Last week marked Neeyamo's Payroll Beyond Borders' virtual global payroll industry event. The keynotes were delivered by payroll industry leaders Dan Maddux, Executive Director, American Payroll Association, and Ken Pullar, CEO, CIPP. The event had around 1,200 participants from around the world and was the first global coming together of global payroll industry experts since the start of the pandemic. As well as looking at the impact of the pandemic on payroll operations, there was also attention paid to how global payroll and agility is increasing in importance, reflecting changing priorities and the need to "meet the employee" where they want to work.

New Payroll Complexities Created by the Pandemic

The pandemic and related regulations or government subsidies meant new levels of complexity were introduced to payroll operations, complexities that needed to be handled without any delays. Payroll leaders highlight that payroll teams, both outsourced and in-house teams, should receive recognition for their efforts. The migration of staff to work-from-home locations put additional strains on payroll departments, both because of the associated risks and also the challenges in managing employment taxes in alternative payroll jurisdictions. Employees don't always feel the need to tell their employers where they are located if they are working remotely. Over the next year, some organizations may be facing the tax impact of changed employee locations retrospectively. The business continuity plans that were activated were not designed or expected to remain in place for months on end as lockdowns were extended. 

The pandemic and the general ensuing migration to WFH has helped shift the employee/employer power dynamic in favor of the employee. Employers will increasingly need to meet their employees' requirements as to where they want to work and how they want to work if they are to keep talent. Payroll systems need to be agile to support additional payroll jurisdictions, and payroll managers should consider adding new processes to enable employees to include remote locations for recording their place of work.

Employers are advised to re-evaluate business continuity plans and payroll controls. This is a time to upgrade and improve business continuity by investing in more robust digital processes to enable payroll to continue flexibly. The pandemic has exposed significant manual processes based on outdated systems that need to be re-evaluated to keep the payroll running during times of crisis.

On-Demand Payroll Increasing in Significance

There has been a growth in on-demand payroll offerings, otherwise known as ESAS (employer salary advancement schemes), particularly in the U.S. and the U.K., which are the primary markets currently. The pandemic has helped accelerate this growth: in the last two years, more workers have had to contend with financial stresses caused by a combination of limited or zero savings, reduced income, and unforeseen emergencies. And as the cost of living continues to rise in most markets, this isn't going to get better any time soon. Even amongst workers with above median, secure incomes and a decent level of savings, a growing proportion has been facing problems with their financial budgeting, perhaps due to timing mismatches between income and major outgoings. The household debt-to-income ratio has been rising for years, and in the U.S. and U.K. is over 100. With the current war for talent, there has been an increased focus by organizations on employee retention and the employee experience – and this includes improving employees' financial wellbeing. It should go without saying that employees that are financially stressed are not going to be the most productive, healthy, safe, or loyal members of the workforce.

But there are major considerations to be taken into account by employers when considering introducing on-demand pay systems, among these:

• The potential impact on company cash flow, though this is not an issue for organizations that work with third-party ODP providers
• Providing employee education on the principle that having access to a proportion of their pay on an on-demand basis does not automatically lead to financial wellness. Placing restrictions on the frequency with which an employee can apply for on-demand pay might help employees in their debt management and/or financial budgeting to an extent
• The risks of exposing employee data to financial services companies who might push other loan products.

So which types of employees are more likely to be interested in on-demand pay solutions?

• Younger employees with little or no savings, who are also facing large one-off outgoings, and who are new to financial budgeting
• Part-time and temporary employees, who will continue to represent a growing proportion of the overall workforce in all geographies
• Industries like hospitality and industries that have a high proportion of hourly-paid workers, especially industries with significant amounts of overtime (not having to wait to the end of the month when you have done a lot of overtime and have an immediate financial need is a significant benefit)
• The public, healthcare, and education sectors, which are major employers.

There were some concerns about on-demand payroll expressed by payroll leaders at the event. Among these was a concern that, given many companies have spent decades moving employees away from weekly pay cycles to monthly (U.K.) or two-weekly (U.S.) cycles, and thereby reducing operational payroll costs, is going on-demand a backward move for both employer and employee? However, from the employee's perspective, having access to on-demand pay is likely to be an attractive element in a benefits package.

The pandemic has changed organizations' priorities in terms of their people and operations. And it has thoroughly tested the robust nature of payroll operations, to unprecedented levels. There was a general consensus at the event that there is a continuing need to prioritize agility and automation in global payroll operations.

Nobody should underestimate how essential payroll is, though putting money into the bank accounts of employees in an accurate and timely way is often a thankless task. Payroll processes need to be robust if they are to support new ways of working, and Neeyamo's event was a valuable way to discuss and test thought leadership ideas.