The tradition of running payroll biweekly or monthly is a long-standing practice that can be traced back to the high burden of tedious workloads, historically involving the manual calculation of benefits, taxes, hours worked and other data points to pay workers accurately. As the scheduled payroll cycle strategy has been around for decades, employees have simply come to accept waiting for payday.
But amid new employment models and a younger generation of professionals, the biweekly payday may be on its way out.
Digitization has become both a cause and effect of payroll evolution in recent years. Automation technology has made it possible for employers to run payroll more frequently with less burden. But other changes in the workforce are adding new pressures on the payroll department to modernize and address shifting employee needs.
Speaking with PYMNTS, PrimePay CEO John LaMancuso discussed how employers can overcome some of the newest payroll pain points emerging from a quickly evolving landscape, and described why businesses have a greater opportunity than ever before to take advantage of payroll data that can fuel growth.
The Employer-Employee Link
Though it may not have always been viewed as a strategic and value-added portion of the back office, payroll holds an immensely powerful position, especially today.
“Payroll is always going to be a central priority for employers,” said LaMancuso. “It’s that link between the employee and the employer. It’s that connective tissue.”
As it grows more difficult for companies to attract and retain high-quality talent, payroll efficiency is critical to getting professionals paid accurately and on time. But facilitating that connection between employer and employee has grown more difficult over time, particularly amid work-from-home requirements and arise in cross-border hiring activity.
It’s in this context that data derived from the digitization of the payroll function has become more important for the enterprise.
Payroll data, along with other information from human resources systems, can be instrumental for identifying workforce risks, employment trends, or gaps or weaknesses in the talent pool. Employees are increasingly embracing self-service portals that can generate even more data.
“Today’s business intelligence tools can extract significant amounts of predictive data to not only forecast but also to plan and develop models for growth or optimizing organizations,” noted LaMancuso.
Cash Flow Preparation
Not surprisingly, the financial data within payroll systems can also be especially useful for a corporate cash flow strategy. Taking financial and human resources data and placing it within the context of broader trends in economics and talent availability can be especially useful to driving company growth.
Today, the biweekly or monthly payroll offers stability and predictability in corporate capital outflows. But employee needs are changing, and thanks to automation technology, there may no longer be an excuse for an employer to only run payroll every other week.
“The reality is employees earn wages every single hour, day, week or by the month,” said LaMancuso. “Employees don’t want to wait for a paycheck every two weeks if they don’t have to. And in many cases, they can’t afford to wait.”
While technology can facilitate connecting employees to earned wages on a daily, or even real-time, basis, this model throws a wrench in the more controlled and predictable capital outflows that result from biweekly payroll. Indeed, employers that deploy a more frequent payroll model must also adjust their cash flow management and analytics strategy.
At the same time, there are plenty of other disruptions in the payroll arena. LaMancuso pointed to the emergence of real-time payments capabilities as well as an increasingly complex regulatory landscape, adding pressure on the payroll function.
But by outsourcing payroll operations, LaMancuso said employers can offload the burdens of compliance and technological adjustments to address a rapidly changing market. Further, with the continued sophistication of digital payroll technology, employers will have greater access to data that can support growth initiatives, cash flow forecasting and actionable insights.
The framework of payroll as we know it may be in flux, but digitization means employers will not only be able to weather the disruption but actually extract value from payroll data in ways they could not have done before.
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