Let’s cut to the chase: If you want to keep your best employees, you need to pay attention to what’s happening in the payroll industry.
With unemployment at historic lows and the number of job openings at historic highs, basic economics says that wages around the country should be going up. For various reasons, that hasn’t happened, and that’s causing frustrated workers to switch jobs for the prospect of better pay.
Poor compensation is the number one reason why employees quit their jobs at small businesses, and companies that don’t have the ability to raise wages are scrambling for solutions.
Which is why you need to know about the three payroll industry trends we cover here.
You may not be in the position to give raises, but adopting these trends can help alleviate other financial woes for your workers—improving their employee experience and boosting retention rates in the process.
Read on to learn more about the payroll industry trends that will impact businesses the most in 2019.
1. Employers will look to financial wellness platforms to ease workers’ money stress
The Stressometer in Best Money Moves can diagnose areas of financial concern (Source)
Companies may be unable to raise pay, but through financial wellness platforms such as Best Money Moves, Edukate, or Enrich, they can at least provide tools to help workers better manage what they have.
Using these platforms, workers can identify financial areas that are causing them the most stress and receive advice on how to pay down large debts, build up retirement savings, or plan for a big purchase such as a house or car. Some of these systems even allow workers to connect with a financial coach for further assistance.
CEOs and HR leaders can then monitor their workforce’s overall financial stress over time through dashboards and analytics, giving them insight into common stressors that they could address with other financial wellness tools.
Why it’s a trend for 2019
According to a recent survey by John Hancock, 72% of employees say they stress about personal finances during their workday; 60% even experience physical and psychological symptoms from this stress, such as a lack of sleep.
If you guessed that this is affecting worker productivity, you’re right:
Employers are now eager to play the role of financial planner to mitigate the damage. HR and payroll technology companies, in turn, are more than happy to help them.
In 2019, we’re going to see more of these employee financial wellness tools and apps hitting the market, and more companies deploying them.
SAP SuccessFactors recently announced that it is adding Best Money Moves as a tool for its customers, and that is only the beginning. We’re going to see more of this functionality creep into the payroll and talent management systems we already use.
2. It’s the beginning of the end for 1st and 15th paydays
Employees enrolled in Gusto Flexible Pay can choose which day of the week they get paid (Source)
Practically the only guarantees in life are death, taxes, and getting paid either on the 1st and 15th of every month or every two weeks.
Companies have stuck with this static payroll schedule for decades, and workers needing access to funds before their scheduled payday have suffered as a result. Outside of expensive and predatory payday advance loans, workers have had very few options when emergencies strike.
That’s all about to change, though, thanks to apps like Even, and new payroll software features such as Gusto‘s Flexible Pay and ADP’s Wisely Pay. These tools allow workers to choose which day of the week they get paid, receive a small pay advance with no interest or charges, or even get paid immediately for completed work in the case of 1099 contractor employees.
Why it’s a trend for 2019
Because of factors such as rising debt, cost of living increases, and the proliferation of unstable jobs in the gig economy, a large majority of U.S. workers have found themselves in extremely precarious financial situations.
Which is why forward-thinking companies and payroll providers are testing the idea of dropping the rigid two-week payroll schedule to offer workers much-needed flexibility regarding when they get paid.
It’s a surefire retention booster with employees that increasingly run into surprise expenses they can’t always cover and a perk that smaller companies with low headcounts have the flexibility to administer relatively easily.
Will the entrenched practice of 1st and 15th paydays disappear overnight? Hardly. But 2019 will signal the beginning of the end.
3. Pay transparency goes mainstream
Buffer lists the salaries of every employee on their website (Source)
Instead of keeping employee salaries and wages private, companies such as Buffer, Whole Foods, CareHere, and Hired have decided to list every worker’s pay publicly—from the CEO all the way down to the newly-hired intern—in an effort to prove they’re offering fair and equal pay.
Dubbed “pay transparency,” this payroll trend has produced both intended results (such as reducing the pay gap for women and minorities) and unintended consequences (when workers learn they make less than their peers, their productivity suffers).
Regardless, pay transparency will continue to pick up steam in 2019 and may even make the jump from spreadsheets to software.
Why it’s a trend for 2019
If there’s one stat that shows why pay transparency is trending, it’s this:
This kind of divide has always existed, but now workers have tools such as Glassdoor and Payscale at their disposal to learn how much they’re really worth. Add in increased pressure to reduce the pay gap, and an influx of young Gen Z workers who don’t mind sacrificing privacy for better experiences, and you have a recipe that threatens to wipe out pay secrecy once and for all.
Only 17% of private companies practiced pay transparency in 2017. However, a 2018 survey by Willis Towers Watson found that 53% of companies are “planning on or considering increasing the level of transparency around pay decisions” in the future. 2019 could be the year that a large number of businesses finally jump on the transparency bandwagon.
Not only that, but 2019 could also see pay transparency evolve from a manual process done in spreadsheets to an embedded feature set in payroll software. With this practice gaining more and more adopters, payroll software vendors would be wise to add a transparency option in employee payroll portals.
Big changes are coming to payroll—are you ready?
It’s probably a good thing that payroll isn’t the most exciting thing in the world. When it comes to their pay, people want certainty, not surprises.
But that doesn’t mean the payroll process has been fully optimized. Far from it. As these trends show, there are plenty of levers that small businesses can pull besides raising wages to give workers more support, more flexibility, and more transparency regarding their pay.
If you’re ready to drag your payroll process out of the past and into the future, but don’t have the system to support it, head to our payroll software directory page to find the best options for your business. And if you think there are other important payroll industry trends that I missed here, let me know in the comments.
Note: The information contained in this article has been obtained from sources believed to be reliable. The applications selected are examples to show a feature in context, and are not intended as endorsements or recommendations.
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