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Payroll Services Vendors Need to Redouble Efforts to Introduce New Digital Models

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NelsonHall recently published its 2016 Targeting Payroll Services market analysis and NEAT vendor assessment, as part of which we interviewed the clients of 16 payroll vendors across North America, Europe, and Asia Pacific to ascertain their expectations and satisfaction levels across a range of payroll service criteria.

Below is a small selection of the results comparing current client satisfaction with future importance.

Further Cost Savings: the biggest challenge for payroll vendors

While client satisfaction with cost savings is currently only moderately below client expectations, this gap will widen markedly unless payroll service providers can accelerate their ability to drive down cost. Key expectations include cost reduction through consolidation of disparate payroll systems, increased automation of current payroll processes, including the use of RPA tools to support query handling, increased use of technology and self-service, and improved integration of payroll and HR systems, reducing manual effort and duplicate data. Comments from users included:

For the future of our type of industry, every aspect of the company cost is going to be important

“There is still too much time spent in checking and re-checking what we need done”

“We only got live in April 2016, we are still in stabilization. We are going to be looking at more ways for reductions”

“It is significant as we are constantly reducing the budget”

Improved Reporting: could do better

Similarly, while client satisfaction with reporting is also currently only moderately below client expectations, this gap will again widen markedly unless payroll service providers can enhance their use of analytics in support of reporting. Improved consolidated reporting across the business, to provide business insight and inform strategic decision making, is important here as is the introduction of more predictive and prescriptive analytics. Comments from users included:

“I think that the more user friendly it gets it takes away from detailed reports, it turns it into over-simplified data. I would rather have them more data savvy”

“This is a hot topic just now as we are going through audits”

“It is meeting expectation but it is becoming more important to us”.

Payroll Accuracy & Improved Usability remain areas for focus

Other areas where vendors need to enhance their payroll services include continuing to improve payroll accuracy and usability. As in cost reduction and reporting, the keys to success lie in the introduction of new digital business models incorporating combinations of RPA, analytics, and cognitive technology to introduce improved accuracy, and reduced “customer effort”, alongside improved analysis, and reduced cost.

What does the future hold?

In terms of ability to meet future client needs, areas scoring the highest client satisfaction include:

  • Strength of partnership
  • Time and attendance
  • Vendor service culture.

Areas scoring the lowest in terms of ability to meet their future needs include:

  • Ability to be proactive
  • Innovation and creativity
  • Analytics and reporting.

Clearly, these are opportunities for improvement. Clients are looking for vendors to take the initiative in introducing new ideas, new processes, and new technologies, and not feeling like they are the ones always leading the vendor. Accordingly, it is important for vendors to be proactive and develop new standards and process models based on new thinking and new technologies. RPA, in particular, is starting to become very important to payroll clients as demonstrated by the following RPA-related comments:

“It will drive down the cost and risk”

“Main goal for next three years”

“Very important”

“Some things are still done manually”

In addition, I believe innovation is a joint responsibility, and my suggestion is for the vendor to ensure that thirty minutes is set aside at each governance and operational team meeting to focus on both innovation and continuous process improvement.

For example, in terms of analytics and reporting, the good news is that the single biggest investment area for payroll providers at present is analytics with ~2/3 of vendors making investments in their analytics offerings, including predictive analytics. Vendors need to make sure that clients are fully aware of the new possibilities arising from these new and emerging capabilities.


NelsonHall’s NEAT comparative vendor assessments look in detail at vendors’ ‘ability to deliver immediate benefit’ to their clients, and their ‘ability to meet future client requirements, and assist strategic sourcing managers in assessing vendor capability while cutting the time and cost associated with their sourcing projects.

The payroll NEAT shows how 16 payroll vendors are positioned overall in terms of their ability to deliver payroll services, as well as within four distinct market segments (i.e. areas of focus designed to meet specific payroll requirements): these are Analytics and Reporting Focus, Technology and User Experience Focus, HR Cloud Integration Focus and Multi-Country Focus. The NEAT online tool also enables buy-side organizations to input their own weightings and tailor the payroll dataset to their specific requirements across over 50 individual vendor evaluation criteria. In this way, sourcing managers can configure the NEAT evaluations in accordance with their own priorities and business requirements for service offerings, delivery capability, customer presence, benefits achieved, and other criteria.

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