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3 payroll challenges your team could face in 2021

On the road to post-pandemic recovery, the stumbling blocks payroll teams may encounter also provide opportunities to future-proof the business.  

The Covid-19 pandemic forced many organizations to change how they do business. Payroll professionals were key workers, playing an important role in getting the global workforce paid through uncertain and difficult times. 

A year and a half later, many companies are recognizing the value of a strong payroll team. The path to post-pandemic recovery is rocky, but successful organizations will see the obstacles along the way as opportunities for change. These three challenges are likely to affect payroll departments in 2021 and beyond: 

1. Increased focus on payroll accuracy

The pandemic has shown how inaccurate payroll is for many workers. ADP Research Institute’s new study, People at Work 2021: A Global Workforce View, found that nearly half (45%) of workers are paying closer attention to their paychecks than they did before the pandemic.

This additional scrutiny may have been because of furlough and other support schemes, but it has exposed other causes of payroll inaccuracy. Over 61% of organizations surveyed in ADP’s The Potential of Payroll research said that a growth in payroll queries during the pandemic has meant they can’t focus on more strategic initiatives. Late payments have risen, with 69% of workers paid late at some point, up from 60% before the pandemic. Only 27% of organizations said their payroll was over 90% accurate six months into the pandemic, compared with 52% before the crisis. Payroll inaccuracy has been a ticking time-bomb – it was there under the surface before the pandemic, and the challenges of the past 18 months have not just exposed it, but made it worse.

The opportunity: Automating manual calculations and digitizing paper-based processes not only saves time and effort but also enhances accuracy, freeing up payroll teams to play a more strategic role in their organizations. As companies restructure their relationships with employees after Covid-19, increasing payroll accuracy not only frees up payroll staff for more strategic work, but the reduced stress for staff helps retain and engage your best employees.

Some companies are doing this by implementing self-service portals. Mobile applications and tools that enable workers to digitally track and manage their pay are gaining traction around the world, with higher adoption rates in APAC (51%) and Latin America (48%) compared to North America (31%) and Europe (21%).

Worrying about pay

According to the ADP Research Institute, many workers experienced paycheck issues during the pandemic:

Received a late payment: 69%

Underpaid at some point: 63%

Frequently underpaid: 20%

Overpaid at some point: 54%

Received a failed payment or tax error: 52%

2. A more complex and distributed workforce

The pandemic sparked a surge in remote work. Despite closures and movement restrictions starting to ease in many countries, workers continue to seek flexibility in the way they work — be it location, hours or type of employment.

Before the pandemic, only 26% of workers felt they could take advantage of flexible working arrangements. In 2021, employees feel more empowered, and that proportion has soared to 67%, according to the ADP Research Institute, with 47% of respondents saying their managers offer more flexibility than company policy. 

For payroll departments, increased flexibility and an influx of contract workers could lead to more complex calculations for working out pay, leave entitlements and other benefits and deductions.

The opportunity: This is the moment to go all-in on digital solutions that can help streamline and standardize payroll processes. Cloud-based payroll, for instance, allows payroll staff to access data wherever they are, while a configurable system offers the flexibility needed to manage a dynamic workforce. This is particularly important if you’re working with multiple payroll locations – different vendors and payroll systems in different countries means your employees are not getting the same experience, and your payroll staff then have to cope with queries and issues across multiple systems.

To help decrease complexity, document procedures for various employee engagements and ensure compliance controls are in place, informed by the applicable laws. Create a centralized location for employee and payroll data to make it quicker and easier to see an entire workforce in a single view. Use automation where possible to drive efficiency, such as when performing currency conversions or calculating deductions for a global workforce.

3. Evolving regulations and compliance requirements

Last year, because of the pandemic, many countries introduced stimulus packages and relief measures to prevent mass redundancies and unemployment. ADP teams reported a 380% increase in legal communications to process in just the first two months of the pandemic in March-April 2020. That included an additional 900 pieces of legislation on top of existing regulations. As a result, 51% of organizations with little or no payroll integration are not confident about being positively audited on payroll compliance.

Governments around the world also deferred regulatory changes related to taxes and wages. This year, many of those paused regulations will take effect, and some subsidies and relief programs will continue throughout 2021 as nations try to revitalize their economies. Keeping track of these changes is a major challenge for payroll departments.

The opportunity: Investing in both people and technology will pay dividends when it comes to managing ever-changing regulation and compliance requirements. Payroll vendors’ solutions should have built-in compliance checks. Compliance training and upskilling for payroll teams will also give these employees an added edge and make them feel more valued.

To help you understand and compare how the global pandemic has affected companies and employees, download People at Work 2021: A Global Workforce View here. To explore how well organizations are meeting the challenges as a result of the pandemic, download The Potential of Payroll: Global Payroll Survey 2021 here.

Rina Diane Caballar

Based in New Zealand, Rina Diane Caballar is a freelance journalist. She has written for publications including the BBC, The Boston Globe and The Atlantic.