Digital payroll: how to prepare payroll for the digital era

Payroll has long been neglected when it comes to digital transformation, but this is changing now. Digitizing payroll processes is an important step towards preparing payroll for the digital era.

But what does it mean to truly digitize payroll? What does a digital payroll look like? What are the benefits businesses can unlock by modernizing their payroll? What are potential pitfalls on the way towards payroll transformation?

Digitization is changing the way businesses operate. From communication to supply chain management to HR, the rise of digitized processes is palpable across all business functions. This includes the way businesses manage their payroll.

Although surveys show that 34% of business owners still rely on spreadsheets to manage payroll, digital transformation is slowly but surely making its way into the payroll department. New technologies and digital processes are revolutionizing the way payroll teams operate.

Conventional, often manual payroll processes are being replaced by payroll software. Paper payroll records are being digitized, and payroll processes and systems are being shifted to the cloud.

Digital payroll is the modern way of payroll processing, but what does digitizing payroll actually include? Here are different steps you can take to modernize your payroll:

• Digitizing payroll and employee records,

• Adopting digital payment methods,

• Using online time-tracking tools,

• Generating and distributing payslips electronically,

• Making payroll information and records accessible online,

• Using modern payroll management software,

• Automating payroll processes and data flows,

• Implementing employee self-service functions, and

• Using an online leave application and management system.

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Businesses that decide to digitize their payroll can unlock several advantages that come with automated, standardized processes and connected workforce management systems.

• No more spreadsheet chaos: Payroll processing based on spreadsheets is a thing of the past. Digital payroll eliminates the need for excel spreadsheets and data transfers via email.

• No more error-prone manual processes: Frequent payroll errors diminish employee trust and can lead to increased employee turnover in the long run. Digitizing and automating payroll processes reduces the need for human intervention in payroll and therefore significantly lowers the risk of payroll errors.

• Improved compliance: Having fewer errors in payroll ultimately enhances payroll compliance. Also, if there are fewer manual processes that need to be carried out, the payroll team has more time to focus on more important tasks that are directly related to compliance.

• Consolidated, standardized payroll data: Payroll data is an important source of information for businesses. A major advantage of digitizing payroll is that it comes with the standardization and consolidation of all the data related to payroll and its processes.

• Improving the employee experience: Digital payroll processing is an important enabler for enhancing the employee experience. Giving employees access to their payroll and related data creates a higher level of digital efficiency and matches the digitization standards they are used to from their private lives.

• Unlocking the strategic potential of payroll: Payroll holds enormous strategic value for an organization because it can provide detailed insights into the business’s workforce and operations and enables data-informed decision making.

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Digital payroll holds many advantages for businesses, but there are also some pitfalls to avoid when modernizing payroll processes and systems. They include:

• Data security risks: Digital payroll systems have one major drawback, and that is the risk of data security breaches. Payroll data is highly sensitive, which means that it needs to be safeguarded through strong data protection measures. Payroll security is vital in the digital era.

• Limited remote accessibility: Remote work is still highly popular with employees, including the members of the payroll team. To ensure the necessary level of flexibility, digital payroll systems need to be accessible from anywhere.

• Mismanaged system integration: In order to fully leverage the potential of digital payroll, the payroll system needs to be integrated with other software systems and tools that are used by the organization for managing its workforce. HR and payroll integration needs to be managed carefully to ensure data consistency and quality across all systems.

• Payroll disruptions: Modernizing payroll is a huge transformation project that will have an impact on payroll staff, processes, and workflows. If payroll transformation isn’t managed properly, businesses risk significant disruptions.

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How global businesses can prepare for the future of payroll

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Digitization and technology are two major drivers of operational efficiency across all business functions, including the payroll department. Organizations of any size can realize significant efficiency gains through payroll automation and payroll technology. However, the effects are even greater for international organizations with a multi-country payroll.

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Global payroll is notoriously complex, especially when it involves multiple in-country payroll providers. While outsourcing payroll to local service providers enhances global payroll compliance, multi-vendor management brings a whole new set of challenges.

The main global payroll challenges faced by organizations with globally distributed teams include fragmented, non-standardized payroll data, lack of operational visibility, and manual data handling. A global payroll solution like Lano can help businesses overcome these challenges.

Lano’s Global Payroll Consolidation Platform is built for seamless global payroll management. Automate, standardize, and consolidate payroll data for different entities and payroll providers and use our powerful analytics tools to slice and dice your data for detailed insights into your global workforce costs. Book a demo with one of our experts to learn more.