Redefining Payroll: A Holistic Approach

Many professionals are curious about entering the world of payroll but don’t know where to begin. It’s clear that the sector is rapidly changing in our increasingly automated world, and that the need for payroll is only expanding as global business becomes ever more complicated.

In our recent podcast with Jaco van der Merwe, we discussed the value of redefining payroll as a holistic program supporting the central needs of business. The functions that payroll provides include far more than just paying people on time and correctly.

Properly understood, payroll is really a part of a "Center for Excellence" that also carries out important activities such as data analysis, workforce management, and scheduling. Payroll is truly a strategic asset.

In this article, we will cover topics relating to this new need for redefining Payroll:

AI
Data
Global expansion

AI and Payroll

Contrary to what some would lead you to believe, most applications of AI will improve our ability to do our jobs, rather than take our jobs away.

person using ai in payroll on her computer to help her as a payroll professional

This is especially true when it comes to payroll. Global payroll is simply too complicated for AI to handle more than its most basic tasks. And for those tasks, we absolutely should hand off our work to the computers. But for everything else, humans have important roles to play.

AI frees up the power of payroll to do so much more than just pay people. AI can also help:

Generate insights and produce reports
Interpret scanned data from paper documents
Identify possible errors in payroll data

Many companies are years behind when it comes to payroll, continuing to operate on manual pen-and-paper systems for time and attendance. Fortunately, these companies can use AI to leapfrog their way into the 21st century. There are already free AI programs, in Microsoft Office, for example, that can turn their pen and paper documents into digital data.

Ultimately, computers will do much of what payroll employees do today. But payroll employees of the future will likely find themselves giving most of their drudge work to AI systems, freeing up their attention to making smart decisions out of the results it gives them.

Data

Much of the value of modern payroll comes in the form of data analysis and insights. Several decades ago, the problem was that it was difficult to get any data insights since everything was done manually. Now, the greater difficulty is often selecting the right picture to focus on, out of an ever-widening sea of data points.

insights by payroll professionals about different facets of payroll processing

Payroll specialists are responsible for finding insights on topics such as:

Gender equity
Accuracy
Payments on time
Tax liabilities
Overtime
Sick leave

Some companies are afraid of updating their payroll policies and compensation programs, due to the possibility of discovering negative insights. While this is a fear we can empathize with, having such insights can help correct problems and propel employee engagement, and the business, forward.

Global Expansion

Companies have been expanding their global footprint for decades, and this trend has only accelerated dramatically since 2020. Now it is common even for small businesses to have employees in different countries.

making sure payroll professionals in the payroll departments from all over the world are using ai technology

With a presence in different regions come more and more payroll complications. Tax liabilities vary widely across, and even within, different countries. Few businesses are capable of becoming experts in the tax laws of every country they operate in, especially if they just have one or two freelancers in each locale.

As a result, there is now more need for payroll services than ever before, especially for international tax-related expertise.

Redefining Payroll

To understand how we should redefine payroll, let's take a look at the history of a closely related department: HR.

What we now call Human Resources was invented in the late 19th century, with the rise of massive conglomerate corporations. These corporations had to manage so many people at once that they created an entire department for it.

Back then, Human Resources was different. Personnel Administration, as it was called, consisted mainly of hiring, firing, and compensating employees.

But as the function grew and developed, in the 1960’s, the term shifted to Human Capital Management. The department focused more on building, maintaining, and improving employee relationships.

And as the role of HR expanded throughout the following decades, organizations began rebranding with modern names, such as “People and Culture” departments.

We believe that a similar process needs to take place as businesses redefine what Payroll means and the value the payroll team can provide to the employee experience in the broader organization. Just as with HR, we need to move beyond the core, material function of the department and into a more holistic understanding of the power of Payroll.

Payroll is important because people show up to work to get paid. It really is the foundational pillar on which the rest of the company rests. While paying people correctly and on time is just one small part of the value of payroll, payroll also helps with:

Workforce management
Scheduling
Data analysis
Legal and tax compliance

To that end, we see payroll as part of a broader "Center for Excellence", which is concerned not just with paying people correctly and on time, but also with everything else payroll professionals are capable of.