The tangible impact of an outdated approach to payroll

Failure to keep up to speed with the pace of the market can have drastic and profound effects. Kodak, once the behemoth of the photography world, for example, didn’t grasp the scale of the approaching digital era in the 1990s and ended up filing for bankruptcy in 2012. The early mobile phone pioneer Nokia also overestimated the strength of its brand and believed it could arrive late to the smartphone race, and suffered a similar fate. The same principle also applies in most other markets, including payroll; but what is the tangible impact of not keeping up with the pace of change, and sticking with an outdated approach?

Outside of Kodak and Nokia, the list of brands that have failed to modernise with the market and subsequently suffered major damage to their brand and overall success is extensive. And it’s not only ineffective leadership, overconfidence or a lack of foresight that drives this inertia. Within payroll specifically, a recent study found that two-thirds of companies cite ageing, fragmented technology as their biggest obstacle. This shows that they are actually aware of their existing limitations, and the impact that they can have, but are unable to modernise due to budgetary, or other internal, issues.

Part of the issue lies in an inability to build a strong enough internal argument to secure investment, and sway decision-makers. This is often due to broader macroeconomic conditions or potentially a lack of understanding on the buyer’s behalf over the potential value that a pay function can truly offer. And when we consider the myriad of other areas of a business that require funding to maintain productivity and support business-as-usual, it is perhaps understandable that many employers don’t recognise the value in updating their payroll platforms.

However, it’s now clear that the failure to secure this investment is in fact costing organisations a huge amount of time, and money.

The role of a pay function is to provide accurate and timely remuneration to employees, but as anyone in the profession will know, errors can happen, particularly in the stages of more traditional processes that require human, manual inputs. But the impact that those faults - combined with the employee time needed to rectify them - have on organisations has never really been gauged, until now.

Our recently published Business Case for Change report found that these mistakes, although seemingly innocuous, have a significant cost. In fact, every individual error made in a payroll process is worth around $291 to an employer. Considering the scale of some global workforces, those costs quickly add up. It’s clear that modernising pay technology – and cutting the mistakes – can benefit employers.

However, the financial impact isn’t the most concerning outcome of the reluctance to embrace digital transformation. Our report shows that, compared to those who do utilise unified pay solutions, organisations that rely on outdated and manual processes face up to 80 days, or almost three extra months’ worth of additional workload per year. Very few employers have the resources to manage the time and people required to deal with this effectively, and will therefore naturally trail behind other organisations that are not weighed down in the same way. On the other side of the coin, those forward-thinking employers and their payroll teams will suddenly have access to far more time that can be better spent on value-adding initiatives, or innovation. Modern pay solutions also offer access to more data that can be leveraged to develop predictive analytics and insights and therefore help pay specialists to enable their organisations to act more strategically.

But how can pay teams get decision-makers to agree to invest in modern platforms over other areas of the business?

Almost every organisation will be keeping a close eye on budgets with the broader economic backdrop in mind. The end of 2024 saw several major geopolitical events and 2025 could offer further challenges to overcome. This means that now more than ever, employers will be making decisions that are backed up and supported by data. That’s why being able to provide statistics highlighting the impact that not adopting modern, unified and tech-backed pay solutions can have is so valuable. These metrics should be integrated into specific business cases highlighting why investment is crucially required.

Ultimately, the fewer errors that are made, the less money is wasted. Leveraging the full potential of pay platforms and getting true value for money helps to reduce mistakes and free up months of work and resources, which can be more effectively deployed into areas that require them. That argument alone can help to support a true case for change.