Digital transformation has affected every part of the modern workplace, but payroll has trailed behind the broader embrace of the tremendous power of digital technology.
Of course, humans like to avoid change wherever possible. But payroll professionals are just as ambitious as people in any other profession, so fear alone doesn’t explain why many payroll providers have so far avoided jumping into digital transformation.
More likely, the reason for this reticence is that when payroll is done right, no one notices it. Also, payroll is such a critical part of a company’s processes that changing something which is working fine is seen as unwise. The result is that managers perceive little reward for taking even moderate risks of altering payroll processes.
However, judging by the success of implementing digital transformation in other parts of the workplace, the jury is in on the potential benefits to be gained from deploying the same procedure for payroll.
And since the technology curve will only continue to rise across the modern workplace, it’s well past time for payroll to understand how digital transformation could make life easier.
What is digital transformation?
Digital transformation is a vague, catch-all term that will play out differently for every company. However, in general terms, it can be defined as the integration of digital technology into all areas of a business to change how that business operates and how it serves customers.
Digital transformation is also a cultural change that requires continual experimentation and getting comfortable with failure. This sometimes means walking away from traditional business processes and risking a switch to new practices that still haven’t had all the kinks ironed out.
A business can begin digital transformation for many reasons. But the only reason that matters is that it’s a survival issue. By sticking with tried-and-true processes in an increasingly digital world, money and efficiency are left on the table to be snapped up by competitors that are trying to digitise those processes.
People-centric change management
The McKinsey Global Survey 2020 found that digital transformational projects tend to struggle primarily with skills and culture issues, not so much the software packages.
More than half of organisations surveyed (51%) reported skill gaps widening between traditional and digital teams, while 36% said employees found it tough to adapt to new digital roles. This data suggests that getting digital transformation right means concentrating on the people.
Design thinking is all about putting the human at the centre of any business change. For companies planning a digital transformation project for payroll, the core motivation can’t be: how will this help the company? Instead, a better motivation is: how will improving our payroll help the lives of my employees? After all, employees are the engine of any business, so it is important to put their needs first when upgrading payroll systems.
Payroll will remain at the centre of employee morale and financial wellness, and as such, any digital transformation effort must provide transparent, accurate and timely results.
Adopting payroll technology
Despite the incredible array of payroll software and digital tools available on the market today, the reality is that some companies find it difficult to migrate to these platforms.
As mentioned above, new ways of working were accelerated by the COVID-19 pandemic, such as the ability to work from anywhere and the “hoteling” of office space. While these dynamics have been a boon for productivity in many areas, unfortunately, it also meant larger businesses now have even less opportunity to place large groups of their employees into location-based blocks for identical payroll treatment.
But constraints for the big end of town also imply that smaller companies that do embed digital transformation into their payroll will create an advantage over their larger competitors. By getting comfortable with continual technology change, SMEs can stay ahead while attracting excellent talent that prefers efficiency and working in a digital-first environment.
The same lesson applies to payroll professionals. Digitisation will require learning new skills, and those that acquire those skills will quickly find themselves in an excellent position to offload the repetitive tasks to computers while focusing on good employee management and engagement.
Focus on delivering value
As any digital transformation expert will say, the most expensive place to fix quality is at the end of the process. By that time, the effort needed to finish a task has already been used up.
Payroll teams spend a significant amount of effort in aggregating, reconciling, auditing and adjusting data and records to identify omissions and errors.
In fact, the Deloitte payroll benchmarking survey found that those activities take 31% of payroll’s time. While technology has made payroll more efficient over time, a digital transformation mindset can help solve the fundamental problem that quality is best improved at the front of the process rather than at the end.
And by introducing a deeper digital environment to payroll, companies can also squeeze out extra value by dealing better with compliance and regulatory issues. Manual payroll processes can be prone to errors which can hurt a company’s reputation, productivity and bottom line, and lead to regulatory penalties or government fines during tax filing. It is always a good idea to avoid fines and penalties since it is money that could be used elsewhere to grow the business.
With a bigger digital footprint, payroll can identify and investigate strange outliers in data or processes. Many software packages now come with smart tools that can even spot and chase down instances of fraud. That alone can add important value to a business.
Employers can also benefit from the increased digitisation of payroll since it gives them more control over payment timing and their personal data.
Individual employee productivity, attendance, overtime and incentives can be tracked more closely by both the payroll team and the employee, which should help reduce mistakes by everyone.
A digital transformation does far more than add to the bottom line: it creates a culture where employees can thrive and grow in their careers. And that, above all else, is the best way to drive value.
For over thirty years, Affinity has been a trusted partner for mid-market and enterprise businesses in Australia and New Zealand, empowering them to transform their payroll operations. With a focus on turning payroll from a cost into an asset, we have established ourselves as industry leaders in delivering innovative cloud-based payroll software and exceptional payroll services.