4 ways to re-evaluate your payroll one year into the pandemic
The pandemic jolted all payroll systems and there’s no better time for a payroll post-mortem than now.
If we learned anything since the global pandemic caused by COVID-19 began, it’s that when it comes to taking care of your most important asset — your people — you must stay ahead of their needs.
Now that many employees can work remotely for a company from anywhere in the world, personal taxation and payroll treatment changes are abundant. Previously, payroll was group-specific with some personal implications and because most everyone was in the same geographic location, the differences in taxation were controlled.
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Today, payroll has truly transformed to be an entirely individual experience and that sentiment, regardless of return-to-office plans, is here to stay. During the COVID-19 pandemic, many countries implemented payroll changes to help keep more spending capital in the hands of employees. Those incentives (e.g., payroll tax deferrals, government stimulus payments) increased the complexity of the payroll process and many software systems are not able to handle these new scenarios.
On top of that, the software upgrade process is not agile enough to accommodate these changes, and almost none of the systems have the comprehensive tracking features necessary to prevent a lot of tasks from needing to be performed manually.
The pandemic has also caused employees to pay even more attention to their employer benefits programs, often driven by changes to their financial status or approach to their taxes. Before the pandemic, some employees were in a rhythm regarding how they made payroll decisions and spent little time focused on it. With pandemic shake ups, not only are employees more focused on these issues, but they also have more questions about additional options that may be available to them (increase net pay, increase savings or investments, etc.), and are closely examining benefits packages that they previously never explored, or in some cases, had to consider.
With the sentiment of “live where you want and work from home” on the rise, we are also seeing more cross-border and cross-state impacts that employers are closely monitoring. In truth, most businesses anticipated these impacts from “future of work” predictions and conversations, but the pandemic accelerated the process. For multinational businesses, the solution to global payroll hiccups is simple: lean into transformation and create a concrete plan.
Recognize your ‘pinch points’
Often, payroll teams are so focused on ensuring that the payroll is delivered on time that they don’t assess the pinch points. The pandemic jolted all payroll systems and, perhaps, there’s no better time for a payroll post-mortem than now.
There are usually three to four key initiatives that, when completed, can make a significant difference in a company’s payroll performance. Consider these elements as a start:
- Set up end-to-end governance: It all starts with end-to-end governance. If all aspects of your workforce and elements that affect pay — from HR, IT, operations and finance — live under the same umbrella, it provides your organization with a true holistic view of your current end-to-end systems and processes affecting your employees. Ensure that you’re identifying all source-to-gross input control groups, outputs and policy decision-maker teams that affect payroll and set up a communication and decision infrastructure to proactively look end to end at the impacts, benefits and implications. This will later become imperative to build the gross for payroll.
- Focus on source-to-gross: Interestingly, almost 70% of mistakes in payroll are found at the source-to-gross stage, which is where the different salary gross component and tax treatments come together. Once your company sets up end-to-end governance, the next focus should center around automation. By automating inputs, as well as control totals, your organization will be able to capture changes and showcase (or alert you to) any patterns or red flags. Additionally, scrubbing data beforehand prevents any formatting data errors, which in turn prevents issues with the gross-to-net calculation.
- Partner with a software/service provider: Partnering with your software and service providers is key. Most companies have a hybrid service delivery model that includes in-house and outsourced payrolls. It is key to partner with your providers to be able to leverage the new technology advancements and features, while also provide feedback regarding pain points. Additionally, providers help point out the gaps technology can solve and regulatory change features that enable the systems to stay ahead of the compliance and regulatory changes.
- Deploy leading practices: Finally, it is critical to identify key leading practices that will have a big impact in improving the quality of the payroll and your employee experience. Put together a road map with specific checkpoints and communicate the impact to your teams. With the use of these leading practices and the evolution of the payroll service delivery model, payroll teams are changing and focusing on automation, problem-solving skills, metrics, change management and communications.
The pandemic has pushed companies to re-evaluate and re-imagine their payroll function. These companies are successfully elevating and transforming their payroll delivery by proactively diagnosing issues, prioritizing its people experiences and leveraging the payroll data to better facilitate future business decisions. If you’re considering enacting or actively engaging in any of these steps, you’re not only “ready for the future of work” but you’re a step ahead.
Sheri Sullivan is payroll operate leader with EY Global and Americas. The views reflected in this article are those of the author and do not necessarily reflect the views of Ernst & Young LLP or other members of the global EY organization.
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