This National Payroll Week, it seems clear that Payroll is in a period of unprecedented adjustment.
The nature of the Payroll function is ever-evolving, and those working in the field have had much to learn to adapt to over the past decades, especially with automated processes being ever more integrated into the practice. As the use of robotics and artificial intelligence gets absorbed into Payroll systems and processes, some now are raising questions about how this impacts the Payroll profession overall.
How much will my role as a Payroll professional change?
Will Payroll as a stand-alone function be absorbed as a piece of a larger, yet-to-be-defined administrative function that encompasses all things related to employee experiences?
While there is no reliable crystal ball to let us know how things will turn out in the next five years, we can look back at similar crossroads when Payroll professionals addressed the same questions. The answers were found in how resilient the Payroll community becomes when big changes occur.
Payroll professionals have faced previous challenges that appeared to threaten their livelihood, only to emerge with even more significant roles in the organizations they serve, contributing in more meaningful ways than ever. Some examples of how Payroll has evolved so far can provide hints to what those in the industry can expect in the near future.
Emerging From Accounts Payable
This evolutionary process started with Payroll outgrowing its position in accounts payable.
For many organizations, Payroll has been and continues to be the largest accounts payable outlay. If not the largest, then certainly in the top two or three.
During the 1980s, the profile of Payroll operations was changing. Employers started to see Payroll’s role as the key implementer of compensation programs, as well as a big accounts payable function. There was a recognized need to coordinate Payroll’s work with HR’s compensation and benefits teams to put in place new programs, handle more reporting, and process pay more efficiently.
It became clear that payday was much more than a simple arms-length transaction between the employer and the employees.
What did this mean for those in Payroll during this transition?
Payroll clerks charged with entering dollars and cents data and having to calculate salary amounts had to learn new skills.
They began to master automated programs developed to increase efficiencies and integrate Payroll data with HR, and compensation and benefits data.
Then there was the necessary tracking of that data and the additional auditing of the results that had to be done. Payroll reports were developed not only to check for errors but also to spotlight work trends – such as overtime pay -- and people had to learn to run those reports. All this was done in addition to the main purpose: paying the employees on time and accurately.
The era of the detail-oriented data entry Payroll clerk had given way to more duties and responsibilities to the organization. Those who could not or would not adjust to the newer roles generally saw fewer opportunities, while those who embraced the challenges saw a real career path developing for them.
The Payroll professional was born.
The Need for Specific Payroll Compliance
Around the same time that Payroll moved to its unique role beyond accounts payable, Payroll professionals became more involved with ensuring compliance with laws and regulations covering a wide gamut of issues.
Payroll compliance is carved out of tax law, labor law, and other laws; even family law, contract law, estate law, and privacy law have some provisions that impact Payroll operations. And, it is not getting simpler, it is getting more complex.
With governments seeking not only revenue through taxes for funding, but also fair and equitable employment practices, there are more requirements than ever burdening the practice of Payroll.
Payroll service providers have processes for their clients/employers to pay employees that are designed to meet regulatory obligations such as tax payments and filing reports, but these systems are only as good as the ability of those clients/employers to provide them with accurate data based on compliant policies.
Service providers have teams to cover compliance issues and they inform their clients of changes. They even institute automated compliance-related programs, but many are not set up to provide tax or legal advice about particular situations or issues. The service providers generally welcome informed clients as they are primarily in the business to process pay. The fact remains that if something is inaccurate or late, it generally is the client/employer that remains liable.
Legal teams for employers are great resources, too, and while there are legal speciality areas that delve into payroll provisions, such as employment law and tax law, few are experts in all the laws surrounding the Payroll function.
Forward-looking Payroll departments have stepped up to better understand the specific Payroll requirements that apply and, working with their third-party providers and their legal, tax, and HR teams, are helping to ensure regulatory exposure and liabilities are minimized.
This, too, has been a transformation of the Payroll role. Certifications for Payroll often are based not just on knowing the programs and processes that go into ensuring an accurate payday, but also on an ability to correctly identify key legal exposure points.
Now, many Payroll jobs require at least a basic understanding of the laws that apply.
Beyond the Easy Button
Misunderstandings about the Payroll function are not new and remain prevalent across organizations.
To those in Payroll, it seems with every new creative compensation scheme or benefit, there is the convention that Payroll first has the capacity to implement it, and second, that any addition to the process is turn-key, a switch, or, as we see too often referenced, implemented through “the easy button.”
This is true for governmental programs as well. Tax Pay-As-You-Go and other Payroll-related requirements in many countries, for example, often are made without much consideration for the system alterations and testing that are needed, and the lead times to ensure the changes are properly put in place.
In addition, there have been significant advances in Payroll technology that continue to move the needle toward more effective automated processes and streamlined, cost-efficient solutions. With these new tools, there may be more credence for some in upper management to think that Payroll will become a much less labor-intensive operation, and that the “easy button” may be within reach.
But, as often as is the case with higher-tech and higher-capacity programs, there come new opportunities.
The data that Payroll collects and stores continues to grow in volume and importance, providing much more than what is needed to successfully run Payroll. Seen as underutilized, Payroll data can be leveraged in myriad ways. For one, this data has a more strategic use in providing insights into the workforce. It can also shine a light on transactional issues, helping to ensure the integrity of money transfers.
So, an additional skillset is needed as the new world of Payroll data analysis descends upon the Payroll community.
While artificial intelligence will aid in identifying and categorizing Payroll issues that have an impact on an employer’s operations, it will not effectively replace the capable, experienced Payroll professional who can perform a proper analysis.
This expertise will further enhance Payroll’s role in the organization. For many in Payroll, it is likely some aspects of the job will become more strategic in nature because of this desire to use Payroll data beyond simply processing pay.
It would be convenient to have the prognostic ability to see precisely how the role of a Payroll professional is going to change. One certainty is that the Payroll community will continue to be resilient when big changes occur.
Do not be surprised in five years to see modern Payroll operations continue to develop and evolve, and the staff within them forging enhanced career paths, allowing them to contribute in numerous ways to the success of their organizations.
Happy National Payroll Week!
Author: Michael Baer
Michael Baer is the President of Baer Unlimited. Baer Unlimited helps companies and Payroll departments elevate their brand and achieve secure and compliant pay processing while practically navigating today’s most difficult issues.
This National Payroll Week, it seems clear that Payroll is in a period of unprecedented adjustment.
The nature of the Payroll function is ever-evolving, and those working in the field have had much to learn to adapt to over the past decades, especially with automated processes being ever more integrated into the practice. As the use of robotics and artificial intelligence gets absorbed into Payroll systems and processes, some now are raising questions about how this impacts the Payroll profession overall.
How much will my role as a Payroll professional change?
Will Payroll as a stand-alone function be absorbed as a piece of a larger, yet-to-be-defined administrative function that encompasses all things related to employee experiences?
While there is no reliable crystal ball to let us know how things will turn out in the next five years, we can look back at similar crossroads when Payroll professionals addressed the same questions. The answers were found in how resilient the Payroll community becomes when big changes occur.
Payroll professionals have faced previous challenges that appeared to threaten their livelihood, only to emerge with even more significant roles in the organizations they serve, contributing in more meaningful ways than ever. Some examples of how Payroll has evolved so far can provide hints to what those in the industry can expect in the near future.
Emerging From Accounts Payable
This evolutionary process started with Payroll outgrowing its position in accounts payable.
For many organizations, Payroll has been and continues to be the largest accounts payable outlay. If not the largest, then certainly in the top two or three.
During the 1980s, the profile of Payroll operations was changing. Employers started to see Payroll’s role as the key implementer of compensation programs, as well as a big accounts payable function. There was a recognized need to coordinate Payroll’s work with HR’s compensation and benefits teams to put in place new programs, handle more reporting, and process pay more efficiently.
It became clear that payday was much more than a simple arms-length transaction between the employer and the employees.
What did this mean for those in Payroll during this transition?
Payroll clerks charged with entering dollars and cents data and having to calculate salary amounts had to learn new skills.
They began to master automated programs developed to increase efficiencies and integrate Payroll data with HR, and compensation and benefits data.
Then there was the necessary tracking of that data and the additional auditing of the results that had to be done. Payroll reports were developed not only to check for errors but also to spotlight work trends – such as overtime pay -- and people had to learn to run those reports. All this was done in addition to the main purpose: paying the employees on time and accurately.
The era of the detail-oriented data entry Payroll clerk had given way to more duties and responsibilities to the organization. Those who could not or would not adjust to the newer roles generally saw fewer opportunities, while those who embraced the challenges saw a real career path developing for them.
The Payroll professional was born.
The Need for Specific Payroll Compliance
Around the same time that Payroll moved to its unique role beyond accounts payable, Payroll professionals became more involved with ensuring compliance with laws and regulations covering a wide gamut of issues.
Payroll compliance is carved out of tax law, labor law, and other laws; even family law, contract law, estate law, and privacy law have some provisions that impact Payroll operations. And, it is not getting simpler, it is getting more complex.
With governments seeking not only revenue through taxes for funding, but also fair and equitable employment practices, there are more requirements than ever burdening the practice of Payroll.
Payroll service providers have processes for their clients/employers to pay employees that are designed to meet regulatory obligations such as tax payments and filing reports, but these systems are only as good as the ability of those clients/employers to provide them with accurate data based on compliant policies.
Service providers have teams to cover compliance issues and they inform their clients of changes. They even institute automated compliance-related programs, but many are not set up to provide tax or legal advice about particular situations or issues. The service providers generally welcome informed clients as they are primarily in the business to process pay. The fact remains that if something is inaccurate or late, it generally is the client/employer that remains liable.
Legal teams for employers are great resources, too, and while there are legal speciality areas that delve into payroll provisions, such as employment law and tax law, few are experts in all the laws surrounding the Payroll function.
Forward-looking Payroll departments have stepped up to better understand the specific Payroll requirements that apply and, working with their third-party providers and their legal, tax, and HR teams, are helping to ensure regulatory exposure and liabilities are minimized.
This, too, has been a transformation of the Payroll role. Certifications for Payroll often are based not just on knowing the programs and processes that go into ensuring an accurate payday, but also on an ability to correctly identify key legal exposure points.
Now, many Payroll jobs require at least a basic understanding of the laws that apply.
Beyond the Easy Button
Misunderstandings about the Payroll function are not new and remain prevalent across organizations.
To those in Payroll, it seems with every new creative compensation scheme or benefit, there is the convention that Payroll first has the capacity to implement it, and second, that any addition to the process is turn-key, a switch, or, as we see too often referenced, implemented through “the easy button.”
This is true for governmental programs as well. Tax Pay-As-You-Go and other Payroll-related requirements in many countries, for example, often are made without much consideration for the system alterations and testing that are needed, and the lead times to ensure the changes are properly put in place.
In addition, there have been significant advances in Payroll technology that continue to move the needle toward more effective automated processes and streamlined, cost-efficient solutions. With these new tools, there may be more credence for some in upper management to think that Payroll will become a much less labor-intensive operation, and that the “easy button” may be within reach.
But, as often as is the case with higher-tech and higher-capacity programs, there come new opportunities.
The data that Payroll collects and stores continues to grow in volume and importance, providing much more than what is needed to successfully run Payroll. Seen as underutilized, Payroll data can be leveraged in myriad ways. For one, this data has a more strategic use in providing insights into the workforce. It can also shine a light on transactional issues, helping to ensure the integrity of money transfers.
So, an additional skillset is needed as the new world of Payroll data analysis descends upon the Payroll community.
While artificial intelligence will aid in identifying and categorizing Payroll issues that have an impact on an employer’s operations, it will not effectively replace the capable, experienced Payroll professional who can perform a proper analysis.
This expertise will further enhance Payroll’s role in the organization. For many in Payroll, it is likely some aspects of the job will become more strategic in nature because of this desire to use Payroll data beyond simply processing pay.
It would be convenient to have the prognostic ability to see precisely how the role of a Payroll professional is going to change. One certainty is that the Payroll community will continue to be resilient when big changes occur.
Do not be surprised in five years to see modern Payroll operations continue to develop and evolve, and the staff within them forging enhanced career paths, allowing them to contribute in numerous ways to the success of their organizations.
Happy National Payroll Week!
Author: Michael Baer
Michael Baer is the President of Baer Unlimited. Baer Unlimited helps companies and Payroll departments elevate their brand and achieve secure and compliant pay processing while practically navigating today’s most difficult issues.