Innovations Shake Up Payroll Technology

​Payroll is one of the few core HR technologies that has largely remained immune to innovation, until recently. The sensitivity of employee pay—research shows it only takes a few paycheck errors for workers to consider looking for a new employer—along with the fragmented, highly regulated nature of payroll processes, has made vendors hesitant to innovate at the same levels seen with other types of HR technology platforms.

That historic reluctance has given way to an increased willingness to introduce next-generation technologies and new approaches to payroll practices. The introduction of earned wage access or "on-demand" pay for hourly workers kicked off the change about five years ago. More recently, payroll vendors have unveiled new technologies designed to give employees more control over their paychecks and have created new, chat-based apps to make it easier for small-business managers to run payroll from their phones.

Giving Employees More Say Over Payroll

One of the most significant changes allows employees to access, review and approve their paychecks in advance of their scheduled pay days. A handful of payroll technology vendors have introduced this capability, with the goal of reducing payroll errors, educating employees about their pay and benefits, and reducing costs and administrative work for payroll teams by avoiding mistakes.

"We see it as a natural extension of the self-service options already offered to employees in other areas of HR," said Jennifer Kraszewski, vice president of human resources at Paycom, whose Beti product features such an employee-driven payroll process. "Employees already manage their benefits, their PTO [paid time off] requests, expenses and timecards through self-service, so we believed it made sense to give them more access and ability to review their pay in advance."

Beti is an app where employees can enter hours worked and access other information related to their pay, including any changes in benefits, taxes paid and more. Employees receive alerts letting them know when it's time to review their scheduled pay.

Kraszewski believes products like Beti can benefit employers as much as employees because they can reduce liability and avoid costly post-payroll corrections.

A survey Paycom conducted with OnePoll found that 64 percent of respondents have had to perform a retroactive payroll adjustment because an employee's pay was incorrect or miscalculated. The survey includes responses from 300 HR, payroll and accounting professionals in the United States.

Ron Hanscome, a research vice president specializing in human capital management (HCM) technologies for Gartner, said such employee-driven payroll practices potentially can have benefits for smaller organizations, noting that they may be easier to apply in "simpler or more straightforward" payroll scenarios.

"If it can be shown that employee review of pay before running payroll is helping companies avoid significant rework on the back end, I think it's something more will likely want and could become a differentiating feature of payroll systems going forward," Hanscome said.

How Much Self-Service Is Too Much?

Some HR technology analysts are cautioning that as more self-service options are deployed, there's a risk that too much responsibility will be shifted to employees' plates.

"One of the questions we see more organizations asking is, 'How much self-service responsibility do I really want to place on my employees?' " said Greg Pridgeon, a senior analyst with Forrester specializing in HCM technologies. "If you look at the HR technology environment today, there is a growing list of self-service demands on employees, from things like benefits enrollment to time and attendance to having to fill out return-to-work questionnaires related to COVID-19."

While many employees embrace self-service tools because they can provide rapid, 24/7 access to HR information, Pridgeon said it's important for leaders to consider the pros and cons of asking employees to take on even more duties, like reviewing and approving their own pay.

"Employees have to take the time weekly or biweekly to attest to the fact that their pay is accurate," Pridgeon said. "Will that control lead to greater employee satisfaction, or is it getting to the point of self-service overload that will impact the employee experience? That's a discussion more companies will be having internally, especially if they have an employee base that is relatively low-tech."

Payroll Innovations for Small Business

Some payroll vendors also are targeting smaller businesses by introducing new technologies designed to make running payroll more intuitive and simpler on mobile devices. One such product is ADP's Roll, a mobile app that uses voice recognition to allow users to create, manage and run payroll from their phones.

Users speak their requests into the Roll app—be it to start running payroll, add new employees or change salaries—and the app uses natural language processing technology to interpret and execute the commands. 

"Small companies can use Roll to do 100 percent of their payroll on their phones," said Roberto Masiero, vice president of ADP Innovation Labs in Bernardsville, N.J. "It's a benefit to small-business owners who tend to always be on the go."

The conversational user interface has evolved to where it can understand multiple variations of terms people use to describe payroll functions, Masiero said. "The more you use the chat function, the better the natural language processing gets at translating and interpreting," he said.

The application also sends push notifications to let users know about important payroll deadlines and tasks and uses artificial intelligence to monitor payroll patterns and inform users when anything deviates from normal practices. Payroll-tax-filing processes are built into the app and backed by ADP.

Continued Momentum for On-Demand Pay

Earned wage access, an option introduced by vendors about five years ago, also has continued to gain momentum, analysts say. While only 5 percent of U.S. companies with majority hourly workforces offered an on-demand pay option in 2019, according to research from Gartner, that number is expected to grow to 20 percent by 2023.

Analysts say giving hourly employees access to earned pay before their scheduled payday not only can ease their financial burdens, but also has proved to be an effective recruiting and retention tool. Some payroll vendors offering on-demand pay have added new features like streaming pay, which automatically delivers earned wages to workers' bank accounts at the end of each workday.

Casey Enevoldsen, vice president of employee experience at Lunds & Byerlys, a grocery store chain in Minneapolis, said the organization offers earned wage access to its workforce through a tool from vendor Ceridian called DayForce Wallet.

"By giving our team members the option to get paid after each shift, the technology can get earned income into their hands sooner," Enevoldsen said. "That's given us a competitive edge against others by offering significant flexibility in how workers can get paid."

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