Feature insight - the future of payroll
blockchain technology. Julie Lock’s article: Blockchain – the future of payroll, in Issue 44 (October 2018) of Professional in Payroll, Pensions and Reward , explained the concept of blockchain: “…builds a secure ledger across a decentralised infrastructure. When someone makes a transaction it is broadcast to all parties in the network who validate and approve it. The data is encrypted and anonymous to those outside of the network. Once the transaction is complete, a new block is created and added to the existing chain of transaction records. The chain provides a permanent and transparent ledger, ensuring that the historical record of data becomes unchangeable. When data changes, all parties receive a copy of the data, so each member is responsible for its integrity. As there is no centralised version, an intruder would need to break all of the blocks on all parties at the exact same time, which makes blockchain very secure”. For payroll, blockchain could be used to pay employees. It could be used as a payment channel for those who do not have bank accounts; and is something that some payroll software providers have been developing and testing. Blockchain could also be used as part of organisations’ recruitment processes as it provides a way of validating qualifications. Pay on demand Flexible payment arrangements will increase in importance, as will flexible working. This is due to people wanting to work in different ways, but also needing to work differently to allow for a work-life balance and family care arrangements, be that for children, parents or both. Advances of pay have always been around but have tended to be responses to ad-hoc and infrequent requests. What we have seen recently is the increase in awareness and demand for ‘pay on demand’ or ‘pay when I want to be paid’. How this is operated can vary: it could be that employees are opting to be paid more frequently as opposed to traditional monthly pay dates, or it could be that they are looking for a one-off advance on their salary. Whatever this looks like within your organisation, there are implications for both employer and employee. The former arrangement of employees choosing
their pay frequency is straightforward, and technology should allow for this without much additional work from the payroll team. The latter arrangement is essentially another form of loan and has financial implications for the employee as well as potential cash flow issues for the employer. Faster payments have made this more accessible than ever before and many payroll systems can handle additional pay runs. ...an increase in the number of pay and reward roles... Organisations should consider the financial implications for their employees if they are frequently asking for advances of their pay. By continuing to offer this facility you could be putting your employees in more financial hardship whereby they become dependent on the ‘loan’. There are also legislative considerations relating to collection of income tax and National Insurance. A true pay-on-demand arrangement would have a significant impact on payroll, which must meet the obligations placed upon it by legislation which requires a full payment submission made to HM Revenue & Customs on or before the date payment is made to the worker. This would render pay-on-demand unworkable for payroll without legislative changes. Brexit Perhaps a more imminent change is that which will be brought about following Brexit. However, at the time of writing there is still much uncertainty with regards to Brexit, and those who responded to the CIPP future of payroll survey indicated that this was not a concern for payroll. Payslip distribution According to the CIPP Future of payroll report 2018-19 , 60% of those who responded issue payslips via a self- service portal. This is expected to increase as more millennials and generation-Z (otherwise known as the generation born with a mobile phone in their hand) enter the workforce. This generation will expect to access payslips online and probably via a smart phone. Whatever the method of payslip distribution, technology exists to automate
the distribution, and this should be embraced by payroll departments to allow more time for other tasks such as analytics. Reward It would be remiss to talk about the future of payroll without including reward, as the future of payroll is reward. We are seeing an increase in the number of pay and reward roles as pay is about more than just pay. People are increasingly interested in their overall remuneration package, the benefits which are available to them and how they can get more from their pay and employer. Organisations are starting to recognise the value that payroll data can bring if they use the professionals working in the industry to analyse and understand that data to identify which benefits to introduce. Financial awareness With employee wellbeing being topical and on most organisation’s agenda, payroll can make a real difference through providing financial awareness. In the UK there is very little education on how to manage your money from one pay date to another and as a result there is an increase in debt and short-term lending. I talked about pay on demand and the ‘loan’ element earlier in the article. Payroll professionals of the future could play a part in increasing people’s financial awareness through the introduction of financial education in the workplace, or even just explaining pay and the benefits available within the organisation and how employees could save money through benefits available to them. The future With so many technological changes in payroll’s future, the skill set of payroll professionals will change. Those working within the profession will need to be knowledgeable and skilled within the profession, they will need to maintain continuing professional development to keep up with changes, and they will be required to deliver excellent customer service to their employees. n Future of payroll report 2018–19 The CIPP Future of payroll report 2018–19 is now available within My CIPP at cipp.org.uk .
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Issue 47 | February 2019
| Professional in Payroll, Pensions and Reward |
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