New Alight Report Finds 40% of Companies Will Modernize Payroll Systems By 2023

Rhea-AI Summary

According to Alight Solutions’ report, cloud-based payroll systems have surpassed traditional on-premise systems, claiming 61% of the market. This shift indicates a strong movement towards payroll modernization, with 26% of companies accelerating their digital payroll initiatives recently. Key drivers include regulatory risks (42%) and corporate strategies (39%). However, challenges persist, particularly with payroll accuracy, where 27% of breaches since 2019 stemmed from human error. Without addressing basic payroll errors, companies risk significant financial losses.

Positive

• Cloud-based payroll systems now represent 61% of the payroll market, indicating a strong trend towards modernization.
• 26% of companies have accelerated digital payroll projects in the past year.
• 62% of businesses expect to undergo digital transformation within the next two years.

Negative

• 27% of payroll data breaches since 2019 resulted from human error, highlighting accuracy issues.
• Non-compliance with GDPR may incur fines of up to 4% of annual revenue or €20 million.
• Payroll leakage could cost companies 2% of their total salary bill, indicating financial inefficiencies.

Employers are increasingly using cloud-based technology to change how they run payroll and pay their people

LINCOLNSHIRE, Ill.--(BUSINESS WIRE)-- Reflecting a growing appetite for payroll modernization, companies are increasingly replacing their antiquated payroll systems with technology that moves them toward more rapid calculation and payment methods, according to a new report by Alight Solutions (NYSE: ALIT), a leading cloud-based provider of integrated digital human capital and business solutions.

For the first time, cloud-based payroll systems (61%) exceeded on-premise (39%) as the dominant payroll delivery platform, according to Alight’s 2021 Global Payroll Complexity Index. Furthermore, a quarter of companies (26%) have accelerated digital payroll projects in the past year, and another two-thirds (62%) expect to go through a digital transformation in the next two years.

“The payroll function is becoming increasingly complex as companies struggle to keep pace with shifting workforce demographics brought on by the pandemic,” said Luca Saracino, senior vice president, international sales and strategy at Alight. “It was a major achievement for companies to keep payroll running at times when business continuity was challenged, but it was far from ideal. Clearly HR and payroll leaders are eager to realize the benefits of digital payroll.”

According to our respondents, the primary drivers for accelerated digital payroll projects include regulatory risk (42%), corporate strategy for outsourced business processes (39%), cost controls (27%), payroll talent shortages (19%), and M&A and business divestment activities (15%).

Respondents also reported challenges associated with payroll accuracy, as frequent legislative updates and changes to furlough and job retention programs often required manual updates to payroll systems, which increased the risk of costly payroll errors. For example, the report revealed that 27% of data breaches in the payroll processes since 2019 were result of human error, according to respondents to the survey. In Europe, companies that don’t comply with General Data Protection Regulation (GDPR) may be fined up to 4% of annual revenue or €20 million, whichever is higher. In addition, payroll leakage, resulting from poor payroll process management, may cost companies 2% of their total salary bill.

“It’s possible companies are hemorrhaging millions of dollars annually through basic payroll process failures,” said Wilson Silva, senior vice president customer experience and HCM delivery at Alight. “Luckily, they can turn those losses around quickly by simply examining the payroll processes and correcting the basic payroll errors commonly made by companies that lack visibility into and governance of their payroll processes.”

About the Global Payroll Complexity Index

Alight’s Global Payroll Complexity Index provides HR and payroll leaders with timely insights into the challenges and complexities associated with processing single or multi-country payroll. Now in its fifth edition, the biennial survey reflects the responses from 147 companies operating around the world. Nine percent of respondents were corporate officers, while the majority (57%) were senior-level management who oversee the HR and payroll functions.

Earlier this year, Alight released a list of the top 40 countries ranked by payroll complexity. France topped the list for the fourth consecutive report, followed by Italy, Belgium, Germany, Spain, Poland, Russia, Switzerland, Japan and the United States making up the remaining top 10.

For more information and to access the complete report, please visit alight.com.

About Alight Solutions

With an unwavering belief that a company’s success starts with its people, Alight is a leading cloud-based provider of integrated digital human capital and business solutions. Leveraging proprietary AI and data analytics, Alight optimizes business process as a service (BPaaS) to deliver superior outcomes for employees and employers across a comprehensive portfolio of services. Alight allows employees to enrich their health, wealth and work while enabling global organizations to achieve a high-performance culture. Alight’s 15,000 dedicated colleagues serve more than 30 million employees and family members. Learn how Alight helps organizations of all sizes, including over 70% of the Fortune 100 at alight.com.

View source version on businesswire.com: https://www.businesswire.com/news/home/20211110006055/en/

MacKenzie Lucas

mackenzie.lucas@alight.com

Source: Alight Solutions

FAQ

What percentage of payroll systems are cloud-based according to Alight's report?

Cloud-based payroll systems now represent 61% of the market, surpassing on-premise systems at 39%.

What are the primary drivers for companies accelerating digital payroll projects?

The main drivers include regulatory risks (42%), outsourced business processes (39%), and cost controls (27%).

What risks do companies face regarding payroll accuracy?

Frequent legislative updates and human errors have led to 27% of payroll data breaches since 2019.

How much can non-compliance with GDPR cost companies?

Companies may incur fines up to 4% of their annual revenue or €20 million for non-compliance.

What is the potential cost of payroll leakage for companies?

Payroll leakage can result in a loss of about 2% of a company's total salary bill.