By David Deacon, Chief People Officer at activpayroll

Employees today are motivated by having access to increased flexibility at work - both in terms of preferred working hours, and where they are based. This creates opportunities for businesses to look further afield for the best talent, but it also brings challenges in how businesses manage employee pay and payroll reporting across the globe.

These flexible working patterns and adapting to location requests may be a challenge for payroll systems; especially alongside the business demand to automate complex processes. Amid international expansion and growth plans, organisations must not lose sight of how to manage the overall employee experience - especially the critical element of where payroll fits into the picture. With such complex processes in play, many businesses are turning to external providers to help alleviate some of the short-term pain points, and ultimately benefit longer-term from the levels of expertise available.

Working arrangements evolve

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Surveys and polls consistently show that many employees value flexible working, especially hybrid working where working remotely (usually from home) is a significant part of the working week. Improved work-life balance, greater flexibility to adapt to their preferred working style, and savings on commuting costs and time are frequently cited as benefits that employees value and are reluctant to give up. And this is magnified for those with highly valuable skill sets and work patterns suited to virtual working who choose to work 100% remotely, sometimes in locations far from where offices are based, and sometimes from different countries entirely.

In contrast, many employers are still not convinced, citing concerns around innovation, creating positive and distinctive work cultures, opportunities for learning and training, building a sense of community and belonging, and even worries about performance standards and productivity. This has therefore led to many companies reining in flexible working.

There are even some indications that the pre-covid model of in-office working will return, with 64% of global CEOs included in the KPMG CEO Outlook survey predicting that there will be a full return to the office by 2026. Another question in the same study revealed that some employers are considering rewarding those who work in the office full-time with more pay and promotions. Is this enough to tip the balance in encouraging the reduction of flexi-working?

At activpayroll, we take a pragmatic view. Looking at the practices from across our 500 global customers, it is clear that addressing the context and the situation is critical. For some organisations, based on their maturity and the nature of the work, fully remote seems to be here to stay. For others, with younger workforces and high training needs, the opposite appears to be true. For a company like activpayroll, with a significant technology component and highly-skilled and stable knowledge workers, a hybrid pattern works best and suits employees and employer equally. So we advise looking at the reality of your business and employee base and acting according to what that analysis tells you.

Payroll and HRIS systems need to evolve too

Adaptable working arrangements have the potential to significantly impact individual careers - and often for the better - but only if the systems alongside them run effectively. Payroll, attendance, your HRIS and other such integrated systems must be able to keep up with the evolving work patterns for both the employee and employer when it comes to keeping flexible working patterns, paying for variable hours, recording countries of employment, or monitoring international secondments to ensure tax legislation is taken into account.

Reliability in these systems is already a given. But don’t forget the tax implications, and maybe even the visa implications, if one of your employees chooses to move to another country. And time recording, including for paid time off, can be challenged by remote working practices. Then there are updates to local legislation or tax practices - changes in requirements internationally may be subtle, but importantly they need not mean manual updates are necessary. In the USA, for example, employers are required to report certain information about new hires to a designated state agency under the Personal Responsibility and Work Opportunity Reconciliation Act of 1996. The data from payroll systems can help employers keep in line with these sorts of requirements; which is even better if the updates can be automated.

The monthly employee experience that impacts talent retention

Whilst working patterns and arrangements are changing significantly, some things remain pretty stable. Organisations want to attract the best people available in the marketplace and meeting employee expectations is a critical part of talent acquisition and retention. Flexible work arrangements can be great for attraction and retention, but we also need to keep a focus on the basics. Working is a necessity for most of us, so getting paid correctly, on time, every time, is a baseline commitment that we make to our employees. And people are not going to have faith in an employer that cannot process its payroll efficiently. The reality of the complexity of your payroll – potentially made tougher now with more variable hours from flexible working and even different tax regimes to consider as a result of remote working – is not something that occurs to your employees and complexity cannot be an excuse for payroll problems.

Seeing payroll through a narrow lens as a mechanical process undermines its role in the employee experience. Your payroll teams are actually critical components in your employee retention and engagement practices. Getting payroll wrong can be frustrating, expensive and extremely detrimental to a company’s reputation. It can lead to compliance failures, risks of fines and even prosecution. In California, for example, employers can be fined one hundred dollars for each failure. A single payroll error is estimated, by Eyquest, to cost an average of $3,200 and 29 hours to resolve. Rectifying payroll errors requires audits and investigations that are expensive and time-consuming, but also are a significant distraction to the business-as-usual processes

But beyond compliance, getting payroll right is really about building trust. What employers can often overlook is just how emotive payroll processes are for employees. When people are paid incorrectly it can have a knock-on effect on other aspects of their lives and can cause financial anxiety and stress, with some employees experiencing financial difficulty if their pay is delayed by just a few days.

So what can employers do to make the payroll process more robust and reliable in servicing its employees? Providing employees with more information can help; such as self-service functions that include access to online payslips, and enabling employees to access their data on demand. In a world where all information is only a click away, this is no longer too much to ask, but equally something that is more commonly expected as standard.

But at its core, the real answer is to invest the right amount of time and energy in making sure your payroll service is fit for purpose, is delivering for your employees, and is adapting to the complexities of today and the challenges of tomorrow.

Getting payroll right for the company as well as the employee

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From a business perspective, service quality and payroll performance is not the end of the story: effective data management and ensuring data integrity is critical. Central dashboards and systems integration have become vital as real-time data is demanded to make decisions that affect the direction of a business, and all those who work within it.

When it comes to getting payroll right, it’s important to select an external partner that can dive into the details of your specific needs. If your business is conducting payroll on a global scale, and in multiple countries, then having experts with knowledge of each country is indispensable - whether that’s regulations, taxes or local languages. In the UK, for example, HMRC will consider penalties if payroll information is not provided on time, and there is the Trust Fund Recovery Penalty in the US for unpaid payroll tax. There is a very real cost to businesses for making payroll mistakes or not having the necessary information to provide to external authorities on demand.

For some large global organisations, they must also factor into the process their own in-house treasury functions where they handle payments, which adds another level of complexity to payroll management. Data transfer has to be seamless; reporting and remittances have to be fully coordinated.

Having a partnership approach between the payroll provider and the customer can elevate things to the next level. The payroll provider uses the data such as salary payments or overtime to process the payroll, but also discusses areas for improvement with the customer. Such areas for focus and development can include adjustments in automation when it comes to the processing of payroll data, or in providing better-supporting employee self-service portals as well as integrations with accounting and HR software systems.

And when you look to the future, as a business, you want to be confident that you are continuing to investigate process enhancements, and are effectively managing and monitoring tax and compliance checks. You will also want to ensure reports are timely and accurate, that you can meet data security demands and are able to customise and scale payroll for the future - so you are in a strong position to support growth strategies. And that’s what your stakeholders are expecting too.

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