B2B Payments

Workforce Shifts Bring About Payroll's Own Evolution

The evolution of payroll is all about pushing back against the notion of one-size-fits-all. As innovative technologies move down stream, small and medium-sized businesses are poised to benefit significantly from being able to customize a flexible payroll and human capital management (HCM) program.

Employees and a shifting talent landscape have introduced the demand for payroll flexibility. In the American Payroll Association (APA) 2017 "Getting Paid In America" report, researchers emphasized that workers now have control over how their employers compensate them, with demand for digital wages moving paper paychecks out of favor. The vast majority of the 35,000 survey respondents told the APA that they get paid via direct deposit, with only 4.3 receiving paper checks and even fewer using payroll cards.

However, payroll flexibility isn't just about moving away from paper, said Catherine Dunwoodie, leader of client success at payroll and HCM technology firm Paycor. It's also about accounting for the industry in which a business operates, and what kind of back-end systems are already in place, even geographic location all of which impact the way small businesses want to manage and pay their employees. Employers don't simply want a payroll solution, she said, but a holistic suite of human capital management tools that can handle everything from tax compliance to integrations with time-tracking solutions.

"What I've seen is, as our economy changes, and as the way that people work changes, clients are looking for flexibility in how they deliver compensation to employees," Dunwoodie told PYMNTS in a recent interview. "They want us [payroll providers] to adapt with them as the workforce changes in a way that allows them to attract and retain talent."

In the U.S., small businesses are feeling the squeeze from a tight labor market, with talent attraction and retention efforts not at the top of the priority list for business owners. Payroll company ADP published its own research last year that found a significant portion of professionals would turn down a job offer if they were unable to choose the way they received their wages.

The rise of the gig economy is one example of not only how employee payroll demands are changing, but how a one-size-fits-all approach will fall flat. In PYMNTS' December Gig Economy Index, analysis revealed that nearly 85 percent of gig workers said they would do even more freelance work if they were paid more quickly.

In an interview with PYMNTS, Taso Du Val, CEO of freelance staffing platform Toptal, said he's seeing more employers "hiring people outside of their own country," another trend in the modern workforce that adds the pressure of cross-border payroll on businesses.

"You're seeing the global freelancer market pick up tremendously, in part, because of the technology infrastructure being built to allow for this," he explained.

With changing employee landscapes comes changing employee payroll demands for features like faster access to wages, employee lending programs, financial wellness tools, cryptocurrency payments and more. Like Du Val, Dunwoodie acknowledged that technological progress has lifted the barrier for smaller employers to meet these demands.

"As technology has evolved and come down-market, a lot of smaller employers are looking for a more complete human capital management solution," she said.

She added that access to new solutions has propped up the benefit broker industry, a field that Dunwoodie said allows professionals to develop the custom HCM programs (payroll included) that employers need to meet employee demands. Technology providers like Paycor, meanwhile, join the relationship by providing the tools based on what programs the brokers have designed.

In Identify Force's 2018 Benefit Broker Survey, researchers explored the types of features that businesses and employees are demanding beyond the traditional payroll function. Most brokers said they are able to recommend identity theft service providers to their employer clients, for example. Thirty percent of brokers cited employee wellness programs as a regularly requested non-traditional benefit, too.

For companies like Paycor that may have entered the market as payroll solution providers, these workplace shifts mean vendors have their own evolution ahead. Dunwoodie told PYMNTS that, in addition to offering the diverse array of solutions that workers and employers now seek, it is critical that service providers are able to integrate within their clients' existing platforms.

Again, the augmented availability of technologies once reserved for the largest conglomerates means small businesses are able to adopt a variety of tools that must coexist with their payroll and HCM solutions. Dunwoodie pointed to API technology as a useful facilitator of this connection today.

"Our point of view is to create an ecosystem where data flows seamlessly and invisibly to the outside user," she explained, "but also give flexibility where our clients need us to go, in terms of integrating with other partners they already do business with. ...We have evolved into a place where employers of all sizes can enjoy that kind of robust integration."



The How We Shop Report, a PYMNTS collaboration with PayPal, aims to understand how consumers of all ages and incomes are shifting to shopping and paying online in the midst of the COVID-19 pandemic. Our research builds on a series of studies conducted since March, surveying more than 16,000 consumers on how their shopping habits and payments preferences are changing as the crisis continues. This report focuses on our latest survey of 2,163 respondents and examines how their increased appetite for online commerce and digital touchless methods, such as QR codes, contactless cards and digital wallets, is poised to shape the post-pandemic economy.