Nearly 15 years since the first modern business applications migrated to the cloud, organizations are finally following suit and moving their employee payroll operations to the cloud. In fact, 40% of companies say they will modernize their payroll systems by 2023, according to research conducted by Alight Solutions, a cloud-based provider of integrated digital human capital and business solutions.
According to the Global Payroll Complexity Index report, cloud-based payroll platforms accounted for 61% of payroll solutions last year, compared to on-premise platforms, up from 34% in 2019. One-quarter of companies (26%) have accelerated digital payroll projects in the past year, and 62% expect to go through a digital transformation in the next two years.
What it mean for HR leaders
Employee wellbeing, motivation and loyalty are closely linked to being paid accurately and on time every time, and governments also mandate this, says Wilson Silva, senior vice president of customer experience and HCM delivery at Alight. “The payroll process is strictly regulated and, as is revealed in the Alight Global Payroll Complexity Index report, fines for non-compliance are stiff,” says Silva.
Migrating payroll to the cloud “removes much of the stress of overseeing this highly challenging and essential process. Done manually or using a disparate mix of processes leaves it open to human error. Digital payroll automates much of the routine and error prone admin,” he adds.
According to respondents, the primary drivers for accelerated digital payroll projects include regulatory risk (42%), corporate strategy for outsourced business processes (39%), cost controls (27%), payroll talent shortages (19%), and M&A and business divestment activities (15%).
HR directors are also interested in bringing payroll in line with the transformation of other HR functions, says Silva. Employee benefits such as learning and development, time and attendance, and leave administration are now largely self-service and making them accessible via a mobile device is favorable for employees who are not in a desk-based role. “For HR, this increases the likelihood of people engaging and taking advantage of L&D resources and career advancement opportunities,” says Silva.
While some older payroll systems are reaching the end of their service life for technical support, these set-ups are often near impossible to access remotely without significant IT support investment. “This raises the risk of missed payroll, leading to potential loss of staff loyalty and compliance failure,” says Silva. “Both costs [are] too great in an already crisis situation.”