Is payroll technology the future of fintech?

Fintech is an integral part of a winning strategy to compete for talent.

Fintech solutions need to address the empowered employee

Businesses that dug into their customer experience for higher profitability now need to dig into their employee experience for many of the same reasons. Enter fintech — where the consumer is the employee — offering organisations an easy way to boost their retention.

Companies have been talking about the tightening of the talent market since before 2016. But we are now entering a period of history-making turnover and growth. The Great Resignation has driven organisations to reconsider different aspects of their employee experience. And it’s no shock to learn that organisations can increase their revenue by as much as 50% by focusing on improving employee experience, according to research by Harvard Business Review.

So, successful companies that are able to attract and retain their employees understand the need to rethink the employee experience. One of those aspects equates the employee experience with the consumer experience as the line between the two experiences merges.

Fintech-enabled employees continue to drive this melding. An example is a growing desire for regular remote work — an estimated 25% of all jobs will be remote by the end of 2022, according to research by Ladders. People want the freedom to work where they want and when they want. They have begun to view their employee experience and their consumer experience in many of the same ways. After all, they live and work in the same space.

Fintech-savvy employees are also digitally enabled consumers and they don’t leave their consumer expectations at the door when they are at work. What does this mean for businesses? They need to see and enable the employee as both an employee and a consumer.

Access to payroll payments beats office catering and unique perks

With the rise of fully remote and hybrid workplaces, things like office catering and beer kegs are much less of a draw for hiring and retaining employees. Add in rising inflation and the employee experience becomes more about the bottom line — their salary. Paying wages accurately and on time is simply not enough. Empowering employees to have more control over their finances has become crucial to the employee experience.

Payroll — a part of the weekly, biweekly, or monthly employee experience — dominates the other milestones of EX. Employees need to be able to trust that their hours are correctly compensated for, their leave is up to date, and their money is easily and immediately available.

The employee side of the payroll experience isn’t the only part found lacking. HR and finance administrators also suffer from outdated technologies. Those people who pay salaries and access payroll data for business planning, cost-containment, and identifying talent requirements need a more efficient, consumer-like user experience.

For the first time in decades, there is a shift from payroll bureau to software as the consumerisation of payments bleeds into the business-to-employee relationship. Employees want the freedom to get paid anytime, anywhere, and by any means, and payroll tech has stepped in to help.

Blurring the lines between consumer fintech and employee payroll tech

Fintech dominates consumer life, whether it’s mobile payments, online banking, or sending money to friends. Employees, as fintech consumers, expect their payroll and wages to be delivered precisely and according to their preferences.

It’s important to note that salaries delivered seamlessly and preferentially are more important than simply personal preference. Being able to receive payment no matter where workers are provides greater financial flexibility, which significantly impacts financial wellbeing. That can mean investing when and where one wants to but also meeting financial goals faster, paying bills more quickly, sharing funds with family and friends when the need arises, and more. And payroll technology companies have taken notice. They have moved into the fintech space by revolutionising how people are paid and receive their wages.

Businesses on the whole tend to offer payroll once or twice a month. But employees as consumers need to be able to use their money throughout the month to pay bills, cover emergencies, and buy goods and necessary services. This can lead to financial stress and lower employee engagement and productivity.

Still, it may be impossible for organisations to change these payment dates with little disruption to current processes. That’s where payroll tech and fintech collide as payroll tech opens up new ways to pay employees. Driven by creating less stress and a better employee experience, discerning employers can use payroll tech to offer earned wage access (EWA) or on-demand pay that employees can access through a downloadable mobile app. New tech allows employees to log in at any time, view their hours worked and their PTO data, and draw down on their earned pay when they need it.

Recent research from EY revealed that 80% of workers would take advantage of EWA and on-demand pay. And that number was not exclusive to lower earners. Others cited it as a means to control their cash flow and the timing of their bill payments — helping to reduce reliance on credit cards or payday loans.

Employers looking to hire top talent and retain current talent in the tight labour market must use all the technology available to improve the employee experience. Taking a strong cue from fintech, savvy payroll tech has stepped into this employer need by understanding employees as consumers and offering financial wellbeing tools to increase how much access they have to the money they earn as they earn it. This sort of visibility and availability provides the flexibility to self-manage finances as needed throughout the month and boosts employee experience to improve employee retention and engagement, and even attract new hires.

Payroll tech affords the additional benefit of dynamic and accessible payroll data — past earnings, hours, earnings per hour, expenses, benefits, taxes, saving plans, and expected future earnings. Consider the data visualisations already in a bank app. A complete payroll record becomes enriched data for meaningful and actionable insights for the organisation and the employee. Payroll data can now serve companies with unprecedented means of business intelligence while serving employees with data for financial planning and life planning in new and unexpected ways.

Payroll tech is key to an evolving financial ecosystem

Increasingly, workforces worldwide are tech-enabled and expect their employee experience to be similar to their customer experience. Fintech solutions need to address the empowered employee with tech that ensures interoperability, customisation, and privacy. And that means that new payroll technology must take a page from fintech and meet employee expectations to be paid seamlessly, quickly, and on their own terms. The two go hand in hand, and it’s short-sighted not to see a future where fintech is married to payroll technology.