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Pandemic-related payroll disruption builds case for automation

CFOs encouraged to prioritise investments that support organisational health to help maintain business resilience

Payroll processes experienced multiple complexities, from disruptions in business operations affecting inputs, to the everchanging legislation around the UK government’s furlough scheme, encouraging employers to turn to automation to build business resilience.

“The more automated you can make things, the less risk there is in those [disruptive] events because it just runs,” says Abigail Vaughan, COO at Zellis. “If you’ve got the fundamentals there in place, then you’ve got more capacity to be able to deal with those kinds of events.”

Twenty-seven percent of organisations said they would accelerate their adoption of automation in the payroll function as a result of the pandemic, according to a recent survey by Zellis.

Similarly, Alan Kinch, CFO at Zellis, says companies that have embraced digital technologies and automated processes have been more effective at maintaining and building resilience.

“Companies have reacted well when they understand the trends early, that could be through understanding data and analytics. We’ve also seen many companies be successful around maintaining business resilience where they adapted their strategy and operating model to dynamically meet customer needs and changing environment.”

Building resilience into payroll

Payroll teams had to adapt quickly to understand the constantly evolving government policy around pay and learn how to process that in the payroll systems.

In fact, 41 percent of payroll and HR leaders said they have struggled with the complexity of emergency payroll measures, such as temporary changes to Statutory Sick Pay and employee furlough schemes, according to Zellis’ survey.

“Covid shone a light on the business-critical nature of the payroll process and all of the processes that lead into the payroll process,” says Kinch. “It tested the resilience of those processes and the risks associated with having it on premise.”

Working remotely provided another challenge for payroll teams, especially as 18 percent of payroll and HR leaders said their team members do not have access to the appropriate resources to be productive when working remotely.

The complications to payroll encouraged organisations to look at the benefits of cloud-based technologies and extracting greater intelligence and insights from the payroll that can help manage the future direction of the business, says Vaughan.

Payroll is poorly invested in in most companies, she says. Many companies rarely invest properly in their internal processes and colleague experience, spending more on CRM systems and digital process for customers. The events of the pandemic have made organisations question the true cost of forgoing such investment, she adds.

“The long-term impact will be that people want to automate things that have traditionally been done very manually and free up the people who have been doing the manual work to focus on the “so what” and have more strategic conversations.”

Vaughan adds CFOs should place a greater focus on prioritising investments related to organisational health going forward.

Additionally, CFOs need to balance prioritising investments that build resilience and mitigate risks with scaling the company for growth and improvement initiatives, adds Kinch.

Maintaining company-wide resilience

The pandemic, for some companies, exposed weaknesses in their business resilience, says Kinch.

“It tested how robust operating models were to disruption, how agile business models were and the capacity of the management teams to bring innovation in the way they operate.”

Not many businesses would have had a global pandemic scenario in their risk register and for those who did, not many would have tested or planned for it. The pandemic shone a light on risk management frameworks, the importance of testing backup plans and reducing the risk, says Kinch.

Companies should test their business-critical processes against the risks and understand the plan of action if the risk occurs, he adds.

The key to limiting disruptions caused by future events to company-wide processes including payroll comes down to conducting risk assessments, risk planning and having a good business continuity plan, says Vaughan.

Fifty percent of organisations have updated their business continuity risk planning during the pandemic with an additional 25 percent still working on updating their planning, according to a research by Zellis.

Continuity plans typically fall within the domain of the finance team and operational executives, says Vaughan. The voices of HR and people have been elevated over the last two years and has demonstrated thy have been a “missing voice” when developing continuity plans.

“HR teams have now got an important part of ensuring that we’re looking after our people because no business works purely by machine and at the end of the day, it’s our people that help us get through these crises,” she adds.

Kinch says the pandemic highlighted the importance of supplier assurance.

“It’s not just about making sure your business is resilient but that the businesses that supply your business  are resilient too.”

It’s a whole ecosystem, he says. It’s “super critical” that businesses make sure the suppliers have got the appropriate controls and business continuity plan in place.

In fact, 49 percent of CFOs said they were spending the majority of their time reviewing supplier relationships, according to the survey.

“Fundamentally, the resilience of the company is determined by a company’s appetite for risk, and the agility of their business model,” says Kinch. “Some people accept risk, and they run with that risk. They do that knowingly, because either it can’t be managed, or is too expensive to manage.

“It’s making those judgment calls and ensuring that you are operating with an acceptable level of risk and that your model is resilient to operate in your specific industry or sector.”

Similarly, Vaughan highlights building resilience and risk management is something that is set from the top of the organisation. “It’s the experience of the leadership team and their agility and ability to weather it.”

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