Payroll is not a one-size-fits-all function of the enterprise. That's not only true for businesses of different sizes, as a payroll tool that works for a small business won't function properly for a large multinational corporation, but for businesses of different industries, with various sectors having their own unique challenges and demands when it comes to paying workers.
As payroll technology evolves, companies have more options when it comes to improving this financial function. With many differing needs, though, not all tools will mitigate the complexities at hand.
In the entertainment industry, there are certainly commonalities with businesses of other sectors. For example, Mike Leiba, COO of GreenSlate, said the continued reliance on paper checks challenges both the accounts payable (AP) and payroll functions of entertainment industry employers. However, Leiba, whose company targets the entertainment sector with its accounting and payroll offerings, spoke with PYMNTS about some of the hurdles this industry faces more than others. Among the largest: a significant reliance on gig workers, and how it impacts everything from employee onboarding to compliance.
"One unique thing is that this is a highly freelance-based business," he said. "You have a number of employees onboarded frequently to different productions, and some are only employees for a matter of weeks or days. There's a high churn rate."
In today's market, gig work is a booming space that's challenging the status quo of payroll. As much as one third of the U.S. population has been a gig employee at one point in time, according to the PYMNTS Gig Economy Index, and these professionals are introducing new pressures and demands on how they are paid.
At the same time, however, payroll technology hasn't kept up. Research from Kronos Incorporated and the American Payroll Association found nearly one-third of companies reported that their existing payroll solutions are at least a decade old. As payroll professionals look to upgrade, having a solution that can track an array of worker classifications, like temporary and seasonal workers, is near the top of their priority lists. Being able to classify which employees are gig, temporary or full-time is essential to remaining compliant with labor laws, but Leiba noted that there is another regulatory issue that comes into play when reliance on gig workers is high.
"You have a lot of laws designed for either large businesses or small businesses, and these employers are kind of somewhere in between," he said. "They can be large employers for very short periods of time."
That categorization affects how companies in this market provision health insurance other employee benefits, he continued, and introduces "unique compliance challenges" for the sector.
High on the list of payroll solution demands for the entertainment business is a tool that can streamline onboarding, another impact from the high use of gig professionals. Leiba explained that the high churn rate of workers, as well as the desire to re-hire a professional that has worked with a production company in the past, introduces heavy demands on the payroll onboarding function of any solution a business decides to adopt. It's also important that the employees themselves have access to their information — like bank account details to support direct deposit — so they can more easily be paid when re-joining a company.
It's typical in the entertainment space for payroll solution providers to have accounting functionality bundled with their offering, and GreenSlate fits into this category as well. Leiba said that, as such, firms like GreenSlate are in a position to analyze and impact their clients' financials beyond payroll.
There are several areas of accounting and AP that must be optimized for this industry, including the ongoing use of paper checks to pay both employees and vendors. The fees associated with electronic vendor payments tend to keep these companies on the paper check, said Leiba, despite the fact that paper checks place an administrative burden on these firms. Any accounts payable solution that wants to disrupt this market must be able to offer either check management or support in helping companies move their vendors to ACH payments. As GreenSlate moves forward, Leiba said the company is exploring the addition of AP functionality into its offering.
The firm will be looking to explore other electronic payroll solutions as well, to support the shifting demands of payroll accelerated by the gig worker community. Gig workers certainly do not prefer to be paid via check, and even direct deposit takes a back seat to PayPal, which was found to be the preferred way to receive wages among gig workers, according to PYMNTS research. Leiba said GreenSlate's next move will be to explore payroll cards, though PYMNTS found card products to be one of the least common ways gig workers are paid today.
As payroll technologies continue to innovate, and as external forces like faster payments and the gig economy affect the evolution of payroll tools, organizations may have more choices, but they have to be more diligent about picking the right solutions based on their unique needs. In the entertainment industry, one thing is clear: There is opportunity for improvement.
"There are a number of areas that need to be modernized," Leiba said of the industry's payroll challenges. "IT's unique to the population of a freelance-heavy business."