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How Robotic Process Automation (RPA) is Shaping the Future of Payroll

Aug 9, 2016 

"Everything that can be automated will be automated’ - the first of three laws conceived by the noted professor Shoshana Zuboff, in the context of her work on the business implications of IT.

One of many global trends lending credence to Zuboff’s assertion is the emergence of robotic process automation (RPA). Though many RPA technologies are still relatively immature, it’s estimated that robotic automation at large is already impacting up to 40% of back-office processes for businesses – and payroll is very much one of them.

For the uninitiated, RPA is defined by the Institute for Robotic Process Automation as the configuration of computer software to “capture and interpret existing applications for processing a transaction, manipulating data, triggering responses, and communicating with other digital systems.” In simpler terms, it’s the use of ‘software agents’ to carry out business processes that would normally be done by human beings, typically with the goal of driving cost savings, efficiencies, and other improvements. 

To optimize the benefits of RPA, organizations should apply it to processes that are repetitive, rule-based, and liable to human error. For many organizations – especially those relying on outdated, legacy global payroll software – that makes payroll the perfect place to start.

RPA in the Payroll Function 

Payroll contains perhaps the greatest amount of administrative activity of any human resource process, with every pay cycle demanding accuracy, timeliness, and well-planned coordination across multiple organizational entities. The demands come from both inside and outside the business, given that global payroll is heavily governed by statutory and fiscal law and a raft of internal guidelines.

High-quality service is therefore non-negotiable – but since senior business stakeholders tend to see payroll as a tactical (rather than strategic) area of the business, the pressure is on to keep costs low. RPA presents a rare opportunity to simultaneously improve the consistency and quality of service in payroll while also driving down the total cost of delivery.

Among payroll professionals, RPA often conveys the perceived threat of ‘job-stealing robots’ – but that’s not what it’s about. Far from “taking over” today’s payroll process, RPA is largely focused on increasing the day-to-day efficiency and effectiveness of the payroll function, freeing up the workforce to analyze the increased level of insightful data that becomes available as a consequence of automation.

Self-Learning Artificial Intelligence (AI) 

Given payroll’s highly repetitive nature and reliance on straightforward, rules-driven calculations, outsiders could be forgiven for wondering why 100% accuracy isn’t delivered every time – with or without ‘robotic’ assistance.

But inside the payroll sector, we know better. The fact that 100% perfection is rarely achieved is normally a result of unplanned, yet commonplace, interruptions that can create unintended disruptions to the pay cycle: non-standard process requests, off-cycle changes dictated by business events, or unforeseen legislative changes at a country level.

To respond to such unpredictable interventions, RPA technologies are typically developed with self-learning artificial intelligence (AI) capabilities designed to ensure that an RPA-powered system can respond to changes and execute tasks far beyond basic processing.

Which Payroll Processes Can Benefit from RPA? 

Broadly, across many different industries, the software systems that utilize RPA are advancing significantly in terms of the complexity they can cope with. But that doesn’t necessarily make them complex to implement; RPA-powered global payroll solutions remain relatively simple to deploy – requiring no need for changes to IT infrastructure or any need for coding capabilities. 

Robotic process automation has already been crafted and utilized to great effect in many different payroll functions, with the following areas in particular seeing tangible benefits from more automated and rules-driven processing:

  • New starters / leavers
  • Contractual changes – position, benefits, roles, responsibility
  • Permanent changes – increases in salary, adding benefits, contact details, address changes
  • Temporary changes – bonus payments, expenses payments, overtime
  • Attendance records
  • Absence records
  • Holiday records
  • Validation and reconciliation of payroll
  • Deductions – pension, union, travel card, loans

By eliminating the manual strain on these processes, RPA has helped payroll teams reach far higher levels of accuracy more consistently, while delivering a host of other impressive results:

  • Auditing requirement reduced by 80% on average
  • Cycle time cut by 40% (including exception handling and auditing)
  • Completion rate (work flowing straight through) on Absence ~ 87%
  • Completion rate on attendance ~ 96%
  • FTE savings of between 80-90%

The deployment of RPA software is proving especially useful for organizations with data spread across multiple, fragmented systems – communications between robotic software being much faster and more reliable than human interaction.

For example, if a certain field in your HR system were missing a zip code, an employee would ordinarily handle the exception, completing the field and sending the form on to payroll colleagues, who would in turn enter the information into the payroll system. With RPA in place, the software would identify the missing field, rectify the error and then interact automatically with the global payroll system itself – in effect eliminating the need for human involvement on both sides of the exchange.

 

Summary 

The trend for robotic process automation is generating significant interest in many areas of business and is already impacting back-office processes that might typically be contenders for outsourcing. Due to its repetitive, rules-based nature, global payroll is one such candidate for RPA deployment, offering the opportunity to reduce costs and improve performance simultaneously.

Top-level executives can therefore be excited at the possibilities. A robotized process typically takes just four to eight weeks to implement, and payback can be realized within a year through multiple efficiencies.

Despite the natural inclination to be weary of RPA, payroll professionals should approach it with positivity. While technology may replace some administrative positions in the future, it’s also sure to create new roles and opportunities. After all, the need to govern, operate, monitor and improve RPA will become a key requirement and, with the payroll team freed-up from repetitive tasks, more value-adding activities might finally get the attention they deserve.


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