More than just paychecks

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Payroll is one of those tasks that everyone benefits from, but no one really wants to perform. With many payrolls containing varying hours and rates, it’s not always easy to hit the nail on the head every time out. There are also changing rates, withholding calculations, benefit changes, and other moving targets.

To get a handle on where payroll is today, and where it might be tomorrow, we asked nine providers of payroll software and services for their insights.

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ADP’s director of channel marketing, Nick Panepinto, shared several trends that he sees impacting accounting professionals and their clients. The first of these is the impact of the Tax Cuts and Jobs Act: “Tax reform has certainly left the heads of many small-business owners and their accountants spinning, but it has also provided a tremendous opportunity for accounting professionals to play an even-more pivotal role in providing much sought-after tax guidance and strategic consulting opportunities to clients. Perhaps one of the most talked about components of the TCJA is around Section 199A of the new Internal Revenue Code, which is the deduction for qualified business income of pass-through entities such as S corps, sole proprietorships and partnerships. Opportunities may exist for accountants to advise their clients on restructuring their businesses to realize increased tax savings.”

Another trend he sees is more employee-friendly HR compliance changes. “More and more jurisdictions are passing laws requiring employers to provide sick leave and paid family leave to employees,” he explained. “Employers that are subject to paid sick leave requirements often have questions about the impact of these laws on their existing paid-time-off and leave policies. In addition, minimum wage rates continue to rise at the state and local level, with 18 states and many more jurisdictions instituting new minimum wage rates that became effective on Dec. 31, 2017, or Jan 1, 2018. Some additional jurisdictions will see increases at other times throughout 2018. The #MeToo movement we have recently seen is also likely to prompt additional legislation aimed at combating sexual harassment in 2018.”

SurePayroll vice president of service delivery Jamal Ayyad noted some other developing trends: “There are two major trends to watch in the payroll space — the changeable political environment and the resulting changes to taxes affecting payroll, and the similarly rapid pace of changes in customer expectations and preferences. With respect to the regulatory side of the trend story, payroll providers who handle tax filing have to be extraordinarily nimble, keeping pace with the thousands of changes in federal, state and local tax codes and the respective effective dates. Compliance is only growing more complex.”

“In terms of customer expectations and preferences, we are seeing a collapse in the traditional division between B2C and B2B buying habits and associated buyer expectations and preferences. Even purchase decisions related to professional services are being evaluated through the lens of an experienced digital and e-commerce buyer,” he continued. “As a result, automation and self-service are increasingly important; our users strongly prefer self-service models in which what is perceived as unnecessary contact with providers is virtually eliminated — unless they need help, in which case the expectation is that assistance will be available on demand across multiple channels that match their communication preferences — whether they prefer phone, chat, email, social media, or traditional methods like fax.”

Security is an important trend noted by Thomson Reuters’ senior product manager of payroll, Louie Calvin: “Above all, the most important trend in payroll is the security and protection of client/employee data. It’s going to be your first priority as a trusted service provider of payroll processing to your clients. No one wants to talk about it, but the threats are real. Cybercriminals are specifically targeting tax and accounting firms at increasing rates and all payroll providers are within scope. We must invest in staff training on best practices, build formal security policies, educate the end payroll client, and have a plan in place if your firm does experience a data breach.”

All of our respondents have strict security protocols in place. For example, Patriot Software marketing manager Michele Bossart explained, “All core, sensitive customer data is encrypted both in transit and at rest. Sensitive data (Social Security numbers, bank accounts, credit cards and customer passwords) are encrypted in our database, which protects against access to sensitive data that is at rest. We’re using [Advanced Encryption Standard] encryption with 256-bit key size to encrypt the data at rest. Sensitive data is masked in our in-house CRM — Social Security numbers, bank account, credit cards and customer passwords are not viewable by internal users.”

And Gusto’s communications manager, Rick Chen, added that their security includes the highest encryption standard available, 256-bit SSL, to protect any transmitted data as well as backing up data in multiple secure locations throughout the day, every day. The data is also protected by state-of-the-art firewall technologies. Users can add an extra layer of security with two-step authentication.

Responding to the changing workforce will also continue to be a major trend, according to Paychex vice president of corporate strategy and product management Tom Hammond: “Businesses today need to position themselves to meet the needs of an increasingly technology-dependent workforce. For payroll, that means the ability for employees to complete required IRS and tax withholding paperwork electronically, receive bonuses or tips via prepaid card, and view payroll information themselves via self-service.”

Finally, AccountantsWorld’s director of customer success, Hitendra Patil, added, “Cloud-driven integrations and automation will continue to drive increases in the efficiency of payroll technologies. Enhanced data quality (due to the lesser need to replicate same data manually across different apps) will also make compliance easier and stronger. Payroll technology will increasingly offer more collaborative and connected features so that the employer, employees, payroll service providers and compliance/regulatory systems are all interconnected seamlessly, yet securely, to protect data privacy.”

Not always easy

When you examine the payroll application, it becomes very clear almost immediately that just calculating gross pay and deductions isn’t always a simple and straightforward process. Vertical payrolls can also add to the complexity, as can withholding taxes and benefit deductions.

Federal depository requirements and those of the state and possibly city must be accurate and paid on time. Workers’ compensation requirements and rates are often tied to the type of business and employee job title. And then there are employee benefits. Minimum wage requirements both on the federal and state level add even more complexity. With clients that do business in multiple states, figuring out who gets paid what, what deductions are required, and where and when tax deposits need to be made leaves many clients frustrated.

Other changes in payroll from the past include the need for more collaboration between accountants, clients and employees, and the need to get the payroll data into other applications.

Not just payroll anymore

One point that many of the vendors made is that they either offer HR software or services in addition to payroll, or include features addressing HR needs in their payroll systems. For example, Thomson Reuters’ Calvin told us, “While not marketed as human resources software, the features of the Accounting CS Payroll and myPay Solutions service offerings include, by default, many features that fall under the HR umbrella, such as tracking and retention of employee demographics, W-4 status, hire dates, and customized fields to track much more, including historical wage data, HR notes, pay raises, and salary information, accruable benefits.”

ADP also provides HR resources in addition to payroll. These include customizable employee handbook templates, onboarding tools, an HR Help Desk for live support for employee-related questions, sample workplace policies and job descriptions, weekly online HR tips, and sample policies and job descriptions that help assist clients as their businesses grow.

Accessibility is prime

“With the inception of online software, more customers will demand a platform that users will be able to access anywhere from any computer or mobile device. Software should have a responsive design to meet the customer need,” said Patriot Software’s Bossart.

Thomson Reuters’ Calvin added, “There is substantial risk for payroll providers if they are not investing in mobile and cloud technologies. There are so many competitive payroll offerings today and employers demand tools that drive efficiencies and accommodate their needs. Payroll providers must deliver the convenience of online payroll tools to collect time and time-clock information. Payroll providers must offer online, anywhere/anytime, paperless delivery tools. So we’ll see more firms investing in tools to offer to clients. Employee self-service allows the client’s employees to enter their own time and view their pay stubs and more through a secure portal from any internet connection.”

Mobile access doesn’t just mean being able to access an employee’s payroll and HR data; it’s also a method to allow collaboration between accountant, client and employee. To a large extent, this is accomplished through the use of a portal.

For example, the ADP web-based Employee Portal and the ADP Mobile Solutions app make it easy for employees to access their own information, including pay data, PTO, retirement and benefits information, helping to reduce the number of questions received by the business owner or payroll administrator. Using the ADP Mobile Solutions app, employees can check pay statements and view W-2s, view time-off balances and submit/approve requests, clock in/out and submit time sheets, and enroll in benefits and make elections.

SurePayroll’s Ayyad detailed their client portal: “SurePayroll provides our accountant partners with an easy-to-use, secure dashboard that enables them to manage client payroll and access reports. Additionally, we also provide a portal for a firm’s clients to use — providing the payroll services to their small-business clients (and their employees). Our partners can choose whether to white-label the payroll portal or, if they prefer, simply use the SurePayroll branded version.”

Gusto also offers a client portal. “Employees have lifetime accounts with Gusto, so they can access their pay history and Forms W-2,” said Chen. “They can also e-sign any important documents (such as their Forms I-9 and W-4) … allowing new hires to onboard themselves online seamlessly. As a result, new hires can get started with orientation, training or their work right from the get-go. Accountants who partner with Gusto can use their partner dashboard to manage their complete
book of business. They can run payroll for all of their clients, view upcoming deadlines from one central place, and access benefits and human resources tools for their clients.”

Put ‘er there, partner

Just about every vendor that we queried has a program in place to work with accountants. Some, like Patriot Software, offer special pricing to accountants who refer clients. Gusto’s Chen also offered reasons to partner with the service, which already works with more than 3,000 accountants: “Gusto partners receive free payroll for their accounting firm, free migration services for moving their clients to Gusto, access to a dedicated accountant support team, and marketing resources to promote their firm. Most importantly, partners can increase the services and value their firms provide beyond payroll, such as benefits and human resources tools, and the opportunity to pass on bulk discounts and earn revenue from customers they add.”

Others, such as Thomson Reuters and AccountantsWorld, offer software for accounting firms to do the payroll processing for their clients. “AccountantsWorld has always sold its payroll software only to accounting/payroll firms (not directly to employers). Payroll Relief is a product that gets custom-branded to the accounting/payroll firm so that when the staff of employers log in (if accountants authorize their access), they see the accounting firm’s branding,” said Patil.

SurePayroll is another processor that strives to work with accounting firms. According to Ayyad, “We offer firms two options to partner with us in order to provide their clients with a payroll option and increase their bottom line. Neither requires upfront investment and both enable firms to run payroll and accurately collect and file federal, state and local taxes for their clients. These options are referral and reselling. By referring small-business clients to SurePayroll, firms can give clients an easy and secure payroll solution and have real-time access to their clients’ payroll reports, free of charge. SurePayroll compensates partner firms for each referral. And becoming a reseller partner allows accountants to grow their business by offering SurePayroll’s online payroll service right from their own website. Additionally, firms have the option of white-labeling
the SurePayroll solution, giving their clients a fully branded online portal that can be accessed from the firm’s website.”

White labeling is one of the options that Paychex gives to accountants. “At Paychex, we meet accounting firms wherever they want to be on the payroll spectrum,” said Hammond. “From a simple hosted solution, with white labeling available, to a fully outsourced model using our powerful and easy-to-use technology that addresses every aspect of the employer-employee relationship, including applicant tracking, onboarding, HR services, benefits management and much more.”

Peeking into the crystal ball

A few vendors shared their future plans with us. “Currently Payroll Relief has open API and it integrates with HR software like ASL and Shugo,” said Patil. “AccountantsWorld will soon offer its own, fully cloud-based human resources solution integrated with Payroll Relief. The forthcoming new HR software will cover employee records management, compensation and benefits data management, time and attendance, health and safety, workers comp, job evaluation, employee self-service, learning and development, position administration, etc. Some of the features may be optional to ensure a good fit across different sizes of companies.”

SurePayroll also has some things in the works, said Ayyad: “These include automated payroll processing and enhanced support for specific geographies, such as support for Pennsylvania local service taxes, rolled out earlier this year, and the processing of Washington L&I, which is slated for release later this year.”

And Paychex’s Hammond said, “To ensure we remain attuned to the evolving needs of the accounting community, Paychex will be launching an Accountant Advisory Board, kicking off in conjunction with AICPA Engage, bringing together a diverse group of accounting professionals to provide feedback and insights to Paychex and the AICPA on industry, firm and client objectives.”

Plays well with accounting

Getting payroll data into back-office systems in the business is important. “One of the most compelling reasons to offer payroll to a practice’s back office is that it helps strengthen client relationships,” said ADP’s Panepinto. “As payroll becomes more complicated because of legislative and rule changes, clients naturally feel more secure when their accountant is involved with the payroll process.”

MyPayrollHR’s Grant added, “We are seeing a strong trend of clients utilizing integrated GL services in particular. The benefit to clients is no manual keying of information as well as multiple departments (i.e. payroll/HR/accounting/finance) are able to have all their needs met.”

According to Paychex’s Hammond, “Like any business owner, accountants today are looking for ways to increase efficiency, make data-driven decisions, and positively impact the bottom line. Paychex is committed to developing integration capabilities with other accounting systems in order to best serve the accounting community and help them achieve their business goals through smart, seamless and transparent data integration. This past year alone, we’ve introduced real-time integration with Sage Intacct, QuickBooks Online and Xero.”

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