The Impact of AI on Payroll

By Brad Stockman. Published at Feb 26, 2019, in Technology

Payroll is one of the largest expenses for business and can equate to as much as 70 per cent of total business costs. The objective for payroll teams managing this cost is perceived as a relatively simple one - pay your people correctly, at the right time and in the right way.

This has seen the function become more automated through smart payroll software, as businesses look to reduce the cost associated with payroll, particularly for larger businesses taking advantage of the economies of scale. So payroll is already ahead of the curve when it comes to automation. Now, a single payroll professional can manage the pay of thousands of employees, where once they were just responsible for the pay of 50. And, this is all thanks to continually evolving payroll technology.

This incremental automation of the payroll function has made the department more efficient and accurate, whilst reducing the costs associated with paying your employees.

This has led many to believe payroll’s days are numbered, due to the increasing adoption of Artificial Intelligence (AI), causing unease around job security for professionals. In fact, according to SEEK, almost a third (30%) of Australians said they are not welcoming of AI into the workplace, with fears around job security being a major factor.

The question is, will we see machines replace people, as businesses look to cut costs and implement smart AI payroll technologies?

The benefits of AI

Like automation and the internet before it, AI is set to the next evolution of payroll. It will bring greater insight, efficiencies and understanding to the payroll function. Whereas automation provided “if-this, then-that” functionality - i.e. if sick-day is logged, then subtract 7.6 hours from their pay - AI will use data analytics and machine learning to figure out broader business questions - like which department is the least efficient.

One of the major benefits of AI will be the insight it will provide managers into workforce efficacy. For example, it will notice some employees are staying back later and responding to out-of-hours emails more. Through its assessment of this data, the AI technology could recommend the hiring of more employees or suggest bonuses to keep the staff engaged during the busy period. It could even recommend the upskilling of staff from another department operating under capacity through the review of their skills, goals and objectives.

But, that’s not all. AI-powered chatbots will be able to answer a range of basic employee questions. AI-powered assistants could offer the ability to manage your work schedule, automatically turning on your out-of-office and deducting the time from your holiday allowance when you request leave via voice command. And, AI-powered compliance officers will be able to identify fraudulent activity or regulations which the business needs to adhere to.

This is only the tip of the iceberg. There will be many more applications we haven’t even thought about yet. And this is a significant reason why payroll teams won’t be replaced by the machines any time soon. We’re still in the infancy of AI. PwC estimates AI could contribute up to $15.7 bn to the global economy, but by 2030. And, these gains really only start to kick in around 2022.

This is one of the reasons why we are likely to still need highly skilled payroll teams as we move into this new future.

Why people still matter

For the foreseeable future, humans will still be the decision makers, with technology providing support through insight and information. Additionally, it will remove payroll professionals from having to do repetitive and mechanical aspects of payroll, like identifying fraud, leaving more time for staff to solve problems and innovate within the business.

AI technology, as it stands today, is not ready to deal with highly dynamic environments. Automation, for instance, ensures workers are paid on a schedule, but there is not likely an AI function that can accommodate for spontaneous adjustments, like a payment outside of a salary cycle yet.

And this is crucial. With AI still being some years away - and, we are talking over 10 years from now - you’ll need to know what parts of payroll are ready to take the technological leap and which ones still require human interaction. Much like automation before it, it will be the incremental AI updates that will eventually change the industry as a whole. A good payroll professional will know where the low-hanging fruit is and how technology could ultimately plug the gap.

In addition to providing the strategic direction for adopting AI, payroll will still need to provide contact support for employees. When employees have sensitive queries regarding their payroll, they want to talk to a real person. We are emotional beings and require support from other humans. Whilst, we’re happy getting basic answers, knowledge and information from a chatbot, we will never truly relate to them no matter how sophisticated they become.

AI will introduce incredible technical efficiency, but could not possibly replace a human. After all, while AI may give you the data to justify a pay increase, would you want to negotiate salary with a robot?

Don’t jump the gun

As much as AI is set to change the world as we know it, it is still a while away from having a significant impact. As such, payroll will still require a human touch in the years ahead.

Additionally, it’s important for businesses not to just implement AI for AI’s sake. Although the hype and benefits make it sound like the silver bullet to help solve your problems, it is important to take a measured approach. The technology is still in its infancy and a long way off from replacing humans.

For payroll managers and businesses looking to take advantage of AI, it is crucial to build it up gradually. That means learning what tasks AI could help us to achieve in the future and understanding where, as a payroll professional, we can add further value to the business.

This article was written by Brad Stockman, Head of Product Management – at Ascender.

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