How Payroll Keeps Up With A Modernizing Workforce

With virtual assistant technology pressing deeper in corporate finance, bots and  artificial intelligence (AI)-powered tools deploying natural language processing are popping up from logistics management to accounting — and payroll is no exception.

At the macro level, the benefits of virtual assistant technology often relate to the ability for machines to automate data processing and analytics, and then present that information to professionals in a conversational way. For payroll technology firm Alight Solutions, the decision to launch a virtual assistant, Eloise, stemmed from the need for payroll managers to have an automated way to process troves of historical payroll data in an effort to identify errors, anomalies and trends.

Alight Executive Vice President, HCM and Financial Solutions Colin Brennan recently told PYMNTS that it’s not just virtual assistant and AI technology, but their combination with machine learning that has the greatest impact for improving accuracy and efficiency in an ever-changing payroll ecosystem.

Technology For The Payroll Department

Payroll is changing, he said, and becoming more complex as employers demand new ways to compensate their employees. That means more workers don’t fall under the category of receiving a paycheck every two weeks for the same amount. Rather, some employers may want to pay workers based on tasks completed, commissions, even location.

For payroll service providers, this elevates complexity, too. A payroll processor might accurately process payroll for a client based on the various information a company has provided. However, if those inputs are inaccurate or incomplete — including salary, commissions, travel across different states, bonus cycles, professionals that are on leave, and more — then payroll inaccuracies are sure to emerge.

Where AI and machine learning come in is being able to take all of those inputs, as well as years of historical payroll data, to more accurately assess whether a worker’s paycheck is correct or not.

The emergence of virtual assistants and AI in payroll isn’t the only technological trend emerging in response to shifting payroll needs.

Brennan highlighted the growing demand for global payroll support as another pressure forcing payroll providers to examine how they can offer services that can grow and flex as a company expands across borders — while also allowing that company to maintain accuracy when compensating workers in other markets, too.

“We’re seeing organizations that have traditionally been single-country, or in some cases single-state, employers, going abroad more quickly,” he said. “As the world becomes smaller from a digital, commerce, and connection perspective, the aspect of global payroll is becoming more important.

Payroll Evolution For Professionals

Evolution in payments technology, and changes to the ways consumers want access to their money, have also imposed shifts in the payroll space.

Brennan pointed to the evolutionary shift that has taken payroll from paper paychecks, to direct deposit, to payroll cards and, today, eChecks that allow an employer to email a paycheck to a worker. There’s also the increasing interest in daily payment solutions: biweekly payroll emerged from the amount of time it took employers to aggregate employee data, process it and print and cut paper paychecks. While technology has enabled these processes to accelerate, the tradition of biweekly pay has stuck around — which, Brennan noted, can be particularly painful for those employees living paycheck to paycheck, and those that receive an unexpected bill in the middle of a pay cycle.

There’s also, of course, the rise of the gig economy, which adds complexity in providing a holistic experience in wage compensation, tax deduction and benefits for a professional that may be working three freelance jobs.

Brennan also highlighted the emerging trend of employees now looking to receive their paychecks not from direct deposit, payroll card or eCheck, but via push payment into mobile wallets and payment technologies like Apple Pay.

Building Trust

Finally, shifting regulations have also forced the payroll industry to make some changes, said Brennan.

Earlier this week, Forbes highlighted the Internal Revenue Service’s recent changes to professionals that travel for business, with new per diem rates coming into effect at the start of the month. The rules impact how much money employers can provide to workers on a per-day basis before it becomes taxable.

In New York, state officials have subpoenaed dozens of payroll processors as part of a broader investigation into the ongoing MyPayrollHR collapse, allegations of fraud, and concerns over whether payroll companies should be forced to obtain a license to operate.

While Brennan declined to comment on the MyPayrollHR case specifically, he did highlight the increasing complexities of payroll regulations — both for employers and payroll service providers — and emphasized the role that payroll companies play in building and maintaining trust with their clients.

As a result, he said, the industry will begin to more closely look at the payroll business model. Today, that can mean either a payroll processor having access to an employer’s bank accounts to issue funds to employees, or a payroll firm managing its own bank account, funded by an employer to pay workers. Regardless of which will win out — if not both — Brennan said there is an element of trust in the payroll sector that’s growing more important as service providers react to a range of shifts, from the need for daily pay to adoption of faster payment schemes to accelerate access to wages.

After all, Brennan noted, payroll has a direct impact on individuals’ livelihoods, and a lackluster or inaccurate payroll experience can have a wide-ranging impact, from negatively affecting employee retention, to preventing a worker from being able to pay bills.