Payroll must not be seen as a mere "business transaction", but, in its actuality, as "a meaningful activity for employees that puts either food on the table for their family, pays for their children’s education or bills. It's for a higher cause”, notes Vijay Vemulapalli, GM & MD, ADP India, a leading provider of online payroll software & HR services and solutions, while stressing how organisations need a payroll that’s both powerful and accurate.
Pay is crucial to employee wellbeing and can impact an organisation at every level. And while paying people on time and accurately may sound simple, it is actually quite complex, said Vemulapalli, who took centre stage at People Matters TechHR India earlier this month to explore the various technological hurdles organisations face as they scale their payroll processes for 'anytime, anywhere' work models.
He also shared some vital insights on how digital innovations in payroll can help organisations add value to business and improve the employee experience.
Common payroll problems for companies
Usually, on time payroll is not a concern, but the accuracy is, said Vemulapalli, sharing some of the common challenges that companies face when it comes to payroll management.
“There are multiple inputs that need to come together to contribute to payroll accuracy, including how the employee is set up, different parameters that are taken accounting for holidays, time offs, etc. Payroll calculation is not difficult.., the complexity is in bringing all these different inputs to a platform and then to feed that into the engine,” he contended.
Some of the other challenges include setup issues that typically happen at any time of the employee lifecycle. “Majority of these issues happen during the hiring process when a wrong information is keyed in for the employee or transferring information inappropriately from one system to system during mergers and acquisitions,” he added.
Employee classification is another area where payroll can go wrong.
“For example, as per law in the US, if any employee works for more than 40 hours, the employers have to pay overtime unless they are classified as exempt. If that is not done, then companies have to pay penalties. In 2019 alone, more than $300 million were collected by the Labor Department as back pay. That creates a lot of friction in the system,” Vemulapalli added.
How payroll challenges affect talent strategy
Payroll is a very important event. The people strategy is connected to the payroll but payroll alone is not going to define the people strategy, said Vemulapalli.
“When I started working 30 years ago, getting a paycheck alone made me happy even if it was 40 days after my joining date. The Gen Z employees and gig workers nowadays are not just looking for payroll and the paycheck alone. They want the entire experience from hiring to retirement to be better than earlier," he said.
“On joining, a candidate is required to do a lot of paperwork and there's a lot of back and forth with the talent acquisition team or compensation team. There is a lot of friction in the process that needs to be improved,” he added.
About taxation, Vemulapalli said that in some countries where one lives matters and taxes change when an employee moves from one pin code to another. “In India, we don't have that problem, but we do have the timely payment of the taxes. Organisations need to look if they are compliant with that part."
“Time, leave of absence, benefits, compensation management... all those inputs need to be provided to these systems or processes where it defines a compensation strategy that eventually will lead into the people strategy,” he said.
How digital innovation can steamroll payroll process
Technology plays a huge role in having the right platform, timely inputs, right processes to audit, verify, and move the money to the banking systems, said Vemulapalli.
He dwelt on how in the last 70 years, ADP has been at the forefront of adopting the latest and greatest in a very timely manner.
“In the 1960s, we were using punch cards, time machines, and mainframes. We are one of the first to adopt those technologies those times and a SaaS company all along. We've been on the cloud even before the term cloud was invented. We were not public those days but all our systems were SaaS-based.
"Our Chennai business unit is one of the first business units that migrated to the public cloud and were able to scale up tremendously. Since then the reliability, efficiency, performance, and other aspects leading up to employee satisfaction have gone up from the plant’s perspective.”
Be it the benefits, time, or attendance, technology can help make the process seamless and employees can have a timely payroll and a better experience, he added.
Vemulapalli recalled that people used to take a lot of time in calculating the payroll and getting it delivered.
“30 to 40 days used to be the norm. The new age employees, however, don't want to wait that long. They may work for Uber in the morning, Ola in the evening, and a restaurant at night and want to be paid at the end of the shift. They want to know how much they earned, what's their take home, and what's going out for taxes. That ecosystem hasn't developed yet.”
“It is all about connecting the dots between where we were and what's next. Technology can play a huge role in actually advancing what needs to be done from a payroll perspective,” he added.
Technology problems with payroll
Technology is just an enabler, and it alone cannot solve problems, noted Vemulapalli, adding that what matters is the employee experience and how they feel when they use the technology.
“If you don't have the right strategy and the human element as a part of technology solutions, it won’t work well for an employee. For example, many organisations send out tenure appreciations, event appreciations, and happy birthday emails to employees. I also get that email but I do not know if I receive that email from a system or my manager. I probably would love to hear a happy birthday wish from my manager rather than just receiving that email. So, while technology is good, reminding and sending these messages, if that human empathy and compassion is missing it doesn’t really work well,” he stressed.
The other challenge Vemulapalli pointed out is the friction between the CHRO and chief information officer (CIO).
“Both have their own point of view. The CIOs think from a technology standpoint and the CHRO from a human compassion standpoint and sometimes they don't match. There is an opportunity for both of them to collaborate and find the right way.”