Faster Payments Readies Global Payroll For A Paradigm Shift

Increasingly, the gold standard for payments is invisibility.

Platforms and payment service providers are seeking digital, integrated payment experiences that are so seamless, neither the payee nor payer take much notice that a transaction has even occurred.

Such is a standard that is making its way to the payroll space. Employees want to be paid on time, accurately, and without any additional administrative burden, requirements that have made direct deposits and other electronic payroll methods popular choices over the paper payroll check.

On the employee side, this transaction may seem seamless and straightforward — when it goes right.

But on the back end, said Eynat Guez, Papaya Global co-founder and CEO, complexities abound. Time report collection, data aggregation across different formats and departments, data consolidation for processing, tax withholdings and benefits calculation must all be done, approved, and processed for on-time payroll.

“That’s just a domestic payroll at one company,” noted Guez in a recent interview with PYMNTS. “But when we talk about global payroll, we’re talking about the same process, but in different languages, with different currencies, and with different salary structures, and possibly even different types of benefits. So, a country with employees in five countries faces all those challenges five times over.”

The Distributed Workforce

Having employees in multiple markets around the globe may have been a challenge reserved for the largest multinational conglomerates of the past, but today, global expansion is an ever-more attainable reality for smaller businesses, Guez added.

This is an important component of a company’s ability to grow and succeed, she said. But with that cross-border expansion comes growth of the distributed workforce, especially as digitization now enables companies to hire employees around the world without the need to establish physical offices in every location.

But this expanded talent pool not only compounds the complexities and volume of payroll tasks, but as Guez noted, compliance can quickly turn into a headache.

“It is important to remember that payroll today is much more than simply calculating earnings and paying people,” she said, pointing to challenges like data privacy, tax codes that change from jurisdiction to jurisdiction, and more. “Compliance is still a major challenge. GDPR and similar legislation are tied with payroll because of all the personal data that goes into payroll calculation. Calculating costs for each employee is a new challenge for the global age.”

Faster Payments Shift the Landscape

The complexities of payroll, especially when paying employees across borders, threatens to increase payroll errors. Research shows employees quickly become frustrated when payroll mistakes are made.

According to Guez, collaborating with third-party providers is a useful tactic for payroll firms like Papaya Global to promote accuracy and compliance in individual jurisdictions, although she said the company is currently developing a proprietary, automated payment transfer function to meet global payroll demands.

Emerging payment technologies, namely, faster payment initiatives and services, are playing a significant role in not only enabling businesses and their payroll service providers to address global payroll friction, but also in transforming the payroll function at a broader level.

“While there is a discernible shift taking place among millennials, the bottom line is that virtually all employees just want to be paid on time and accurately,” said Guez, adding that faster payments support this demand. “The shift we are already seeing is a gradual movement towards same-day or real-time payments, where employees can receive their compensation at the end of each workday, or have the funds available in their accounts whenever they want to access them.”

While traditional banks and government regulations are certainly supporting many markets’ shift toward faster payments — and thus opening the door for same-day or real-time payroll capabilities — Guez noted there is particular opportunity in corporates’ ability to address global, faster, automated payroll needs without having to rely on the bank, thanks to technologies like blockchain and FinTech business models supporting data integration.

Technological Innovation

Faster payment technologies make payroll “faster and cheaper,” she said.

“They save time because they remove time constraints, which takes a great deal of pressure off of the process,” she explained. “They are cheaper because they do not have to be handled through the banks, saving on unnecessary fees.”

Those goals are also presenting new opportunities for cryptocurrencies, which Guez said not only has potential to disrupt payroll, but will also lead to interesting responses by traditional financial institutions exploring their own digital currency technologies. Artificial intelligence and robotics similarly are gaining traction in payroll to promote automation, as well as to address fraud, a growing concern in payroll amid digitization and global expansion.

At a technological level, these shifts can address much of the pain points of payroll, both domestic and cross border, from security to compliance to the speed and timing with which employees are paid. At a higher level, though, Guez said these technologies are both driving, and a response to, shifting payroll paradigms.

“These tools stand to revolutionize how people think about getting paid,” she said. “It’s hard to predict what that will mean for people, but it is a clear step toward the direction of progress. There is no benefit to making people wait to get paid.”