Everyone loves payday, but the word “payroll” can cause anxiety for payroll professionals as they cope with changing regulations, higher expectations, and shifting workforce dynamics. Workday’s Mariana Santiago, vice president, payroll product management, and Stacey Harris, VP research and analytics at Sierra-Cedar, talked with me about these issues and more. Take a listen here:
If you’re more of a reader, the transcript is below, edited for clarity. And, if you’re an HR professional, you can participate in the Sierra-Cedar HR Systems Survey.
Josh Krist: “Payroll.” It’s a simple word. It’s a word that usually makes employees happy, but it can strike fear into the hearts of payroll professionals as they continue to face changing regulations, higher expectations, and shifting workforce dynamics. That’s why on today’s episode of The Workday Podcast, I’m excited to have Stacey Harris, VP research and analytics at Sierra-Cedar. Also with me is Mariana Santiago, vice president, Payroll Product Management, at Workday. I’m Josh Krist.
Thank you both for joining me today.
Stacey Harris: Sure.
Mariana Santiago: Definitely.
Krist: Stacey, we were very excited to see the expansion of payroll data included in the 21st annual HR Systems Survey. Do you want to talk about why and how that was included this year?
Harris: So payroll is one of those topics that I think sometimes gets taken for granted in the HR technology space. It’s been there forever and it’s one of the first applications organizations adopt, so it’s about 98 percent adopted. The 2 percent who haven’t adopted it at this point are working with other outsourced models. It’s something that everybody has within their organization so they don’t think about it. It’s like having the furniture in the living room. It’s there, but I haven’t really put a lot of effort into thinking about how it should be placed or what it should be doing for me.
But what we’re finding in our research is that as organizations begin to think about the expanded view of self-service and the expanded role of HR technology as a value provider, Payroll has a real opportunity to make a difference. And the organizations that understand this are taking advantage of the wealth of data and the ability to really leverage the payroll connection to employees to create better engagement, to create more opportunities for data analysis, to create a better view of their global business models. So there are now a lot of ways that payroll can help.
Krist: And so from a payroll talent trends perspective, were there any surprises that you saw in this year’s data?
Harris: We saw a couple of things that I think were interesting. One is that as organizations think about expanding the use of Payroll, we’re seeing more organizations invest in buying other services with their payroll. So they’re adding different types of benefits, or they’re thinking about the pay-on-demand model, or they’re trying to do more pay cards, so it’s a mixture of different types of additional services along with the payroll tool. The other thing that we’re seeing in our data this year is that organizations are looking for more dashboards, analytics, and tools in their payroll solutions, which they previously didn’t. Those are the two big trends we’ve seen.
Krist: How about you, Mariana? Was there anything that you saw that piqued your interest or made you think, “Wow, this is great,” or “Oh gosh, I’ve got to do something about this.”
Santiago: First of all, I have to say that I always love reading the research Sierra-Cedar publishes because it’s a wealth of information. What I’m seeing more and more in payroll is that companies realized that if you analyze payroll data, the payroll department can play a different role in the company. We are seeing more and more payroll departments really having a seat at the table. Working with the compensation department, participating in planning meetings; in some cases, a company’s going to merge or acquire another company, and in the past payroll was not part of that conversation, but now it is. So I think that their role has changed and is changing more and more. For sure there are things in payroll that are by definition table stakes with regards to payroll processing and compliance. But with regards to what payroll can do for the business and how it can also be a partner during strategic planning activities—that’s the part that has become a lot more interesting.
Krist: And how did Payroll earn its place at the table? Or how did Payroll earn its place as a strategic partner?
Santiago: I think it’s exactly what Stacey was mentioning— by having insights, by having information, by being able to show trends and look at history, and in many cases, being able to anticipate potential problems that could become bigger problems for the company if you don’t address them. If you think about a company operating in the U.S., depending on the number of states or where they have local presence, you need to plan in advance: What regulations apply? What are we going to do in that location if we open a new office—what is the pool of employees? When Payroll is at the table, there are tons of things that can be discussed proactively that I think companies realize can add a different type of value.
Krist: Great. And then Stacey, this was interesting from the report: In aggregate, 28 percent of organizations are either evaluating their options, or planning to replace their current payroll system. But if I remember right, 96 percent of organizations say their payroll solutions meet their business needs. So why look for something new if what you have is working?
Harris: This is one of those paradoxes in the HR technology space. People love their HR technology and sometimes they’re not so happy with it, right? So it’s one of the things that we’re finding—most HR technology really does meet the business needs. HR technology is the table stakes that Mariana was talking about—it gets the work done, it’s a great workhorse, it does the job it needs to do. But it doesn’t add the level of value that organizations are looking for, and it’s that value-add that we’re starting to see.
And when we’re talking about value, we’re talking about the ability to do more enterprise-wide self-service: leveraging paycheck environments so that the employee can think about that as a communication tool, not just as a paycheck stub they get every week, right? It’s thinking about the paycheck data and the pay data as a great way of being able to see where you might have problem areas within your organization, or you might have global issues with data connectivities, or global issues with management who aren’t maybe getting their own data in on time. Those are things that only the Payroll organization really has total view of. And only the payroll piece, which is that direct connection to the employee, has access to the employee.
And so I think that’s what organizations are looking for—something that goes beyond just doing the job. They’re looking for something that adds value.
Krist: As we’re recording this from the floor of Workday Rising, I’m curious to know from both of you what you’re seeing or hearing here that catches your attention as far as payroll.
Harris: You know, I think the thing for me—with what I’ve seen both here at the event and in talking to many of the clients and customers who are the Workday environment—is that Workday early on saw that payroll was a critical component of the HR technology environment. It wasn’t something to outsource or think about later. It was an essential component. And because of that, it has connections to all the other HR technology areas automatically built into it. I think that is always fabulous, when I see that.
The other thing I think is this new worksheets capability, which I think in the next release is going to be available to everybody, right?
Santiago: That’s right.
Harris: I’m a big proponent. I’ve seen the worksheets tool demoed a couple times as we saw it in the business planning capability areas, and I think in the finance area it came out first. Having it in payroll I think will make a huge difference. Payroll and organizations spend an inordinate amount of time in Excel, or Google Docs or Google Spreadsheets. They spend so much time downloading, trying to figure out where the problems are. And being able to do that in an environment that has security built into it, that has the ability to have social tied into it, that has the ability to do line-item editing and cleaning, will be really, really valuable. And to have it updated in real time and still treat it like a spreadsheet—to me, that’s probably one of the biggest things I saw today.
The other thing was the retroactive reporting. The great thing about Workday is that it’s live, immediate, always available in real time—but it also means that the retroactive work is a little bit harder in those environments, and having that prebuilt, pre-done for people really makes a difference. So those are the things I saw that I thought were exciting. So how about you, Mariana, I know you just did a presentation.
Santiago: Well, I think the tools that payroll departments can use now are way different than what they used in the past but, and as Stacey is saying, still with the Excel look and feel. One thing I was talking about during this session is how we focus on making our applications simple for our users. And in that simplicity, we include working with tools that are familiar to you, because when you work with tools that are familiar, the simplicity comes automatically. So we were talking about worksheets and I see the excitement from customers. I see how they immediately start thinking about how they will use it. And in the case of worksheets in particular, I completely agree—payroll professionals use Excel. But the part that becomes really unique, I think, is the collaboration piece that comes with worksheets.
And then in the area of employees in particular, this has been Workday sweet spot from the beginning, with regards to our approach on engaging employees and making things mobile. We keep working on that—we were demoing conversational UI in the context of the employee experience, and how employees can interact with Workday for payroll or time and absence information, workforce-management-related use cases, in a different way now. So conversational UI gives that alternative way of interacting with the system. You can see people thinking about how they want to use it.
A payroll administrator was telling me today that she’s already thinking about how some of the frequently asked questions could be put into Workday Assistant so employees could interact with Workday Assistant and get those answers directly in Workday versus going to a separate document that might be difficult to find. So I see excitement.
Krist: Right. And what might listeners not be thinking of, when it comes to payroll, that they should be? Especially when you talk about this more strategic role—I would imagine there’s some talent and staffing needs there, too, that aren’t being addressed or that will very soon come into contrast, like, “Oh my gosh, we don’t have these people who can be strategic advisors.”
Santiago: Our customers have been telling us that even now their hiring practices for payroll professionals and the skills they look for are different than what they were in the past. They look for analysts—people who can really focus on analytics. In the past, customers were really focusing on people who can do the transactions and do the audits and have that attention to detail, what is important in payroll. But now they are looking for the person who can really analyze data, who can focus on the exceptions, who can troubleshoot if there are issues that could be coming from benefits, because that’s the nature of payroll. When you’re troubleshooting something in payroll, probably the problem is not in payroll per se—it is that you have to track it, right? [The problem likely started] in changing compensation and benefits, what is it? It’s that time data. So they look more for analytical skills—and I am really interested in seeing and hearing what Stacey thinks.
Harris: Yeah, I think you’re right on target. One of the challenges we find in our data set is that organizations are struggling to have the capabilities across the board, in all their HR environments, to get the skill sets to do the job. When we ask organizations “How well does the system meet your business needs?” Any organization that doesn’t answer “always” then gets the question, “Why doesn’t it meet your business needs?” And one of the options is, “I don’t have internal skill sets to use the technology well enough.” And 25 percent of the organizations who say it doesn’t meet their business needs is because they don’t have internal skill sets to do it. And Payroll is right up there with that issue, especially when it moves to the cloud.
One of the things we’re finding is that the current payroll administrator or Payroll department, shared services department, is often one of the organizations that is very hesitant about making big HR transformation moves. And part of that is because they are very worried about the fact that they’ll need to change skill sets, and rethink their department. And what we’re finding in our data is that organizations that really think about this and think about change management through their process from an opportunity can take a lot of what the organization oftentimes sees as administrative skill sets and transfer that with a little bit of skill development into what you were talking about: the ability to think analytically about what’s happening within the organization. All you have to do is point out how employees often did research manually and how they can use tools now to do that research.
So it’s going to require some skill development, it’s going to require internal conversations about what people want to do in their careers, and it’s going to require making people feel comfortable that there will be a place for them when you do the transformation. So I think that’s a big issue right now.
Krist: Yeah, it’s interesting. I happen to know a forensic accountant, and it seems like a lot of his issues are looking backward in time to answer the question, “How did we get there?”
Harris: Exactly. Same things. And payroll does that all the time. It’s just that oftentimes, they have to go through papers or people in traditional systems. In the new systems, they have to know how to use the tools. And a lot of times we think it’s because they don’t want to, and most of the time it’s because we haven’t given them the opportunity to learn it.
Santiago: And sometimes by learning to do it in a different way, right?
So people who have been doing the job for some time, they are now getting to know the new tools and it’s a process. It’s a journey for them. It’s not a switch. And then you also get the new professionals in payroll who come with different expectations about what they want to see in the systems they use today. So it’s an interesting time.
Krist: So what does the new world of payroll look like, especially when you were talking about the conversational interfaces? How will these professionals interact with payroll systems?
Santiago: When I look at the new world in payroll, I would say first that I think that what is changing is that payroll is no longer the process that you’re running at the end of a pay cycle, the crunch time at the end of the pay cycle. So now payroll is more that kind of process that is always running behind the scenes, always picking up the transactions that need to be processed. The process is spread out across the pay cycle while analysis is being done, while sometimes you have to tackle the unpredictable with regard to changes within the org. So we have changed from beginning to end, with regards to how things are done in the Payroll department. And what I am seeing more and more, and hearing a lot of buzz about in the market is the concept of moving to the instant pay approach.
And as the workforce is changing, it’s not just about salaried employees and hourly employees—it’s now about the contingent workforce and freelancers, so there is a completely different landscape. Now we are hearing from companies saying that some of their employees want the option to get instant pay—that if they worked X hours this day, they want to get paid by the end of the day. It’s what I personally call the Uber model of pay, right? And so it’s that intersection of what we all the changes we’re seeing in the workforce, plus technology, plus business demands, that are, I personally think, completely changing the way Payroll departments operate.
Krist: Stacey what’s your perspective?
Harris: I think everything you were talking about, Mariana, is right on target. The on-demand or instant pay is a big conversation, the role of the administrator and the role of Payroll within the organization as strategic—I think all of that is changing. The fact that it’s continuous versus once a month, once a pay cycle. I think if you’re going to wrap it into a big picture, I would call it a consumerization of the payroll environment. The interesting thing is that payroll is that sort of technology area that sits between HR and finance. And HR went through what we would consider a consumerization process over the last 5 to 10 years—it went from a back-office system to a system that is really intended to be completely interactive and continuously gathering data and information from the employee and providing them with data and information about in management.
And so that model of thinking about technology as a tool to get your work done—not just as a database to hold data and pull data from, but as an interactive environment that’s always learning and feeding you information—is now shifting into the payroll environment as well as into the finance department. And I think Payroll is the front edge of what we’re going to see happening in the finance space in this area, and it has the opportunity to teach the finance space how to go about consumerization. And so I think this is a really great space to be in. If you take a look at what’s happening at Amazon or Netflix or any of the big consumer tool environments, it’s about “How do I create an interactive environment where the engagement goes both ways, the information is going both ways, the activities are constant and continuous?” That’s the consumerization model. And I think Payroll is going through it; we’re going to start to see it in the finance space, it’s going to change how we think about business.
Krist: So if I am a current or an aspiring payroll professional, what advice do you have for me to get ready for the future?
Harris: Sign up for analytics classes or understand how data works. Understand data governance models and how data works inside of technology. One thing we find at a lot of organizations is employees struggling because they don’t understand that data is zeroes and ones, and that it has a base of how it’s being built and how it has to be trained over time, right? So my advice would be to take analytics and learn about it.
Santiago: Yes, I have observed young professionals that do internships at Workday, and I think that if someone is interested in the payroll, I would encourage them to do an internship in a Payroll department to get a look and feel of what the department does and how it works, because they come with a fresh perspective. And as I have many young professionals on the team, and I can say they do learn from the experienced professionals, but the experienced professionals learn from them too. I would say an internship is also a great thing to do, to get a better feeling of everything that goes into payroll, including compliance, taxation, and those complex pieces that are part of the job.
Krist: Is there anything else I should ask that I haven’t yet?
Harris: I think you’ve covered a lot of good ground. The only thing I would say is that if organizations are trying to figure out where to start this process—or journey—about their new approach to payroll, they should really start thinking about how they’re managing data and thinking about compliance within their organization, and how those two things connect. Because I often think we look at compliance as something we have to do; if you connect compliance with what’s happening with data in your organization, you might realize that it’s giving you, in some cases, the ability to think more broadly and more strategically, if you look at it that way. That’s my two cents.
Krist: Great. Thank you both so much for taking the time and sharing your really great insights on the payroll talent trends of the future. This is Josh Krist with the Workday podcast, signing off.