2024 Payroll Tech Trends: Globalization, GenAI and On-Demand Pay

Payroll systems have long been HR’s unsung technology, a vital asset that usually hums along unnoticed until there’s a problem such as a paycheck error, a delayed payment or a costly tax compliance issue.

Yet as more organizations expand their workforces to new countries and deploy innovative payroll features to boost the employee experience, payroll platforms have gone from an under-the-radar technology to one that holds new strategic importance for many human resource leaders.

Payroll’s Holy Grail: A True Global Solution

A top priority for many enterprise payroll technology providers has been to develop a truly global solution that meets the complex payroll needs of clients operating around the world. In the past, such systems have often been created by cobbling together a network of “payroll aggregators” that send pay data to third-party providers based in different countries. But these fragmented systems have flaws, such as processing delays and errors resulting from poor integration.

To address the issue, payroll vendors have worked to create “native” solutions that don’t rely as heavily on piecemeal structures. These systems strive to provide a more consistent user experience across a platform, give end-to-end visibility or a “single-pane view” of the entire process from employee scheduling to payroll funding, and use the latest technology, such as AI-assisted features.

The 2023-2024 HR Systems Survey from the Sapient Insights Group found that global payroll costs and payroll accuracy were the top priorities for large buyers of payroll systems.

“I’ve seen more truly global solutions start to appear in the last year or two that are technology-led, not service-led, which I think is the critical difference,” said Ben Eubanks, chief research officer of Lighthouse Research and Advisory, a HR advisory and research firm in Huntsville, Ala.

Eubanks said that while there will likely always be a need for local presence or “boots on the ground” with global platforms to address issues such as customer support, country-specific compliance requirements and other unique needs, vendors have realized the technology component of these systems can increasingly be global.

“Technology is much better than humans at distributing pay data, aligning with compliance and other requirements, and doing it in a rapid manner,” he said. “The benefits are multifaceted, but the ones I think are most critical are higher confidence and lower risk.”

Josep Maria Elias, chief strategy officer for London-based payroll platform provider CloudPay, said globalization presents growing challenges and complexity for organizations attempting to administer payroll across multiple countries.

“Each country is governed by its own rules and legislation, but technology can help establish a standardized approach across those borders,” Maria Elias said. “Technology can harmonize data originating from diverse sources and formats, and automation can help seamlessly integrate that disparate information to streamline the payroll process.”

Greg Pridgeon, SHRM-CP, a senior analyst for Forrester in Atlanta who specializes in human capital management issues, said many large payroll vendors have prioritized trying to create the next generation of global payroll platforms.

“Many of these systems continue to leverage payroll aggregators and preferred in-country providers to pool together solutions,” Pridgeon said. “But at the same time, we’re also seeing a genuine increase in the footprint of a number of payroll technology platforms around the globe. These providers are adding, on average, six to 10 countries per year to their footprints.”

Among the payroll vendors that have increased their international presence are UKG, Oracle, Ceridian, ADP, CloudPay and Paycom. UKG, for example, introduced its new global One View product in 2023, a system that resulted from the acquisition of multicountry payroll provider Immedis. A UKG spokesperson said One View offers payroll onboarding and support in more than 160 countries with features including fulfillment of payments covering employee net pay, statutory and tax payments, as well as global currency conversion.

The State of On-Demand Pay: Slowing Adoption?

The addition of earned wage access (EWA) or “on-demand” pay options to a growing number of payroll technology platforms has been viewed as a way to boost recruiting and retention of hard-to-find hourly workers who often welcome the pay option.

These tools, which allow employees to access pay they’ve already earned before a scheduled payday, are sometimes paid for by workers who are charged a fee to access their money early. In other cases, employers pay to provide the service to their employees.

Some studies show a majority of business leaders as well as workers are in favor of EWA. A 2022 study from ADP found that 76 percent of employees said it was important for employers to offer such on-demand pay solutions, while 82 percent of employers that didn’t yet offer the solution were interested in adopting it.

Despite that interest, there are signs that adoption of EWA has slowed since the pandemic and that usage isn’t meeting early expectations. The 2023-2024 Sapient Insights study found only 12 percent of respondents were using EWA solutions. Of those organizations in the study using on-demand pay, 83 percent of salaried workers, 73 percent of hourly workers and 8 percent of contingent workers had access to EWA.

Pridgeon said adoption of EWA on a global level has in some cases fallen short of his expectations. “You might expect to see higher adoption in countries with longer pay cycles like the United Kingdom, but the numbers don’t yet bear that out,” he said. “But it certainly serves a need within specific verticals, such as hourly and front-line workers, where it also can help an organization’s recruiting and retention efforts."

Although EWA can be a good substitute for the predatory payday loans that hourly workers sometimes rely on to pay for unexpected expenses, some experts believe on-demand pay can pose its own problems.

“In our research, we’ve run into quite a few HR leaders who believe that these types of pay ‘benefits’ are actually harmful to workers because they don’t teach them to manage and budget their money,” Eubanks said. “These pay options just tell them they can access their money earlier, which could put them in a deeper financial hole if they aren’t making other changes towards creating a more stable financial foundation.”

AI Makes Inroads in Payroll

Payroll vendors also have joined in the artificial intelligence rush, with many embedding AI in their platforms to help HR clients with payroll compliance issues, answer questions workers have about their pay or benefits, and make it easier for managers to create employee work schedules or monitor time cards.

Some organizations are also employing AI to make up for staff shortages, as it’s become more difficult for them to hire or retain payroll professionals.

Pridgeon said that among the most valuable uses of AI in payroll is for compliance with tax requirements and payroll regulations.

“The use of AI can help both systems and humans become more aware and prevent compliance-related errors,” he said. “There can be a strong ROI for using AI in compliance, especially in those regions of the world where an organization might not have a lot of compliance expertise.”

Time and attendance software also now commonly employs AI for tasks such as alerting managers about time-card errors. “Validating paychecks is a primary use case for AI,” Pridgeon said. He noted that AI tools can provide automatic notifications when workers miss clock-in or clock-out times.

Eubanks said an AI adoption model created by his firm suggests that process-focused and repetitive tasks are ideal for AI to handle in payroll, while people-focused or variable tasks are still better suited to humans. “It’s not hard to envision a near-term future where employee work time is calculated and payroll is run with little to no human intervention other than handling exceptions,” he said.

Regarding the use of generative AI (GenAI) in payroll and benefits, Eubanks said he’s seeing use of ChatGPT and similar tools to help tailor the explanation of employee benefits to specific workforce demographics, such as high school graduates. He believes the technology can be applied in other ways to payroll.

“An employee might ask a GenAI tool, for example, why their pay is different in a particular pay period,” Eubanks said. “The tool would respond that they worked four hours of overtime in the past period, and a new benefits plan year started in the period which included the worker’s new flexible spending account contribution. Using GenAI will mean the employee won’t have to make a call to payroll or HR—it’s just a natural conversation with the system itself.”

Dave Zielinski is principal of Skiwood Communications, a business writing and editing company in Minneapolis.