U.S. Firms Seize Innovations to Tackle Payroll Complexity

Enterprises in the U.S. are adopting new payroll technologies and services to solve increasingly complex problems, in some cases faster than companies in other regions, according to a new research report published today by Information Services Group (ISG) (Nasdaq: III), a leading global technology research and advisory firm.

The 2024 ISG Provider Lens Payroll Solutions and Services report for the U.S. finds that changes in enterprise management and employee experience, such as the rise of remote work, make payroll a more strategic function and introduce new challenges. Facing new requirements with limited internal resources, many enterprises are outsourcing components of payroll to gain access to the latest technologies.

“Employees and governments both are demanding more from payroll departments,” said Stacey Cadigan, partner, ISG Human Capital Management and Enterprise Transformation. “Service providers continue to develop new ways to address and anticipate new requirements, especially using AI.”

AI and ML are central to many advances in payroll technology, introducing greater accuracy, efficiency and intelligence, the report says. As in other regions, U.S. enterprises are starting to deploy AI in all business processes, including customer-facing functions.

Increasing regulation is shaping payroll challenges and solutions. In the U.S., equal pay legislation has led companies to prioritize pay transparency to attract new hires and maintain good employee relations, ISG says. They expect systems to accurately update pay data in real time and make it available on easy-to-use dashboards.

U.S. enterprises have sharpened their focus on payroll data privacy over the past year, though most remain less aware than firms in Europe, where penalties for unsafe data handling are higher, ISG notes. As U.S. laws grow stricter, providers are prioritizing encryption, secure data storage and access control methods, including multi-factor authentication and role-based permissions. Providers’ toolkits also include incident response plans and regular employee training.

“The U.S. market is increasingly savvy about payroll privacy,” said Jan Erik Aase, partner and global leader, ISG Provider Lens Research. “Enterprises are embracing new tools and expect providers to use best practices and regular testing.”

Companies in the U.S. have been quicker than others to adopt some tools that give employees more visibility and control of payroll, ISG says. On-demand pay, which lets workers receive partial payment before the pay period ends, has seen slower-than-expected adoption in most of the world but more acceptance in the U.S. Likewise, the U.S. market shows greater interest in apps that let employees check and correct their pay stubs before payroll is processed.