There was once a time when payroll professionals would place cash in little brown envelopes to pay employees. Technological developments have completely changed how people are paid. This section of the report will examine what the future looks like for payroll payments, with a focus on three key areas:
● pay on demand ● cryptocurrency ● pay transparency.
The industry has seen a lot of discussion regarding pay on demand in recent years. Pay on demand provides employees with the option to access pay earned before their usual pay day. Systems which allow workers to see how much they’ve earned so far in a particular pay period are used in conjunction with the facility to request immediate payments. Some respondents had questions about the intricacies of the functionality. For example, if someone claimed money before it was checked, or before a new tax code or contractual change was implemented, could it open the door for overpayments? Overall, 20% of respondents saw pay on demand as an attractive benefit, while 46% did not. 5% of respondents are providing pay on demand services and another 5% of respondents are planning to introduce it. 44% of respondents are undecided about the future. One comment added that since pay on demand was introduced, it’s been extremely popular among employees. A question about whether respondents would consider introducing pay on demand was included in the CIPP’s Future of Payroll Survey in 2020, to which 65% answered no. This year, only 46% of respondents completely rejected the notion. 24% of respondents said that more employers should offer pay on demand. It would be fair to predict, therefore, that pay on demand will become more popular in the future. Of those who favoured the idea of pay on demand, 70% were from smaller payroll teams, with five or less people in their team. 73% of them were from in-house payroll teams, from a wide range of industries. One reason respondents gave for their support of pay on demand was that employees are given a financial ‘safety net’ for emergencies. If an unexpected expense arrives, access to pay they’ve already earned could be an alternative to interest-based pay day loans or using a credit card. An interesting comment was that younger workers who have grown up in an era of instant access through technology will tend to be attracted to employers who provide pay on demand. Another argument was that it is not only workers in financial difficulty that would be affected. Even workers who are less dependent on their pay could see it as a benefit to access pay before it’s due. One comment suggested that pay on demand could help with preventing incorrect payments by giving employees visibility of their pay in advance.
Reasons provided by those who didn’t see pay on demand as an attractive benefit were as follows, as it could:
● be a burden on employers’ administration and cash flow ● lead to financial difficulties for employees who already struggle with budgeting. Access to some pay may seem like it will reduce financial difficulties, but it has been argued this is more of a delay to the consequences, rather than a long-term solution. One respondent gave the example of when an early pay day in December has caused financial issues for employees ● affect workers who claim universal credit, as being paid on different dates could affect the monthly assessment of finances. Perhaps there are things organisations can do to ensure that pay on demand is introduced in the correct way. Could the answer be that this benefit is offered alongside financial advice and budgeting support? Perhaps a limit can be placed on some proportion of the net pay? 55% of respondents predicted that the future will see payroll professionals having more involvement in employee financial well- being. We could see increased overlap between the duties and roles of human resources (HR) and payroll if financial well-being begins to sit within the payroll department’s remit. Comments highlighted the role of payroll data in displaying trends in employee finances, as well as the role payroll advice can play in raising financial awareness among employees. Cryptocurrency refers to a digital financial system, which uses blockchain technology and cryptographic functions to create and manage digital assets, allowing people to own and conduct financial transactions with them. The technology is known for its decentralisation; that it isn’t reliant on third party financial institutions, banks or governments to uphold or maintain it. Earlier this year, Her Majesty’s Treasury (HM Treasury) announced plans to make Britain a global hub for cryptoasset technology and investment. Part of the plan is to bring cryptoassets within regulation so they can be used for payments in the UK. Cryptocurrencies can be highly volatile, but HM Treasury plans to introduce stable coins and link them to the value of fiat currency, such as British pounds. A majority of 62% of respondents felt unsure as to whether this will impact payroll, mostly commenting this is a subject they don’t know much about. 25% believe that it will affect payroll, while 14% said they don’t think the plans will lead to any change.
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