The Impact of AI on Payroll

Published 26-FEB-2019 12:28 P.M.

|

5 minute read

Hey! Looks like you have stumbled on the section of our website where we have archived articles from our old business model.

In 2019 the original founding team returned to run Next Investors, we changed our business model to only write about stocks we carefully research and are invested in for the long term.

The below articles were written under our previous business model. We have kept these articles online here for your reference.

Our new mission is to build a high performing ASX micro cap investment portfolio and share our research, analysis and investment strategy with our readers.


Click Here to View Latest Articles

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.



General Information Only

S3 Consortium Pty Ltd (S3, ‘we’, ‘us’, ‘our’) (CAR No. 433913) is a corporate authorised representative of LeMessurier Securities Pty Ltd (AFSL No. 296877). The information contained in this article is general information and is for informational purposes only. Any advice is general advice only. Any advice contained in this article does not constitute personal advice and S3 has not taken into consideration your personal objectives, financial situation or needs. Please seek your own independent professional advice before making any financial investment decision. Those persons acting upon information contained in this article do so entirely at their own risk.

Conflicts of Interest Notice

S3 and its associated entities may hold investments in companies featured in its articles, including through being paid in the securities of the companies we provide commentary on. We disclose the securities held in relation to a particular company that we provide commentary on. Refer to our Disclosure Policy for information on our self-imposed trading blackouts, hold conditions and de-risking (sell conditions) which seek to mitigate against any potential conflicts of interest.

Publication Notice and Disclaimer

The information contained in this article is current as at the publication date. At the time of publishing, the information contained in this article is based on sources which are available in the public domain that we consider to be reliable, and our own analysis of those sources. The views of the author may not reflect the views of the AFSL holder. Any decision by you to purchase securities in the companies featured in this article should be done so after you have sought your own independent professional advice regarding this information and made your own inquiries as to the validity of any information in this article.

Any forward-looking statements contained in this article are not guarantees or predictions of future performance, and involve known and unknown risks, uncertainties and other factors, many of which are beyond our control, and which may cause actual results or performance of companies featured to differ materially from those expressed in the statements contained in this article. S3 cannot and does not give any assurance that the results or performance expressed or implied by any forward-looking statements contained in this article will actually occur and readers are cautioned not to put undue reliance on forward-looking statements.

This article may include references to our past investing performance. Past performance is not a reliable indicator of our future investing performance.

 

Discover Small Cap
Biotech Stocks

Join thousands of other Investors following our stock commentary for Free

X