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Ever-changing regulations, emerging technologies and an evolving workforce represent ongoing challenges for payroll and HR. Meet modern demands by adapting to the following 15 payroll HR trends for 2020.

1. Pay transparency

Equal pay for women and minorities is a major issue in today’s business climate. Though the gender wage gap has narrowed, Pew Research Center reports that women still earn just 85% of what men make for the same jobs. That equates to more than a month of full-time work. Companies that have bridged that gap are using pay transparency to illustrate their dedication to income equality. Pay transparency is the practice of making employee compensation data available to others. It can be shared internally, known as partial pay transparency, or publicly, known as full pay transparency. Companies that practice pay transparency may be better able to attract and retain top talent across all genders.

2. Paid leave

More state and local governments are enacting laws that mandate employees be given paid leave for a variety of purposes, from illnesses and childbirth to vacations and personal days. It’s important for payroll and HR departments to keep abreast of paid leave regulations to ensure compliance. Complying with regulations is only part of the equation. You should also implement a system to track and plan upcoming leave dates so managers can coordinate their departments to avoid being short-handed on important projects.

3. Flexible pay

Though weekly, biweekly and monthly paychecks and direct deposits remain the norm, some workers seek companies that offer flexible payment options. This is especially true for contractors, freelancers and gig workers who shun traditional 30-day invoicing and expect to be paid same-day or at the time of service. Moreover, some workers are unbanked; that is, they do not have traditional bank accounts so they cannot accept traditional checks or direct deposits. Pay cards are one solution. Flexible payment might seem like an inconvenience, but it may allow companies to attract more talent.

4. Flexible work schedules

Work-life balance is more than a buzzword; it’s a way of life for many workers in the gig economy. In more traditional business models, remote workers in particular often thrive outside the structure of a corporate environment. Companies that cater to flexible work schedules may be better positioned to attract top talent. Moreover, they often can minimize expenses by taking advantage of contract employees on an as-needed basis.

5. Globalization

A globalized workforce presents new challenges to payroll and HR departments. For starters, if you hire overseas employees or U.S. citizens who work in other nations, you might be subject to foreign payroll policies and regulations. In addition, you might need a system to convert U.S. dollars to foreign currencies and comply with offshore tax regulations. Hiring overseas might also affect your company’s U.S. tax obligations. If you pay people working in a different country, you’ll need to fully understand and comply with any additional regulations.

6. Data privacy

Be on the lookout for new state regulations that govern how you can use employee data, even internally. For example, Illinois recently enacted a law that requires companies to obtain applicant permission for AI software to analyze videotaped employee interviews. That same law mandates that only authorized personnel are allowed to watch taped interviews and that applicants have the right to have their recorded interviews destroyed. If you hire in the European Union, you should also be well-versed in the General Data Protection Regulation (GDPR), which governs the use and sharing of personal employee information.

7. Employee self service

Busy HR departments know it can be difficult to keep up with employee requests and the ever-changing payroll landscape. New systems that offer employee self-service can lessen the burden of daily operations and allow staff to focus on more meaningful activities. For example, platforms can be deployed that allow employees to review information such as income to date, tax withholdings and eligibility for fringe benefits. Employees can also use these platforms to swap personal days or shifts with other employees without the need for prior approval, enroll in benefits such as health insurance coverage and view their status on the pay step scale.

8. AI and analytics

Progressive companies are employing AI and analytics to improve employee performance and retention as well as increase overall payroll and HR operational efficiency. For example, machine learning can analyze employee turnover rates to draw correlations between promotion times, management hierarchies and demographics. That data can then be used to enact new policies that may help foster long-term employment rates from your best employees. Payroll Key Performance Indicators (KPIs) can be coupled with software to predict when a given employee might leave, and why. That information can be shared with management to intervene before good employees are lost to competitors.

9. Automation

New technologies can automate important tasks for payroll and HR. For example, chatbots can be deployed to answer employees’ most common questions, help them enroll in benefits or even make changes to their tax withholdings, all without the need for human intervention. The result is a more efficient department whose personnel can focus on critical tasks rather than daily operations. Technology can also help you make payroll compliant with local, state and federal regulations, including tax rates, wage laws and vacation pay. The Affordable Care Act (ACA) is a good example, as software can automatically update to the latest rules and track reporting compliance for each employee. It can also streamline end-of-year IRS filings. Thus, software may help reduce the risk of costly penalties and may enable you to simultaneously improve operational efficiency.

10. Salary histories

Several states have enacted new regulations that prohibit employers from using an applicant’s salary history to determine wages. Indeed, it can be a violation of law to even ask an applicant how much they made at their last job. Best practice dictates HR departments should stay in tune with local, state and federal laws concerning salary histories and other hiring procedures.

11. Cloud-based payroll platforms

Many companies are moving from internal payroll systems and even Excel spreadsheets to cloud-based payroll platforms. These platforms keep all data in a single system that’s accessible anywhere, which increases efficiency and reduces the risk for errors. Many cloud-based payroll systems are automatically updated with the latest regulations, which helps companies maintain compliance and avoid costly penalties. Other benefits include employee tracking for accurate reporting, a paperless office, real-time access to data, transparency and employee access. You don’t need to worry about software backups and some systems even integrate with third-party apps for a variety of business needs. Cloud-based payroll platforms also offer scalability, so small businesses don’t need to change software as they grow.

12. Overtime compensation

Starting in 2020, the Fair Labor Standards Act (FLSA) salary threshold has increased. Nationwide, that means more than one million employees will need to be reclassified from exempt to nonexempt. If you have a lot of employees, it could have a significant impact on your payroll. Ensure your company complies with the new overtime compensation regulations to avoid getting pinged with penalties, and plan to account for new overtime expenses, new hires or other workforce changes so you don’t exceed your payroll budget.

13. Minimum wage

Minimum wage increases continue nationwide, so your company must be prepared to keep up with increasing wage costs as well as demands from tenured employees who might seek equitable pay raises. So far, 21 states and more than 50 U.S. cities have either increased minimum wages or plan to do so in 2020. Check with your legal counsel to determine if the minimum wage increases affect your workforce.

14. Recreational marijuana

As more states legalize marijuana, state and local governments are enacting legislation that may prevent companies from barring its use. HR departments would be wise to brush up on new regulations and take appropriate steps to revise hiring and employment policies accordingly.

15. Financial wellness programs

Many companies are adding financial wellness programs to their stable of employee benefits. Such programs help employees learn how to manage their money and invest in their futures. Financial wellness programs can reduce money-related stress — which can ultimately help employees lead happier lives. Some of these 2020 trends for payroll HR have the potential to cause reporting and compliance headaches. Others have the potential to help you foster a positive work environment, improve employee morale and streamline business operations. If you’re concerned about the impact recent trends might have on your company or you’re looking for new solutions to modernize your business, Deluxe Payroll is here to help. 

Editor's note: This blog post was deemed accurate at the time of publication and may not reflect recent changes related to payroll law. The information provided in this blog does not, and is not intended to, constitute legal or financial advice.

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