Payroll has not kept up with payments' tech revolution
While the broader payments industry has seen extraordinary modernization, there is one area that innovation has not reached at scale: payroll.
Elsewhere, the payments industry is having its digital moment. Consumers have benefited most from the recent decade of innovation, with digitization removing friction from retail banking and peer-to-peer payments enabling seamless transactions between individuals. B2B payments are beginning to follow suit with virtual cards and payment automation software driving the industry further away from paper checks.
But despite the significant advances in fintech every company’s most important asset, their employees, have faced decades-old processes when it comes to getting paid. Today’s modern worker, including the growing group of freelancers and 1099 employees, have not been provided payroll options that meet their unique and evolving needs.
The convergence of recent workforce trends should serve as a call to action for payroll innovation. With the average worker no longer average at all, payroll shouldn’t be either.
Today’s modern workforce has led businesses to rethink everything from dress code and office hours to corporate culture and employee perks. At the same time, the face of today’s workforce has changed dramatically as the gig economy allows individuals to dictate their own hours and responsibilities.
Ushering in the greatest changes have been millennials, a group expected in 2019 to surpass baby boomers as the largest generation of Americans. This generation entered the workforce with heightened expectations for their employers, challenging the status quo of the employment relationship every step of the way. Their impact has had a ripple effect benefiting employees everywhere. Additionally, millennials have driven the growth of the gig economy, with nearly half of working millennials freelancing today.
With flexibility and independence a growing priority, the majority of the U.S. workforce is expected to be freelancers by 2027. In addition, the gig economy has stimulated seasonal work with holiday hiring having reached a record in 2018. Furthermore, the number of Americans holding multiple jobs is at its highest level in more than 20 years.
Clearly the definition of a “typical” employee grows outdated each year. With today’s workforce unrecognizable to that of decades past, blanket and static payroll processes are no longer sufficient. The newfound variability in how and where individuals earn their income requires better, faster accessibility to wages.
Businesses must keep up with the times and address the needs of today’s modern workforce with tailored payroll solutions. Changing habits and preferences produce new financial needs that demand new options.
The traditional payroll function works harmoniously under the assumption employees use conventional banks to manage their finances. As consumer interest in technology-driven financial services and bank alternatives grows, payroll methods must also evolve to ensure all employees — even those outside the mainstream — are provided the necessary access to and control of their funds.
A recent Gallup poll found that millennial customers switched their primary bank at a rate 2.5 times more often than boomers and traditionalists and 1.5 times more often than Gen Xers. Over half of millennials don’t believe their bank offers anything unique, with two-thirds believing the way people access their money will be totally different in five years. Furthermore, there is a large population of workers who lack access to bank accounts and financial resources due to barriers such as high fees, lack of convenience and other qualifying factors. Others are unbanked by choice, believing conventional bank accounts don’t provide enough value, transparency or security.
Regardless of banking preferences, all workers deserve the ability to easily access their funds and the necessary tools to manage their finances. The responsibility falls on employers to facilitate a payroll function that helps their workers access funds efficiently regardless of whether an employee chooses or is forced to forgo traditional banking.