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Credit: Employment Hero
The entry of AI into the workforce is inevitable. In fact, AI is already engaged in payroll processes according to Employment Hero that just released their 2024 The Power of Automated Payroll Report SEA: Singapore. The report examines the present state of AI and automation in the field, and how companies are looking towards AI to help.
Employment Hero is a leading HR, payroll, and employee engagement platform. With an award-winning employment software, the company services over 300,000 businesses to make managing employees easier for their clients.
For the report, Employment Hero polled over 1000 payroll professionals across Singapore and Malaysia.
Present day woes
According to these professionals, the most common challenge that payroll services face is troubleshooting payroll errors. The majority of payroll providers spend 3-10 hours a week troubleshooting errors.
In Singapore and Malaysia, 52% and 56% of payroll professionals respectively spend 3-6 hours troubleshooting errors, and revising or querying data. Resolving these errors is vital for companies, as they can affect the credibility of payroll service providers or result in legal issues.
Caption: Employment Hero
In Singapore, the second most prevalent issue, for 33% of payroll providers, is challenges with employee benefit disbursement. Accountancy businesses are particularly affected, with 43% highlighting it as one of their top concerns.
Companies that offer a variety of employee benefits, such as bonuses, incentives, healthcare, and retirement plans must know each benefit type, employee eligibility criteria, and any tax implications to disburse these benefits.
The appeal of AI and automation in payroll manifests itself within this, as this technology will be able to help companies categorise benefit disbursement, and streamline payroll data submission.
AI as a potential resolution
Perhaps this explains why professionals hope to incorporate these technologies into their organisations: 44% in Singapore and 39% in Malaysia expressed a desire for automation in payroll reporting, followed by 41% in Singapore and 38% in Malaysia for automated pay calculations.
Despite the demand, and existing availability of technology to automate pay calculations, payroll reporting and payslips, businesses appear to be holding back from implementing these technologies.
“Some of the reasons that could contribute to this are — having a small number of employees, fixed monthly salaries, and the perceived benefits of automation which might not outweigh the software cost,” said Vance Lim, Head of Partnerships (SEA) at Employment Hero.
“Because of that, businesses may stick with manual processes despite inefficiencies and risk being non-compliant.”
Not all roses
Implementing new software does come with a number of costs — it is a complex and time-consuming process involving multiple stages and numerous stakeholders. The process cannot be rushed, if not, companies may find themselves with more problems.
Payroll processes involve numerous details, such as tax regulations, benefit calculations, and compliance requirements. Organisations also often have unique payroll needs due to differences in their industry, size, and specific employee benefits. Therefore, when implementing payroll software into client organisations, payroll companies must customise the software, which requires time and careful consideration to ensure accurate and compliant results.
For most respondents, 65% in Singapore and 48% in Malaysia, the average implementation time of payroll software for clients is more than 3 months, and thus companies will have a wait time before receiving software benefits.
Then, is AI worth the cost?
Despite the costs involved, payroll providers exhibit a willingness to incorporate AI in the present, and the future.
Today, some companies have already automated at least a part of their payroll services — 52% of payroll providers polled have automated around 31-60% of their payroll services.
Unsurprisingly, larger companies exhibit higher levels of automation. Companies with more than 100 employees, and businesses with more than 800 clients are more likely to have automated 71-100% of their processes.
Credit: Employment Hero
Looking toward the future, a vast majority of respondents have positive sentiments regarding the use of AI and automation to reduce payroll processing time, with 78% of respondents in Singapore and 81% in Malaysia finding it appealing.
Credit: Employment Hero
A gap between employees and employers’ perception of AI does exist. Employers view AI positively, as companies will be able to streamline their operations and gain a competitive edge. Employees on the other hand, have anxieties around AI displacing their jobs, and potential increased surveillance.
However, the incorporation of AI will allow routine and repetitive tasks to be automated, and therefore payroll providers will be able to redirect their efforts towards other tasks, like employee engagement and talent management. Therefore, employees save time on such tasks, and are able to cultivate skills like interpersonal communication, and leadership skills.
To bridge this perception gap, transparent communication and education about the role of AI is necessary so that employees can better understand that AI is a tool and not a replacement.
Fortunately, employees appear to be increasingly warming up to AI and the way it can help them in the future.
Credit: Employment Hero
The report also believes that AI algorithms can leverage historical data and patterns to predict future trends, like fluctuations in workforce dynamics. Thus, companies can do better resource planning, and anticipate and mitigate potential issues related to payroll management.
At multiple levels, companies see AI and automation as being worth the cost.
So, what are companies going to do?
In the year ahead, 71% of respondents in Singapore and 78% in Malaysia expect the usage of AI to increase.
Companies differ in when they choose to incorporate new technologies. About half of the respondents, 45% and 49% in Singapore and Malaysia respectively, were enthusiastic about adopting new technologies.
However, a quarter of respondents, 28% in Singapore and 25% in Malaysia, had a more cautious approach, expressing a desire to wait a little before embracing new technology. This more reserved approach reflects how these companies are more concerned with reliability and proven efficacy, instead of being caught up in the appeal of new technologies.
Companies are also increasing their investment in cybersecurity measures, adopting more robust encryption methods, regular security audits, and advanced monitoring systems to detect and mitigate potential threats. This will ensure that even as companies include new technologies, their data will remain secure.
Overall, companies want to include AI — it’s just a matter of when.
