My Payroll Prediction for 2020

My prediction for the year and for the decade ahead is that ‘disintermediation’ is going to be the single biggest factor driving change in the bureau world. It will give bureaus a strong differentiator in a crowded marketplace, it will remove many of the typical frustrations from information-hungry employers and it will free ambitious payroll professionals to shake off the burden of menial work.

In this article I will answer:

-       What is disintermediation?

-       Why bureaus need to move to a disintermediated model?

-       How can they do that?

-       Should payroll professionals be worried about it?

What is it?

Disintermediation has been rippling through modern economies for 30-40 years and we all recognise it by another name - “self-service”. Everyday examples are:

-       Withdrawing money from a bank account

-       Booking a holiday: flights, parking and accommodation

-       Buying petrol

-       Paying for supermarket purchases

In all these cases the consumer has been ‘empowered’ to carry out some or all of the transaction for themselves, with no assistance from a ‘middleman’. 

Today, when I want to withdraw money from my back I can:

Wait for the bank to open its doors - Queue to get served at the counter - Write out a personal cheque - Pass it to a bank clerk who - Types my details into a computer - Counts out the money and - Hands it over…. 

Or I can walk up to a cash machine and insert my card, enter the PIN and type the amount of cash I require and walk away. Importantly, the value of the transaction is not diminished, it is just different. It is faster, more convenient and is available 24-7. I appreciate that it lacks a human touch but, when I need to access a more complex transaction, I can always walk into the bank premises, meet a real person and he or she can add value to the transaction by listening to my needs, using his/her knowledge to assess my requirements and can then guide me to a range of available options.  

Payroll bureaus today operate like the banks of yesterday. But disintermediation is already sweeping across the accountancy marketplace and we can see this in the growing success of online accounting systems such as Xero, FreeAgent and QuickBooks. It is coming to bureaus too in the form of modern cloud payroll platforms.

Why do bureaus need to move to a disintermediated model?

Bureaus today are processing many more payrolls than ever; they are interpreting an ever-increasing swathe of highly complex legislation on behalf of their clients and they are handling labyrinthine pension arrangements too. They are doing all of this with fewer people and, on the whole, using outdated technology. 

It is my belief that the current, highly manual model of service delivery is unsustainable without increasing headcount; increasing prices or moving to a collaborative model of payroll service delivery. If a ‘middleman’ is to justify his position in the transaction chain, he must add value. The more value they add, the more likely they are to thrive, and vice versa. 

My question is: just how much value is a bureau payroll person adding by sitting in-between the employer and the payroll system and carrying out relatively menial tasks such as:

-       chasing up the client by phone or email to get the payroll information in time to process the payroll;

-       typing information into the system;

-       manually checking that you typed it correctly;

-       to-ing and fro-ing with the client to ensure he is satisfied with the draft calculations and getting the figures finalised; 

-       manually generating reports and payslips and uploading them to the bureau portal/client; 

-       re-generating reports the client has mislaid or can’t find; 

-       handling ad hoc queries from the client between payroll runs including adding starter and leaver information;

-       reminding the client to pay their HMRC bill the next month

If they can spend less time doing this sort of work they will, as a direct consequence, increase their value to the firm and, it can be argued, to the employer too.

How do they do that?

If bureaus are to reduce the burden of menial administrative work upon their payroll team, they need to rethink their client relationships and be prepared to adopt new ways of working. They can best do this by deploying their payroll system in the cloud and adopting a collaborative approach to processing payroll, in much the same way as modern online accounting systems do. 

By working WITH the employer and their employees to deliver a comprehensive payroll service, the bureau can release the payroll professional to truly add value through their skills, knowledge and experience and, consequently, increase their value in their marketplace.

A disintermediated model allows the bureau to radically redefine their business offering to include a much wider range of service styles. The bureau can carry on doing pretty much everything on behalf of the client (the typical approach today) or they can invite the employer and the employees to play a much more active part in payroll processing and management. 

The critical point is this: by deploying a disintermediated model the bureau can directly match the cost of the service they provide to the amount of work they are carrying out on the employer’s behalf. 

Before today it was very difficult for a bureau to establish a realistic price for “just the push of a button”; but now, by exposing the process to the employer it will be possible to ‘train’ them to shoulder much more of the administrative burden of payroll thereby releasing bureau staff to deliver more profitable services.

Should bureau payroll professionals be worried about it?

I believe that disintermediation presents an outstanding opportunity to bureau payroll professionals to completely reposition their value and importance in the world of business and accounting. When such a high proportion of a payrollers’ time is spent doing low value legwork, is it any wonder that they are less well paid than their counterparts in accounting, finance and HR? 

So, the answer is a definite NO! While we move to a disintermediated model there will be room for all types of payroll professionals to flourish and play their part in the biggest change to bureau processing for 10 years.