January 2, 2019
By Jeff Johnson, senior vice president, Netspend Commercial Prepaid
Today’s workforce is being shaped by a number of factors, including changing demographics and the growing number of millennials, the onslaught of new technology applications, more geographic distribution, the draw of the gig economy and more. Payroll has evolved over the last several decades but, even so, businesses must continuously work to keep their compensation systems up to speed with the changing market. Doing so will increase operational efficiency, and improve employee satisfaction and retention, while keeping costs in line.
An increasingly diverse workplace
As the largest segment of our workforce today, millennials’ preferences for convenience, flexibility and efficiency – among other things – are impacting the entire enterprise, from staffing to benefits to payroll. But millennials aren’t the only demographic businesses must retain and compensate, and many organizations are struggling to manage the varying needs of the country’s most diverse workforce to date.1 Women are now more likely than men to have a 4-year college degree, and the minority working-age segment of the workforce is expected to double to 37 percent by 2020.2
Embracing these demographic changes and prioritizing diversity can benefit businesses by having a wider pool of potential employees with broader perspectives, market insights and a more diverse customer base – but the ensuing demand for accessible, convenient and quick payroll options from an evolving workforce puts a strain on traditional payroll systems.
Unique business climate and challenges
As the demographics of our workforce continue to evolve, businesses also continue to become more complex. Organizations must manage payments to contractors, part-time and seasonal employees, out-of-cycle payments and deductions, and remote workers, among other challenges. In fact, the gig economy comprises approximately 34 percent of the U.S. workforce3 and continues to grow, and 43 percent of Americans report spending some time working remotely.4
But some segments of the workforce cannot work remotely, and many day-to-day operations are at risk of significant disruption due to weather events or natural disasters. In 2017, several parts of the country were impacted by natural disasters that disrupted businesses and the workforce and made business operations much more complicated.5 The Bureau of Labor Statistics estimates that around 11.2 million workers and 782,000 businesses in Texas and Florida were impacted by Hurricanes Harvey and Irma alone.6
These factors present significant and costly challenges for payroll managers.
How payroll can pay off
So, what can businesses do to accommodate today’s diverse workforce that actually pays off for the bottom line?
Finance professionals may benefit from taking a holistic approach to payroll, looking at workforce needs beyond a recurring paycheck. Payroll is not a siloed function within an enterprise that just doles out paychecks – management should consider payroll as a strategic opportunity to support HR, employee satisfaction and retention, and make their business more profitable. In addition to paychecks, many businesses are also paying bonuses, incentives, expense reimbursement and more.
By implementing an integrated electronic system for payroll and other payments, businesses can:
- Streamline internal resources and processes,
- Improve visibility into payroll accounts, and
- Provide the workforce with valuable benefits.
Streamlining Internal Resources and Processes
Streamlining processes often includes integrating existing direct deposit programs with new options into a payment portal that allows businesses to manage the entire compensation system from one place. Payroll cards, for example, can serve as a complement to direct deposit programs, significantly reducing the number of checks issued, saving time and resources, and increasing total participation in electronic payroll.
Because of the often-dramatic reduction in check use, organizations save considerable processing, mailing and banking fees, reducing the need for distribution of replacement checks if lost or stolen.
National retailer JCPenney, for example, introduced payroll cards as a second electronic payment option and increased the number of employees receiving electronic pay from 76 to 97 percent, which greatly streamlined the entire process for the business, saving considerable time and approximately $40,000 per month in costs.7
Using an online portal, accounts can often be funded as a one-time load (for contract, bonus or incentive payments); or for recurring loads (as with regular payroll distribution). Administrators may be able to choose when and how much to load to an individual or to multiple cards, or to submit to custom distribution groups, making it simple to manage many varying payment scenarios.
Improve Visibility into Payroll Accounts
With an integrated electronic payroll system, administrators can access employee data and run reports online in addition to funding and tracking all payments – regardless of payment method.
Robust reporting tools allow payroll administrators to audit their program, create personalized reports, and monitor account use to get the information they need, when they need it.
This visibility can allow employers to better manage the flow of funds, while also being more responsive to time-sensitive needs such as making payments to temporary, part-time or seasonal employees. In addition, errors can be quickly identified and remedied, saving considerable staff time. According to a 2017 electronic payments report from Paystream Advisors, accounts payable staff can spend up to 20 hours each week simply resolving payment issues, such as errors, duplicate payments and inquiries.8
Finding errors quickly may also reduce the painful funding delay employees experience waiting for a corrected check to be mailed.
Valuable Workforce Benefits
Electronic payroll allows businesses of all sizes to better accommodate the varying payments needs of all employee groups, particularly employees with non-traditional financial needs.
This starts with a flexible enrollment process, which allows payroll administrators to enroll multiple employees at one time through batch processing, or update individual employees as needed. Multiple card distribution methods ensure that employees have the card they need quickly. This can be especially helpful to both employees and employers during seasonal hiring surges.
Once enrolled, employees and contractors enjoy the primary benefit of electronic payment: timely access to their funds. Whether by direct deposit or paycard, electronic deposits put funds in employees’ hands quickly and are far less likely to be impacted by bad weather or other impediments.
Funds that are automatically loaded to a bank account or payment card also reduce the time and expense of cashing checks and unlock access to e-commerce for payees who may have been limited by cash-only payments practices. Online and mobile portals may also provide helpful budgeting and tracking features for more informed spending – something that cannot be done with checks or cash alone.
Electronic payments programs can also typically provide electronic W-2 statements, formatted to current IRS requirements and readily available to all employees online.
Are payroll cards a win-win for both employers and the workforce?
In a recent BLRâ survey sponsored by Netspend, nearly 52 percent of HR professionals cited lower processing costs as the most popular benefit of payroll cards. Respondents also noted that the most appealing benefits of payroll cards to their employees are having immediate access to funds, eliminating trips to the bank and check-cashing fees, and the convenience of access to funds at ATMs.9
Payroll cards are an efficient, paperless way to manage employee pay. They can improve efficiency, transparency, reporting and compliance. Moving payroll payments to an electronic platform gives businesses the flexibility and responsiveness they need to pay employees and contractors in a timely manner for regular payroll, 1099 payments, overtime pay, out-of-cycle payments, bonuses and incentives.
Electronic payroll allows employers to better respond to common business situations such as a geographically distributed workforce, work-disrupting weather or other natural impediments.
Electronic payroll administration also enables businesses to issue or remove funds from accounts, track all payment activity in real time, and cancel payment cards if lost or stolen. Reporting tools allow the accounts payable team to more efficiently audit the program and create personalized reports, saving staff time and resources.
Payroll cards give employees and contractors faster access to their pay while avoiding check cashing fees, and they often have built-in features to help employees build or strengthen their financial health. Using electronic payroll, businesses can also meet the demands of their changing workforce. Businesses can reach banked and unbanked employees, and they open access to e-commerce and mobile payments platforms that are limited or unavailable with cash or check.
Financial professionals and businesses can help meet the needs of the workforce today and in the future by using electronic payroll solutions, while realizing cost and time savings and efficiencies for their bottom line.
3 Key Takeaways:
- Changes to America’s workforce, like the growing number of millennials, gig economy, technology and geographic distribution, are impacting how businesses pay their workforce.
- Businesses of all sizes can employ electronic payroll strategies to better meet the demands of an increasingly diverse workforce while increasing ROI.
- Finance and HR teams can improve operational efficiencies and visibility into funds distribution for payroll, contractor (1099) payments, bonuses and other out-of-cycle payments.
1 ArchPoint, December 1, 2016, “The state of US workplace diversity in 14 statistics” http://archpointgroup.com/the-state-of-us-workplace-diversity-in-14-statistics/
2 ArchPoint, December 1, 2016, “The state of US workplace diversity in 14 statistics” http://archpointgroup.com/the-state-of-us-workplace-diversity-in-14-statistics/
3 CNN, May 24, 2017, “Intuit: Gig economy is 34% of US workforce” http://money.cnn.com/2017/05/24/news/economy/gig-economy-intuit/index.html
4 The New York Times, February 15, 2017, “Out of the Office: More People are Working Remotely, Survey Finds” https://www.nytimes.com/2017/02/15/us/remote-workers-work-from-home.html
5 RMS, October 27, 2017, “Wine Country Wildfires: Reconnaissance and Loss Estimate Update” http://www.rms.com/blog/2017/10/27/wine-country-wildfires-reconnaissance-and-loss-estimate-update/
6 Bureau of Labor Statistics, “Hurricanes Harvey and Irma and September 2017 payroll data” https://www.bls.gov/ces/cesharveyirma.htm
7 Netspend, “JCPenney Increasing Operational Efficiencies”
8 Paystream Advisors, January 18, 2017, “2017 Electronic Payments Report” https://www.paystreamadvisors.com/resource/2017-electronic-payments-report/
9 Netspend, February 2018, “2018 Payroll Solutions Survey”