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Designing workforce systems for success – Payroll transformation

Designing workforce systems for success

Payroll transformations present an opportunity for organisations to re-imagine the way they engage with their workforce, write David Sofrà and Thomas Purnell.

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David Sofrà

Partner in Charge, Indirect Tax & Grants; Regional Leader, Payroll Services and ASPAC Lead Employment Taxes

KPMG Australia

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As the future of work is rapidly changing, incumbent organisations need to act to leverage their workforce and remain competitive. Large companies across all sectors are now faced with the challenge of needing to strengthen their core and build for the future at the same time.

Payroll, commonly viewed as merely a ‘back-office’ compliance function, needs to be considered as an essential part of an organisation's broader transformation strategy to allow it to adapt to our changing ways of work and succeed into the future.

Key points

  • Developing lean payroll processes and systems can drive greater operational efficiency, deliver effective compliance and allow organisations to leverage their core capabilities to create more profitable growth.
  • As we continue to see the rise of the ‘gig economy’, increased use of contractors and project-based work across domestic and foreign jurisdictions will require dynamic payroll capabilities.
  • Investing in new payroll technologies will enable organisations to re-imagine the way they pay and strategically deploy their workforce.

Agile organisations will succeed in the future of work

This year has pressed the importance of organisations remaining agile and being able to respond to change. In the post-pandemic economy, organisations will need to be able to dynamically scale their workforce both in terms of numbers and across geographies.

As organisations set their objectives and determine workforce needs, we will see an increase in the use of contractors and project-based work. We have seen organisations increasingly engage individuals to perform specific tasks, find talented people and then retain them as they become an integral part of their capability.

To enable this type of growth, organisations will need a payroll system which can integrate with HR and workforce management solutions to monitor the complexities involved with engaging contractors, which may lead to significant employment obligations if the arrangement is incorrectly managed.

Furthermore, for many industries, remote work is here to stay. Organisations that can embrace remote work and consider ‘work from anywhere’ policies will have access to talent pools and capabilities which are no longer restricted by geography.

As workforces expand across the globe, organisations will need payroll systems that allow them to pay their people correctly, tracking and adjusting to the dynamic taxation requirements of foreign jurisdictions.

Payroll technology is important part of the future of payments

We have seen the rise of financial technology (FinTech) change the way that much of the payments industry operates and we can expect to see the same in payroll.

Innovative fin-tech solutions have been designed around the needs of the consumer, providing them with simple and seamless ways to interact with their finances.

In the coming years, we expect to see a new ecosystem of modular payroll applications emerge, that will better address the needs of employees and allow employers to benefit from new ways of paying their people.

Even today, modern payroll technologies are allowing organisations to automate compliance activities, optimise rostering decisions and provide employees with access to their wages as they are earned. Full cloud integration of payroll and workforce data, payroll analytics dashboards and mobile capabilities are becoming the norm.

Organisations that have the payroll architecture in place to support the integration of modular solutions will be able to quickly adapt to the changing needs of their workforce, optimise employment costs before they are incurred and will be able to better attract and retain employees by improving their experience of how they are paid.

Our roadmap to a future proof payroll

Organisations that want to utilise the value of their payroll data and new technologies need to ensure that they have the right underlying processes in place.

Specifically, our experience has highlighted the value of developing lean payroll processes to drive greater operational efficiency, deliver effective compliance and allow organisations to leverage their core capabilities to create more profitable growth.

An essential part of optimising payroll for our clients has been to assist with developing a transformation road map to understand the broader strategy of the organisation and how payroll can be leveraged to help achieve its goals.

Initially, it is important that organisations understand the ‘current-state’ of their payroll and ensure that they have been paying their people correctly to date. Through working with our clients, we have found that system issues and manual processes have inadvertently led to underpayments of both wages and superannuation, that carry significant penalties and reputational damage which can be mitigated if voluntarily disclosed.

Once a clean slate has been established, organisations should then consider how they can design and implement standardised workflows to simplify the end-to-end process of paying and managing their people.

Conclusion

Payroll transformations present an opportunity for organisations to re-imagine the way they engage with their workforce.

Recent advancements have allowed the integration of payroll and human resources systems to provide strategic value, which now means that legacy systems are no longer fit-for-purpose. In response to the changing ways of work, organisations need to consider how they intend to leverage new payroll technologies to adapt to change and develop the capabilities that will allow them to succeed into the future.

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