B2B Payments

How Payroll Partakes In The Back-Office API Ecosystem

An application programming interface (API) ecosystem isn't only for the banking sector. Increasingly, the corporate back office has embraced API connectivity to achieve seamless data integration across various financial platforms.

In the payroll function, APIs have elevated executives' focus on the role payroll data plays in promoting automation, talent retention and even enterprise security, said Inova Payroll President and CEO Farsheed Ferdowsi. However, he told PYMNTS in a recent interview, for service providers to embrace that position in protecting finances and supporting employees, they must acknowledge who owns payroll data.

"The important thing to keep in mind is that this is the client's data. It is not our data," he said. "Making it easy for them to move their data from one system to another is mandatory for those of us in the B2B technology space."

The API is an effective mechanism to facilitate that movement of data, he noted. Manual rekeying of information is time-consuming and prone to error. While legacy strategies like file imports and exports can save time, the technical issues of report formatting and the like make it a point of friction as well.

While payroll may not be the first back-office function that comes to mind when having a need for seamless financial data integration (that distinction typically lands in functions like accounting), payroll data is an increasingly important component of broader enterprise strategy. That is reflected in the evolution of the human resources (HR) landscape overall, said Ferdowsi, which has grown to demand connectivity across multiple areas of a business.

"Our industry used to be payroll, tax filing and direct deposit. That's it," he said. "Then, time and attendance was introduced, and then HR functionality. In the beginning, each was an obvious disparate system. Now, those systems are often integrated into a single database or exchange data via tools such as APIs."

Employee Retention

Obtaining that seamlessness in data movement means a company can manage employee data "from recruitment to retirement," added Ferdowsi. That can be a massive benefit to employee retention, particularly in today's tight labor market, with companies seeing the strain of a shallow labor pool and feeling the heat of making sure they keep their current talent satisfied.

At the surface level, payroll's role in that goal is to adequately compensate employees so they stay. Yet, in addition to competitive wages, research has found that worker satisfaction is impacted by factors like paycheck errors or speed. Furthermore, new FinTech solutions emerging can provide value-added services to workers, like on-demand wages or employee financing. All of this relies on the seamless movement of data between various systems to perform properly.

Ferdowsi said the mobile device is also becoming an important part of retaining employees via the payroll function, again showcasing the importance of data connectivity.

"Employers that want to effectively compete for talent need to provide employees with mobile solutions," he said, pointing to functions like benefits enrollment, managing time off, viewing pay stubs and more. "When employees have access to mobile functionality 24/7 to perform tasks, and [do] not have to wait for accessibility to a person, they are happier and more engaged, and operations are streamlined."

Enterprise Security

A conversation about enterprise data can't happen without a discussion on the security of that data. As the payroll function deepens its data-sharing capabilities, corporates must pay attention to the risks of employee and employer data security, as well as the threat of payroll fraud.

Last September, the Federal Bureau of Investigation (FBI) issued a warning about cybercriminals' tactic of targeting digital payroll accounts, using phishing scams to obtain employee credentials and redirect payroll deposits to their own accounts. Payroll's position to gain from faster and real-time payment schemes may mean faster funds in employee bank accounts, but it also raises the risk that if payroll funds are diverted to a scammer, there is little time to recognize what has happened, let alone retrieve the cash.

Ferdowsi emphasized the importance of awareness — not just among employers, but among employees, too.

"More and more employers are aware of the risks [of payroll fraud] because it's constantly in the news, and really large companies are falling victim to these scams," he said. "Education is the number-one way employers can protect their payroll data."

Unfortunately, even with the latest cybersecurity technologies, human error is often to blame for data breaches and successful fraud attempts — making employee training just as important in combating payroll fraud, added Ferdowsi.

"There is much that can be done from a technology perspective, from firewalls, spam filters, system back-ups and redundancy, etc.," he said. "But, in many cases, human error is the cause of employer data breaches and data hostage situations. I recommend every employer hold employee training on data security procedures, and then train new hires through the onboarding process going forward."



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