Alight study reveals half of companies committed payroll errors during the last five years
- None.
- - Low adoption of AI in payroll processes despite industry trends and media attention.
- - Significant percentage of companies still using spreadsheets and outdated manual processes.
- - Only 26% reported employing fully cloud-based strategies, indicating a need for more streamlined processes.
Insights
The revelation that over half of the companies surveyed have incurred payroll penalties due to non-compliance is a significant indicator of operational inefficiency and potential financial risk. From a financial standpoint, these penalties can directly affect a company's bottom line, potentially leading to an increase in operational costs and a decrease in net income. Additionally, the use of spreadsheets and manual processes by a considerable percentage of companies suggests a lag in the adoption of more efficient and cost-effective payroll systems, which could impede the ability to scale operations effectively.
Investors should monitor the extent to which companies in their portfolios are addressing these inefficiencies, as it could be indicative of management's ability to implement necessary technological advancements and control costs. The shift towards streamlined processes and cloud-based strategies, while currently at a modest 26%, is a positive trend that could result in cost savings and improved compliance over the long term. However, the slow adoption rate of AI within payroll processes might signal a reluctance to invest in emerging technologies, which could be a competitive disadvantage.
The report's findings highlight a broader industry trend towards digital transformation in payroll operations. The market for cloud-based human capital management solutions is growing as businesses seek to modernize their operations. Companies that successfully migrate to cloud-based payroll systems may gain a competitive edge through increased efficiency, reduced risk of non-compliance and improved data management capabilities.
It is crucial for stakeholders to understand the market dynamics at play. As companies continue to prioritize the integration of payroll and benefits into unified platforms, there may be increased demand for providers offering comprehensive solutions. This could impact the competitive landscape, with potential benefits for innovators and market leaders in cloud-based human capital technology. The emphasis on employee data analysis and automatic reporting mechanisms reflects a growing need for data-driven decision-making capabilities in human resources management.
Payroll compliance is a complex legal area, varying significantly across different jurisdictions. The report underscores the legal implications of outdated payroll practices, with more than half of the surveyed companies facing penalties. This not only suggests a widespread issue with keeping up with regulatory requirements but also indicates potential legal exposure. Companies operating across multiple countries must navigate a myriad of tax laws and employment regulations, which can be particularly challenging with outdated or manual systems.
For businesses, the legal risks associated with non-compliance can extend beyond financial penalties to include reputational damage and regulatory scrutiny. The focus on integrating payroll and benefits platforms is likely a response to these challenges, aiming to ensure greater compliance and reduce the risk of legal issues. However, the slow adoption of new technologies like AI in payroll processes could be a missed opportunity to leverage advanced tools for compliance monitoring and risk management.
Outdated payroll practices are penalizing organizations and emphasize the urgent need to make transformative changes in payroll management
Building on the data from the 2023 Alight Global Payroll Complexity Index, this new report surveyed nearly 300 payroll professionals and stakeholders to understand key aspects of payroll operations, including the number of countries that each company processes payroll in, as well as the types of processes and technology they used to execute payroll.
In addition to penalties, the report found
The survey also reveals that many companies are shifting towards more streamlined processes and migrating more of their payroll operations to the cloud. Currently, only
Organizations surveyed also placed integrating payroll and benefits into a unified platform as their number one priority, followed by employee data analysis and implementing automatic reporting mechanisms.
As well, payroll challenges are magnified for companies operating in the top 10 most complex payroll processing countries where there is an increased likelihood of receiving a penalty for payroll non-compliance. The report underscores a direct correlation between the number of countries an organization operates in and the likelihood of receiving fines. Notably,
“Payroll is an integral part of any business and can damage an organization’s reputation if something goes wrong,” said Luca Saracino, executive vice president of payroll and professional services at Alight. “These mistakes can be mitigated with a well-integrated, single platform that combines all-important HR functions such as payroll and benefits into a one-stop shop. Streamlining such processes not only saves time and minimizes risks of human errors, but also goes a long way in safeguarding both the company and promoting employee wellbeing.”
To learn more about Alight’s Company Payroll Complexity Report, download the 2024 report here.
Research methodology
The 2024 Company Payroll Complexity Report is the result of a survey completed by nearly 300 payroll professionals between July and September 2023. The survey targeted payroll professionals as well as key stakeholders with a vested interest in payroll operations in their respective companies including the number of countries companies processed payroll in, to the number of fines and penalties received for non-compliance.
This report builds on and uses the data from the 2023 Global Payroll Complexity Index to create a holistic picture of the current payroll technology landscape, including what options companies have in terms of technology, functionality and processes to optimize their payroll operations.
About Alight Solutions
Alight is a leading cloud-based human capital technology and services provider that powers confident health, wealth and wellbeing decisions for 36 million people and dependents. Our Alight Worklife® platform combines data and analytics with a simple, seamless user experience. Supported by our global delivery capabilities, Alight Worklife is transforming the employee experience for people around the world. With personalized, data-driven health, wealth, pay and wellbeing insights, Alight brings people the security of better outcomes and peace of mind throughout life’s big moments and most important decisions. Learn how Alight unlocks growth for organizations of all sizes at alight.com.
View source version on businesswire.com: https://www.businesswire.com/news/home/20240219392734/en/
Mariana Fischbach
mariana.fischbach@alight.com
Source: Alight Solutions
FAQ
What is the focus of Alight, Inc.'s 2024 Company Payroll Complexity Report?
How many companies were surveyed for the report?
What percentage of companies still use spreadsheets for payroll operations?
What percentage of companies plan to integrate artificial intelligence (AI) into their payroll processes within the next two years?
What is the top priority for organizations surveyed regarding payroll operations?
How many companies reported employing fully cloud-based strategies?
