How the latest technologies are transforming payroll solutions

Technology makes the business world go round and payroll is no different. Over the past few years, technology and regulations have significantly changed the way in which small and medium businesses manage their payroll systems. New software and cloud-based systems have helped businesses streamline their payroll processes, increase the visibility of their data and manage their teams more effectively. As technology becomes increasingly sophisticated, businesses can make a number of significant gains.

Each small business has to satisfy a number of obligations when maintaining payroll records about their employees. According to the Fair Labor Standards Act (FLA) employers must keep the payroll records of their employees for three years. In addition, employers must also keep all records including wage rates, job evaluations, seniority and collective bargaining agreements for two years which explain the basis of paying different wages to employees of opposite sexes in the same establishment.

At the same time, they must ensure all employee data is kept safe and they satisfy all data protection regulations. These include ensuring data is kept securely and that all reasonable precautions have been taken to protect against data loss and that the employees and former employees are informed about what data is held about them by the company and how this will be used.

Keeping everything in order can be difficult. Indeed, according to the IRS, 40% of small businesses end up paying a payroll related penalty every year. Most of these are related to filing errors or not depositing withholdings on time. 

Meanwhile the pandemic has created its own set of demands. Lockdown restrictions were imposed but work went on. Everything from large to small businesses still had to ensure its staff were paid on time. This has prompted a need for online technologies which allow accessibility of payroll systems from any location and at any time.

In this instance, technology can be a benefit and a hazard.

First, let’s look at the benefits. Advanced, automated and online technologies can help in a number of ways. Here are just a few:

• Enhanced accessibility: Online portals mean HR administrators no longer need to be on site to access their company’s systems, they can do it remotely. Flexible solutions can be implemented so that the payroll service can continue to be managed on the go from any secure device.
• Improved compliance: As a business owner, you need to stay up to date with the latest payroll regulations. Failure to do so could result in costly fines. Easy to use payroll systems can automate tasks and obligations and can provide more visibility of data. This helps managers monitor the existing situation in their payroll system and demonstrate compliance to any regulators who come looking.
• Eliminates repetitive tasks: Just ask any Human Resources manager what their least favourite tasks are and the chances are managing payroll will be close to the top. This involves many tedious and repetitive tasks. It takes time and requires high levels of accuracy. Automating these reduces the burden on staff, speeds up processing time and avoids the risk of costly human error.
• Highlights fraud: Having all your data in front of you can highlight instances of fraud – such as ensuring employees are doing the work they are billing for and spotting any inconsistencies which might previously have been missed.
• Managing holidays and expenses: The system can manage all aspects of the human resource pipeline including tracking hours and worker entitlements. The system can streamline the payroll process of tracking and approving holidays and managing expenses. A manager can see all expense claims, approve them before making a direct deposit into the employee’s bank account.

However, alongside these come risks and complexity. Using an online system – indeed any digital solution – can put sensitive data at risk. An HR manager accessing central systems online via remote locations creates the potential for cyber risk by introducing more endpoints – not all of which will necessarily be fully secure.

When choosing new technologies, users will have to ensure they understand what the technology can do and that it satisfies all security requirements.

So, what are the latest technologies and how can these offer value to clients?

The first, as already outlined, has been the increased use of cloud technologies. As broadband speeds grew, enterprise cloud solutions have become increasingly common. Their use was supercharged during the pandemic as small businesses had to find ways of accessing systems remotely. These cloud-based payroll management software packages allow managers to handle every aspect of operations through an online login. They give companies access to the latest technology without having to purchase large amounts of equipment. All you need is a log in and you’re ready to go.

Cloud-based software comes hand in hand with artificial intelligence (AI) and automation. AI can automate tasks such as ensuring each employee is in the correct tax bracket as well as more advanced jobs such as analyzing payroll data. That information may contain all sorts of hidden insights which humans might miss.

Related: What is payroll and how is it calculated?

Systems are also becoming increasingly integrated with other functions such as HR management. Although they are separate items, they are linked and interdependent. Having these systems operating separately adds to the time, expense and work involved in managing payroll. Integrating them effectively can enhance visibility and streamline operations.

These technologies are evolving and having an ever-greater impact on business operations. For the most part, these will be immensely beneficial for companies. They will reduce the administrative and economic burden of key operations and it will help small businesses gain new insights from their operations. However, they will create risks – especially in terms of security. With regulators putting pressure on companies to improve their data protection provisions, making sure systems are adequately secured and conducting due diligence on all third-party payroll service software providers is crucial.