As part of NelsonHall’s recent Next Generation Payroll Services market analysis, in addition to interviewing 20 of the leading payroll services providers globally, our research extended to a survey of the vendors’ clients. We met clients of different sizes, from a variety of geographies and industries, and covering a range of services in-scope and levels of payroll sourcing maturity. The interviews enabled us to gain a comprehensive understanding of the attitudes, perspectives, and satisfaction levels of current payroll services clients. Here I present an overview of some of the findings.

Overall client satisfaction with current payroll processing services is positive (with an average vendor rating of 4.1 out of 5), due to simplified, compliant, and reliable service delivery results. And clients show similar confidence in their vendors’ ability to meet their future needs, and are highly likely to recommend them, resulting in an overall average vendor NPS of +24.   

However, clients cite concerns in three key areas that are central to driving payroll transformation: 

• Technology integration
• Process improvement
• Overall vendor innovation.

Technology integration gap

Clients’ critical future requirements center on technology improvements: they desire a simpler HR/payroll infrastructure landscape as they drive standardization and improvements to UX, integration, reporting, overall ease of use, stakeholder engagement, and the ability to scale to support the business (e.g. by M&A, organic growth).

Technology and platform features are the top vendor selection criteria, as clients are focused on enablers to payroll transformation. Clients indicate that technology is the leading priority for their payroll operations, while many are seeking more robust capabilities (e.g. mobile, self-service, additional HR modules). However, while ~95% of clients leverage cloud platforms with positive satisfaction ratings, clients are less satisfied with the level of integration achieved to date.

Clients point to a lack of integration across the HR/payroll landscape, which negatively impacts reporting and the user experience. Less than half of participants have an integrated HR and payroll solution, and of those that do, most feel that integration is adequate (or did not know enough about it to comment). Those recording lower scores indicated that integration was in place but was not ideal; e.g. employees may be unaware, but behind the scenes connections are lacking, or integration was seen as positive initially, but ongoing vendor support for the integration is poor.  

Clients expressed the need to gain access to their entire workforce, across all regions and countries. However, overall benefit delivery is lacking, as vendors are not delivering the consolidated reporting promised. This can be partly attributed to the integration inconsistencies which clients cited, plus vendor capabilities not aligning to expectations set in the contracting phase (overselling and underdelivering).

Process improvements are not progressing fast enough

Clients indicate that process change management and overall digitalization of the payroll process are critical in terms of future importance. However, most feel that while their vendor supported these initiatives strongly at the start of the relationship, during implementation, they are not always keeping up momentum in delivering process improvements.

Another area where vendors are falling short of client expectations is collaboration. Clients want to see vendors more engaged and collaborative when it comes to maintaining service levels, but more importantly, in improving the process going forward. Clients are seeking vendor guidance on how to help them move closer to an optimized delivery model, through consultation and best practice sharing. They also want to see more “next generation” features rolled out more quickly.

Clients are seeking automation to drive out manual processes and improve efficiency overall. However, they still feel there is a higher than expected level of manual effort in the vendor process, limiting transformation progress. Nearly all clients see automation as an opportunity to improve processes, but most have no idea of vendor automation programs or how they are being used now or planned to be used in the future. On the up-side, the clients who do have visibility of vendor automation programs, though in the minority, feel optimistic that they will be deployed and will deliver process benefits.

Mechanisms for innovation are seen as reactive

Clients feel that vendors are mostly reactive in this area, and that innovation approaches are largely informal. Clients want vendors to be more proactive in bringing innovation initiatives to the table, and feel that vendors are not keeping them abreast of market changes, including how they are handling new solutions, and how the client could benefit from them.

Clients find vendors’ mechanisms for delivering innovation to be primarily centered on regular monthly/quarterly/yearly strategic meetings with account leadership. However, clients indicate that these calls are generally not focused on innovation. Few clients cite the existence of customer advisory boards, vendor conferences, and portals for feedback. Clients often indicate that their suggestions are not acted upon or documented. Approximately 12% are unaware if any innovation mechanisms are in place.

Example vendor initiatives

With buyers keenly focused on innovative managed services and no longer accepting of a simple bureau-style offering, payroll providers clearly have some work to do in delivering on the promise of global payroll transformation. That said, I speak to and track the leading global payroll and HRO providers on a regular basis and I see them investing heavily to deliver innovation that will execute on that promise. In closing, below are examples of innovations that are making an impact, addressing some of the concerns identified in the client survey:

• “Dynamic” integrations with payroll that allow open formatting or “data your way”, and automatically validate results, identify errors, isolate them for resolution (communicated through a chatbot), and continue processing (e.g. CloudPay’s Cloud Connect 2.0)
• Advanced analytic payroll reporting that provides global payroll insights; benchmarking across a wide variety of industries, sizes, and complexity; executive- and manager-level insights and drill-downs; alerts based on thresholds being exceeded, with push notifications; historical and trend information with graphical views; AI and ML to deliver prescriptive guidance to users (e.g. ADP DataCloud)
• In terms of process improvement, HRO vendors, including payroll providers, are investing in and pioneering the use of RPA and AI in HR. They are looking to improve HR and payroll outcomes and drive the innovation buyers seek in the process model. And payroll providers are focused on automating what has historically been a complex and manually intensive process, to the largest extent possible – with vendors like NGA HR seeking to achieve a fully autonomous payroll process in the near future.

Subscribers can access the report ‘Payroll Services – Client Expectations Analysis’ here. To find out more, contact Guy Saunders.

In September, NelsonHall will begin research on the next annual ‘Next Generation Payroll’ market analysis, which will be published in Q1 2019.