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How to fix 7 payroll problems exacerbated by the pandemic

No organization was completely prepared for a global pandemic, but companies with digitized, unified payroll departments were able to adjust more rapidly.

When the pandemic changed our world a year ago, companies were subjected to an unprecedented stress test. Seemingly overnight, teams had to shift to remote work — a big change for people-focused functions such as payroll and HR. 

Companies that had already embraced digitization and created robust business continuity plans withstood the stress best. “Having gone through that transformation before the pandemic was instrumental in making sure people still got paid on time,” said Karen Myers, VP of Global Enterprise Sales at ADP. “Nobody was really prepared to handle Covid-19, but clients who had a global payroll strategy in place were better prepared to react.” 

Tracy Micciche and Kelley Rousayne, senior directors with the consultancy firm The Hackett Group, spoke with Myers recently about the seven payroll problems exacerbated by the pandemic — and how they can be fixed. 

1. Business continuity plans are outdated.

Before Covid-19, your organization’s business continuity plans (BCP) might have been scoped out for an isolated outage of a day or two — not an ongoing, global event. Some companies scrambled to set up VPN access, take-home laptops and sufficient bandwidth for their associates.

“People without a BCP really struggled in the first half of 2020. Many didn’t even think that payroll could be done remotely,” Rousayne said. “But the good news is that payroll organizations have done it.” 

The solution: Business continuity plans should be expanded to cover many scenarios, with stakeholders evaluating those plans on a regular basis. If you have multiple payroll vendors, you should understand all of their BCPs as well. 

“If you have 50 different vendors, trying to manage that from a governance perspective can be really complex and tedious,” Myers said, making the argument for a single global payroll vendor. 

Global payroll process owners need to evaluate the business continuity plans for payroll processing and distribution, and tax filings and payments. Schedule an annual test of the business continuity plan — ideally companywide, so you can ensure that remote working really works. 

2. There’s no global payroll strategy. 

It’s more difficult to make decisions quickly if there’s no global payroll strategy — and less than half of companies have one. Organizations with complex structures, multiple vendors and undocumented processes struggled to take action in the face of the pandemic. “Companies that didn’t have someone who fully owned payroll were faced with confusion,” Rousayne said. 

The solution: The organization should have one global owner for payroll and workforce management to lead decision making and long-term planning. Having clear reporting lines help quickly disseminate important information.

If you can, streamline and standardize processes so that payroll is executed with the same quality globally. Storing all employee attendance data in a centralized location and reducing the number of payroll vendors will help decrease complexity. 

“If another location is picking up payroll processing, you have to remain in alignment with local data privacy rules, such as GDPR in Europe or the new local requirements in Russia, Brazil or South Korea,” Myers said. 

3. You haven’t yet embraced automation. 

Companies still relying on paper-based processes had a harder time switching to completely remote work. “Figuring out how to get checks delivered to associates when they were usually distributed in the office was a very real situation for some clients,” Myers said.

The solution: Determine where in your organization you can transform manual processes into automated ones. In your road map, consider all of the potential from available technologies, such as process automation, chatbots and optical character recognition. A mobile-based self-service portal lets employees manage their schedules and time-off requests. 

“A client needs to standardize and streamline whenever possible to make the automation more affordable and to make the delivery process centralized and updated,” Micciche said.

4. Payroll isn’t yet digital.

Organizations that mostly work in analog ways found it difficult to go digital during the pandemic. Some companies were able to have select employees work on-site to digitize mail and other essential documents, but there’s a better way.

The solution: Consider how you can create workflows to digitize any paper that your department handles. Vital documents that come via mail — such as tax forms and garnishments — can be digitized and processed with optical character recognition services. Many local and state tax agencies will accept and return digital filings, even in developing countries. Encourage your employees to switch to electronic payments and pay stubs, where allowable, and implement global workforce management tools to replace manual time sheets. 

“Machine learning and AI can detect errors and help communicate with associates,” Myers said. Information should be accessible for employees so that people working remotely still have fast access to their payroll teams’ knowledge.

5. Responses to compliance changes are slow.

Managing local, state and national compliance for multiple countries is highly complex, and during the pandemic, many governments enacted new measures to counteract its effects. Keeping up with these changes increased workloads in a time when payroll departments were already being stressed.  

“Compliance is the No. 1 topic that keeps payroll professionals up at night,” Myers said. “ADP tracked a 340% increase in legislative communications in March and April 2020 — 900 pieces of legislation in just two months.” 

The solution: Consider how you currently disseminate information about compliance changes and document processes within your organization. Your vendors should be able to offer guidance on these changing standards and how best to test and work through the changes. 

“Payroll issues can create lots of distractions when people just need to focus on their day-to-day jobs amid all of this anxiety,” Micciche said. 

6. The data quality is poor.

The pandemic put a lot of demands on payroll: People wanted reports on headcount, critical functions and overtime, but most organizations struggled with timely reporting. If an organization is using many different reporting systems for payroll and HR management, it might not have been able to react as quickly as one with a global payroll data system. Unharmonized data of poor quality leads to manual processing, dragging down response times. 

The solution: A global payroll reporting system gives you a harmonized view of your workforce with data dashboards for more expedient analysis. “Make sure there’s a strong connection between the human capital management (HCM) and payroll systems,” Myers suggested. “Having a single system of truth ensures better data quality. Reporting is only as good as the data in the system.”

Predictive analytics can help you develop workplace cost and play with possible scenarios. Always make sure that the company’s tools conform to local privacy regulations. 

7. Processes hinge on a single person.

Some payroll teams struggled to keep up with the workload during the pandemic, and it became apparent how crucial cross-training can be. “In some locations only one person knows how to do something, and that’s a huge risk factor,” Micciche said

The solution: Managers should identify any single-person dependencies and cross-train employees to help ensure continuity. “A lot of companies are moving processes from being local to regional and doing cross-training at a global level,” Rousayne said. 

Ongoing training for payroll staff should start with skills assessments and be customized to individuals’ strengths and needs. Make sure that all of your processes are documented electronically and accessible remotely.  

You can watch the webinar recording here, and download The Hackett Group’s white paper here

Grace Dobush

Based in Berlin, Grace Dobush is the editor of the ReThink Quarterly. She has written for publications including Fortune, Wired, Handelsblatt and Quartz.