As businesses expand their global footprint, cloud technologies are transforming payroll processes that traverse international borders. Most payroll systems across the world are still complicated, with myriad business rules across geographies. According to Global Payroll Complexity Index 2017, payroll management is most complex in the Americas and the least in Asia and Oceania, with Europe and Africa somewhere in between. Global payroll technology is helping solve long-standing challenges such as lack of standardization, compliance, and security to positively impact the bottom line.
Challenges Plaguing Legacy Payroll Systems
While individual challenges may vary, major hurdles tend to be common across organizations. Let us discuss two major challenges faced by global companies:
Compliance variations across geographies: Different countries have different rules, tax complexity, and compliance requirements. Sometimes variations exist between different states within a country such as the US. Regulations also tend to evolve continually or new regulations come into force routinely, for instance the recent GDPR mandate. This makes it challenging for multinationals to monitor global compliance in real time in order to avoid penalties from governing bodies.
Security, wage, and reimbursement challenges: Payroll departments handle sensitive employee information, making security a key aspect given the current backdrop of growing cyber threats and increasing regulations around data processing and privacy. Storage, handling, access, and management of payroll information are subject to specific rules and regulations, which can be difficult to comply with when maintaining records locally. Such a system can also expose critical data to security breaches, theft, and attacks. Equifax spent $200M for upgrading its system after the 2017 data leaks in its system compromising the data of about 150 million people.
Wage and reimbursement fraud is another major challenge. According to the 2018 Global Study on Occupational Fraud and Abuse, there were 2,690 cases of occupational fraud across 125 countries, amounting to USD 7 billion in losses.
Taking Payroll to the Cloud: The Benefits
As digital transformation (DX) gathers steam across all functional areas of business, digital payroll management and automation is emerging as a key enabler. Digitizing payroll leveraging technologies such as SSO, multifactor authentication, behavioral monitoring, and analytics offers several advantages. Besides eliminating repetitive tasks through automation, it can help organizations ensure real-time compliance to changing global regulations, while continuously monitoring for frauds such as ghost employees and false wage claims or expense reimbursements. The result: organizations are better prepared to embrace ‘agile transformation’ and enhance workforce productivity, thereby directly adding to their bottom-line.
Cloud-based payroll software is fast becoming the best bet for organizations, thanks to the convenience, flexibility, cost, and control advantages it offers – for small as well as large businesses. Here are the key benefits a cloud-based payroll solution provides:
- Global payroll management: By alleviating the hassles of country-by-country payroll, cloud technologies allow multi-national businesses to manage payroll globally.
- Superior customization: For companies that need their payroll systems to adapt to local language and compliance requirements, the cloud offers a way to do that cost-effectively, accurately, and quickly.
- Self-service enablement: Pay slips can be sent to mobile devices directly, thereby empowering employees with greater control, while maintaining the highest levels of security.
- Analytics-driven payroll management: Cloud solutions gather real time payroll data and apply analytics to huge volumes of payroll data to drive meaningful insights. The result: ability to identify gaps, reduce limitations, and ensure payroll advancement and predictive planning.
- Superior security: Cloud solutions come with built-in security features, thereby eliminating the risks of storing payroll data on-premises.
- Superior efficiency at reduced costs: Real-time compensation tracking and employee performance monitoring through GPS tracking of time and attendance ensures efficient and accurate payroll generation, in a cost-effective manner.
Payroll for the Digital Age: The Way Ahead
While decentralized payroll models have ruled the roost for decades, consolidation is the need of the hour as Business 4.0™ becomes the new norm. Four key Business 4.0 levers, namely intelligent, agile, automated and on the cloud, will play a major role in transforming the payroll function for the new digital reality. The global cloud-based payroll software market size is expected to reach USD 9.9 billion by 2023, rising at a rate of 6% CAGR from 2017 to 2023. For organizations looking to stay on top of the 3Cs of global payroll transformation – compliance, cost, and consistency – the time to elevate payroll to the cloud is now.