Enterprises embrace provider offerings that cut costs, reduce manual effort and help companies to use data for strategic decisions, ISG Provider Lens report says
A growing number of enterprises are automating payroll systems to meet changing business requirements, often outsourcing digital transformation projects and ongoing operations to service providers as they seek to do more with less, according to a new research report published by Information Services Group, a leading global technology research and advisory firm.
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“This lets payroll departments shift into a more strategic role, focused on improving employee engagement and other high-level objectives.”
The 2023 ISG Provider Lens™ global Payroll Solutions and Services report finds many companies have implemented cloud-based data input, self-service employee portals, mobile apps and other innovations in pursuit of zero-touch payroll systems that can cut costs, speed up results and reduce human error. As macroeconomic challenges cloud the future of funding for in-house projects, enterprises are engaging with service providers that spread the cost of innovation across multiple customers.
“Automation has dramatically streamlined payroll processes, whether performed internally or by service providers,” said Stacey Cadigan, partner, ISG Human Capital Management and Enterprise Transformation. “This lets payroll departments shift into a more strategic role, focused on improving employee engagement and other high-level objectives.”
Managing payroll is a critical part of enterprises’ adaptation to recent and ongoing business disruptions, the report says. The rapid spread of remote work since the COVID-19 pandemic, along with the growing number of contingent and gig employees who traditionally were outside the scope of payroll, have increased the complexity of payroll operations and compliance. Leading service providers offer clients the expertise to navigate these changes.
Enterprises are embracing AI and ML tools that are at the core of many providers’ services, ISG says. They allow for ongoing, automated validation of data inputs, real-time visibility into potential errors and compliance monitoring for greater efficiency. Natural language processing (NLP) powers conversational virtual assistants that can field employee queries around the clock.
While some companies are looking to consolidate payroll vendors to streamline global reporting, regional service models may better serve local compliance and customization requirements, the report says. To find the right balance, some enterprises have adopted a hybrid approach in which they partner with two or three providers.
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As automation spreads, payroll dashboards and AI algorithms offer the possibility of using data for actionable insights, predictive analytics and scenario modeling, ISG says. Companies can use these tools for tasks such as adjusting staffing levels and developing ideal compensation structures.
“With some new payroll systems, enterprises can extract a huge amount of value from data they have never used before,” said Jan Erik Aase, partner and global leader, ISG Provider Lens Research. “Some providers even augment this with third-party data.”
The report also explores other global payroll trends, including the rise of payroll solutions to help employees assess their financial well-being and the growing popularity of on-demand pay with digital wallets.
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