Contributed by Mollie Lombardi Co-Founder, Principal Analyst, Aptitude Research Partners
Gross-to-Net calculations. Benefits deductions. Multi-jurisdictional tax filings. These are not often considered words of passion. But I have become passionate about payroll because it is something that touches every employee, and therefore has the potential to shape culture and behavior. As I’ve said before, and will say again, it ain’t a job if you don’t get paid. Payroll is the one HR function you must have in order to be an employer. But it is so much more meaningful than the mathematical formulas that translate gross pay in the dollar figure on a check.
I’ve been deep in payroll land for some time now, and here’s a few things I’ve learned.
- 78% of full time workers live paycheck to paycheck, including 1 in 10 of people making $100,000 or more (2017, CareerBuilder)
- 7% of households are “unbanked” and have no institutional banking relationships
- 20% are “underbanked”, meaning they have a bank account, but still rely heavily on resources like check cashing or payday loans (2016, FDIC)
These are the kinds of stats that terrify me. And make me realize that recent innovation in the payroll space is essential, not a “nice to have”. Because when I talk to executives and others about trends like using pay slips or pay notifications as a communication device, I often hear “who looks at their paystub every week?” Now I understand, if you know your income more than covers your bills, you might not look. But that’s far from the reality of much of the workforce. Or if we talk about same-day pay or instant pay card loading, I ask people to imagine your car breaking down on Monday and facing the choice of a predatory loan or waiting 5 days for payday to fix it. Not to mention worrying about being late to work because you had to stand in line at the electric company or cable office to pay your bill in cash.
Now I get it. Employers are in no way responsible for employee financial problems. But finances bring real stress, distraction, and even absenteeism. While it’s not their fault, employers do feel the impact. So, what can you do?
- Consider financial education or financial wellness. We see these offered standalone, or as part of payroll solutions – sometimes even included in the price.
- Improve process and use technology to eliminate errors. Aptitude’s Payroll Index Report shows homegrown payroll solutions have an average error rate of 11.4%, nearly twice the rate of those using a third-party solution or service at 6.1%. The time spent by employees finding errors and notifying HR, by HR researching and verifying, and leadership re-approving is bad for morale and productivity.
- Automate to improve the pay experience. Employee self-service, chat bots, and proactive communication tools all relieve administrative burden and alleviate pay anxieties.
Payroll can seem boring. But it’s a huge amount of money. It’s also a huge amount of time spent by your payroll administrators, as well as managers and employees. And it is a clear statement of value of an employee’s time and effort. It’s important to consider not just the number on the check, but how it is delivered and what that says about your company. Money is meaningful, and it can change your organization’s outcomes, as well as impact the lives of your employees. It’s hard not to get passionate about something with those qualities.
Author Mollie Lombardi is co-founder and principal analyst of Aptitude Research Partners. Her sessions at the HR Tech Conference include an HR Tech Market Landscape on Payroll and a spirited discussion during the Women in HR Tech Summit on women, pay equity and financial wellness.