Why it might be time to upgrade your payroll

Every business leader knows that payroll is an essential function of any business; employees work to get paid and payroll is a business's largest expense with the biggest impact on cashflow. The exchange of effort for earnings fuels your entire operation. Despite best intentions, most companies will acknowledge that payroll mistakes happen with many reporting they have experienced HMRC penalties due to common-occurring payroll errors. The consequences can be severe for both the people and the business.

With our own research revealing that almost half (46%) of UK employees have missed a bill payment as a direct result of a payroll error, imagine the personal stress and anxiety a payroll error can cause. Beyond impacting individual employees, your business can face reputational damage and financial consequences including capital issues from unexpected payouts to penalties and fines from HMRC.

Each business’ payroll cycle is different and keeping on top of changes with traditional payroll technology can be an administrative nightmare that requires a significant number of productive hours, stopping HR and finance teams from doing deep, value-add work.

In this blog, I’ll explore the key challenges traditional payroll systems pose and why next-gen payroll solutions are essential in the modern world to create opportunities to drive better outcomes.

What is wrong with traditional payroll?

Traditional payroll is like an old phone, it’s slow, frustrating and does the bare minimum – wage calculation, record keeping and pay distribution – the equivalent of making calls and sending texts. To meet the needs of the modern workforce, payroll should integrate with other systems, automatically update payroll per compliance rules and process payroll in real-time – just like when updating to a newer phone that can make video calls, support streaming and suggest text replies. The bottom line is, traditional payroll makes the task more time-consuming and difficult than it should be.

Also worth noting is the fact that time is a scarce resource, while payroll is important, it is a burden on HR and finance departments and time consuming. It’s not just about how long is spent manually inputting data into the system – a process that can take up to five days for most – it's the time spent after correcting any errors or responding to employee enquiries.

Additionally, rigid payroll systems delay setting up new hires which can negatively impact the business bottom line, alongside productivity and morale. Organisations with a strong onboarding process increase productivity by 70%. Yet, according to our research, 70% of companies face strict deadlines when it comes to onboarding simply because their traditional provider cannot accommodate changes outside of predefined cut-off dates. With modern payroll solutions offering greater flexibility, allowing new employees to be added to payroll whenever is needed, HR teams can focus on crafting a seamless onboarding process that impacts business output. Next-gen solutions allow you to onboard new employees based solely on the needs of your business, and not on the limitations of a fixed payroll schedule.

What are the opportunities of modern payroll?

Accuracy and compliance are fundamental to any payroll system, but with traditional payroll, achieving this requires significant human oversight, which increases the risk of mistakes. Not only are traditional systems more likely to result in errors, most charge additional fees if changes need to be made during the payroll window – regardless of who is at fault. Our research shows 40% of businesses are charged more than £10 per change per pay cycle. That means if a company has 20,000 employees and mistakes happen with 1% of payslips monthly, they incur an annual cost of £24,000.

Modern payroll solutions sync with HMRC and automate payroll calculations, so everything is accurate and compliant from wages to tax and deductions. Next-gen systems also monitor and identify mistakes in real time so any problems can be quickly addressed. By catching these errors, businesses save money which can be re-invested.

Where traditional payroll requires a lot of manual data loading every month, which is repetitive and stressful for finance and HR teams, next-gen payroll solutions integrate into your existing tech stack, and are able to handle the setup seamlessly. By integrating with your current HR system, your HR professionals can focus on value-added activities instead of tedious admin and the automated transfer of data between platforms makes the entire process more efficient.

Today’s businesses are trying to do more with fewer resources, and so freeing up these hours on a regular basis is a great way to improve productivity and give your finance and HR departments time back.

Sticking with a traditional payroll provider means that, regardless of any advancements in the industry, your system and people processes will still suffer from inefficiencies now and in the future. By choosing a modern payroll provider, you set your business up for continuous success. Modernising critical processes like payroll is just as essential as innovating and improving the services you offer your customers. Productive employees are more likely to stay with companies where they have a positive overall experience, and a key part of that is being paid accurately and on time. Just as you would routinely consider upgrading your phone, the same should go for upgrading your payroll software.