom line.
“The information payroll has access to can have a real impact on decision-making,” Graham says. “For example, you can forecast what the impact would be if you increased headcount by X% in terms of expenditure on things like tax, national insurance and onboarding.”
Another possibility is that by analysing trends, HR can better understand what motivates employees. This could enable more proactive actions to engage and support them, she adds.
The customer advisory/relationship management role could evolve beyond handling the more complex queries that AI cannot deal with, both Graham and Deacon suggest.
This role could entail acting as an internal consultant on legislative and regulatory issues. For instance, customer advisor/relationship manager professionals could become the first port of call for questions on thorny issues, such as the implications of setting up a new subsidiary abroad.
The tightening bonds between HR and payroll
Over time, as payroll’s strategic role continues to grow, Deacon believes that the profession’s relationship with HR will become closer and less siloed than is often the case today.
“HR is responsible to a large extent for ensuring that the employee experience is positive, that employment patterns are adaptable enough to attract and retain people, and that the workforce remains productive both now and in future,” he explains.
“They’ll require their payroll colleagues to help them with that, which means they’ll want access to their data and expertise.” Ultimately, according to Deacon, this will result in more HR departments absorbing payroll, to create an overarching ‘people’ function.
“As HR becomes less process-oriented and more about business-building, the payroll function will grow with it and become a sort of people specialism, like talent acquisition or management,” he says. “HR will be keen to have payroll expertise in the team, to help support the company’s growth and flexibility.”
This article was published in the March/April 2024 edition of HR magazine.
Subscribe today to have our latest articles delivered to your desk.
