Is Your Payroll Tech Helping or Hindering Talent Retention?

When you think about payroll, you probably think of obligation rather than opportunity. After all, every company has to pay their employees. 

But is it possible that some companies do it better?

Companies that invest in efficient and well-optimized payroll processes often reap the benefits of cost savings and talent retention, making this the perfect time to reflect on your payroll processes to see if they can be improved, and how they are holding you back.

In this article, we discuss strategies for positively influencing talent retention with payroll. From modern software solutions that save time and money, to leveraging employee data in strategic decision making, learn how your payroll process provides unexpected opportunities for success.

Understanding the link between payroll and employee satisfaction

Employees universally expect reliable, consistent, and accurate paychecks. If any of these aspects miss the mark, even once, it can mar the reputation of your payroll management—and company—for some workers.

A 2023 Payroll.org study discovered that 78% of Americans are living paycheck-to-paycheck, and that number is on the rise. The same way patrons at a restaurant are more likely to leave a bad review than a good one, employees won’t easily forget the time their paycheck was short, late, or otherwise miscalculated—especially if that created financial stress or awkwardness for them.

In fact, reducing errors was reported as a top priority by 56% of organizations in a recent study by Forrester Consulting Group commissioned by Deel in January 2024. Errors in payroll, even honest mistakes, can cause irreparable damage to employee trust. 

For this reason, timely, accurate payroll functions are vital to any business’ operating model. A simple, streamlined payroll system is the gold standard. Automated processes with fewer steps and less human involvement present fewer opportunities for errors. A simple miscalculation, typo, or oversight could mean a delay in an employee’s income, negatively impacting morale.

Leveraging payroll data for strategic insights

While it is pretty clear how a poor payroll process negatively impacts employees, did you know a top-notch payroll system actually offers advantages beyond basic business hygiene? 

Smart payroll software is capable of generating a plethora of reports, from big-picture finance down to individual trends. This data can help you identify underpaid employees, pinpoint over-budget departments, or streamline succession planning.

Having all of your global payroll operating data in one place gives you the ability to glean insights via self-contained analysis and cross-referencing with other resources, like HR software. 

See also: All-in-One Payroll: Why 300+ HR and Finance Leaders Say It’s The New Standard

For example, payroll data can be used to calculate turnover rates and identify retirement trends in your workforce. This information is valuable for providing insights into strategic decision-making about hiring and succession planning to ensure your operation continues to run smoothly.

That same data may also highlight employee retention trends. Imagine your payroll history shows that new salespeople turnover spikes at the one-year mark, when your compensation switches from hourly to commission. This insight into talent retention with payroll could suggest the transition is happening too early, suggesting a solution like hybrid hourly + commission pay for second-year salespeople to ease them into the switch. 

There are many ways payroll data can be analyzed for strategic insights, including pay, benefits, and other expenses. As you know, the true cost of an employee isn’t just their salary. Taxes, insurance, and company contributions add up, and your payroll vendor should have tools to help you understand the true cost of each employee.

Personalizing payroll to meet employee expectations

As payroll needs become more complex, the benefits of upgrading grow. For example, international companies operating out of multiple regions face challenges that local companies do not.

Some benefits, like flexible payment frequency and on-demand pay, are universal. Others, like choice of currency, only apply to some businesses. Both of these features give employees more control over their income, saving them time, inconvenience, and possibly even money, making them significant employee retention strategies that can aid in talent acquisition. 

Top talent is often ambitious when it comes to their career and finances. We know how hiring packages need to include more than just a salary (with things like PTO, 401ks, and HSAs), but if those benefits come with limited or inconvenient control, the excitement is dulled. Empowering these individuals with more control over their income enhances employee satisfaction, morale, and loyalty.

Investing in payroll technology for efficiency and transparency

Many companies have an “if it ain’t broke, don’t fix it mentality,” especially when it comes to something as rudimentary as payroll. However, with payroll being such a core part of business, the last thing you want to do is take it for granted or wait until it is broken.

Investing in modern payroll technology not only has the potential to prevent errors before they happen, but offers many other benefits, such as:

• HR efficiency
• Employee transparency
• Operational simplicity
• Accuracy and consistency
• Improved communication

Let’s take a closer look at how modern payroll systems reap these rewards.

HR efficiency

Many companies still use manual punch cards and time clocks. That means at the end of each pay cycle, payroll professionals have to manually sit down with those cards and calculate the hours worked for each employee. This not only opens the door for miscalculations but also costs the company valuable time every single pay period. (Also, what happens when your payroll manager is out sick?)

Say it takes 45 minutes for someone to tabulate in-house payroll every week. That means over the course of a year, they have spent 40 hours on this task—a full work week. Automated payroll systems can instantly calculate hours worked each pay period, saving you time and money. And that’s just the tip of the iceberg for streamlining your payroll process.

Forrester’s study found that 63% of organizations want to improve efficiency in their global payroll systems. The obvious benefit being cost-savings through reduced man-hours, with some payment professionals reporting spending as much half of their time processing payroll or escalating situations with payroll vendors.

Employee transparency

Payroll isn’t always as simple as translating hours worked to a dollar amount on a check. Benefits, contributions, taxes, bonuses, PTO, and more create complex calculations that aren’t always easy to follow. For old-school payroll systems, the employees’ only option for information is an awkward conversation with HR or the payroll vendor.

Modern payroll software gives employees self-serve access to a lot of useful information like historical data, real-time benefits tracking, and the ability to make changes to their personal information. This puts workers in charge of their situation, which makes them feel less like a cog in the wheel and more in control of their hard work. It is yet another way you can positively impact talent retention with payroll.

Improved communication and support

How is your current payroll vendor enhancing your payroll team's experience? Whether your team is running domestic or international payroll (or both), choosing a payroll solution with ample customer support and expertise is crucial to providing a positive worker experience for your in-house team. 

For example, with Deel Global Payroll, your team is supported by an in-house Customer Success Manager (CSM), local payroll experts, dedicated points of contact for each country, and 24/7 support. Your team also gets access to Deel's Compliance Hub, which supports them by automatically monitoring and flagging the latest payroll regulatory changes.

Choosing a payroll vendor

At the end of the day, your specific needs will determine the best solution for your business. That said, any modern payroll software will offer a slew of benefits to enhance your reporting and operational efficiency by automating standardized processes. 

The best strategy is to understand your organizational needs and compare those to the features offered by payroll vendors. Consider polling your HR/payroll department as well as employees to learn what features are most important to your company.

Training and support for payroll teams

Even with highly sophisticated payroll software doing most of the heavy lifting, some training is required for your payroll staff. It is best to think of this training as an ongoing part of the process, rather than a one-and-done obligation. This is simply due to the constant evolution of payroll regulations, especially in global settings.

Laws, company guidelines, and the software itself are prone to changes and updates. On top of that, HR theory is constantly shifting, establishing new best practices in the ever-changing professional landscape. Understanding how to affect talent retention with payroll is valuable knowledge.

Keeping your payroll team on the cutting edge of technology and strategy empowers them to be efficient and leverage the benefits of a robust payroll system, building employee trust and retaining talent. Annual, or preferably quarterly, workshops are usually sufficient, though increasing that frequency with cause is usually advantageous. 

In fact, the Forrester study found that training and support was a hidden cost of global payroll for 45% of organizations. Other unexpected costs included exchange rate fluctuations (52%) and compliance costs (also 45%).

Measuring the impact of payroll on talent retention

As we mentioned earlier, a bad payroll experience outweighs a good one several times over. Fortunately, a top-tier payroll system has the potential to both avoid bad experiences and deliver noticeable perks. 

Damage to talent retention isn’t generally directly related to payroll, but rather a symptom caused by the chipping away of trust or morale. 

For example, imagine an employee with a sought-after qualification who is exiting the honeymoon phase with a slight dip in engagement at work, while being actively pursued by competitors. A slip-up in payroll, either through actual error or merely perceived through a lack of transparency, could be all it takes to tip the scale and provide that individual with the nudge they need to jump ship and pursue another opportunity. 

A simple survey conducted periodically, or during exit interviews, will highlight the good, the bad, and the ugly aspects of your payroll system from the employee perspective. This data will provide valuable insight into the shortcomings and needs of your payroll solution for your organization. 

See also: Uncover Payroll Blindspots By Looking Into These 7 Metrics

See how Deel Global Payroll can help

In a competitive talent market, companies need to take advantage of every chance to impress and retain quality hires—and payroll is one such opportunity.

Archaic methods of processing payroll leave a lot of time, money, and opportunity on the table. Investing in, and planning around, an effective payroll solution provides advantages for both employees and the company, such as increased morale, HR time savings, and fewer conflicts. 

The strategic use of Deel Global Payroll offers the following benefits:

• Saving time and money through automation
• Improved accuracy and consistent pay cycles
• Better communication and transparency
• More employee agency over pay and benefits
• Better recordkeeping for actionable data

Book a 30-minute demo today to see how Deel can transform your business with true global payroll and cutting-edge HR technology.