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Dave Foxall The Unique Payroll Issues of the Financial Services Sector

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 By Dave Foxall

Sector-Specific Factors in Financial Services Payroll Operations

On the subject of competitive advantage, a recent Oracle white paper, (Driving Return on Human Capital Investment) noted that, “Employee salaries make up close to half of many organizations’ operating expenses”. From the point of view of payroll management and software, this figure is certainly an incentive for greater efficiency and effectiveness of processing. When the same document goes on to suggest this proportion, “…can be even higher in some industries such as financial services,” the argument for top-of-the-line payroll automation in this sector becomes a key factor in leveraging any advantage, competitive or otherwise. So, it is no surprise to learn from the latest Cedar Crestone HR Systems Survey that the adoption rate for administrative HR and payroll software in the financial services industry stands at 95% (compared to a worldwide average of 93%). Aside from the usual payroll functions (i.e. tracking hours and calculating pay, depositing employee checks on time, withholding employee taxes, and compliance with federal, state, and local legislation), financial services organizations carry a number of broader sector-specific payroll factors to consider.

Financial Services Payroll Issue #1: Reward’s Role in Retention

Following the recent global economic crisis, it is fair to say that the banking and wider financial professions have come under fire; receiving a large amount of media-fuelled criticism and have been largely held by most people to be jointly responsible (along with national governments) for the whole fiasco. Of course, the actual situation is somewhat more involved and complex but it remains true that with bank collapses and bail-outs no longer as unthinkable as they once were, there is concern within the sector for job security. These fears among the industry’s workforce can then translate into a retention problem for organizations. Indeed, Mercer’s predictions in the 2012 Compensation Planning report cite Switzerland as an example: “employees in certain industries (financial services) fear impending job cuts and are therefore focused on job security. Some employers face talent shortages in specific job families, which will lead to a ware for specialty talent. For talent that industries and companies deem vital, these employees will remain well compensated, but reward strategies overall are expected to stay the course.” Switzerland may feel distant, but in some respects it is at the heart of the global financial sector and may reflect issues elsewhere. From a strategic perspective, payroll and benefits must offer flexibility and be attractively packaged, including increasingly innovative reward scenarios that must be paced by an organization’s payroll and accountancy software.

Financial Services Payroll Issue #2: Self-Service Culture

Partly due to the ‘branch office’ organizational structure, and partly due to online banking being at the vanguard of the on-going consumerization of IT, financial institutions tend to be at the forefront of offering HR and payroll self-service functionality to their personnel and such functions are becoming more and more expected as standard. Even back in 2010, an HR Outsourcing Association report, Optimizing HR Channels found a 92% adoption rate of employee self-service (ESS) via the web in the financial services sector (placing the sector in the top five industry adopters). A year or so later, CedarCrestone continued to find financial institutions at the top of the list for both ESS and manager self-service (MSS). Common transactions provided by software vendors specializing in financial sector payroll include:

  • updating direct deposit choices
  • online payslips,
  • links to 401(k) providers,
  • locating a doctor in their health plan

The resulting time savings tend to be felt in the HR department and CedarCrestone recommend financial institutions utilize a full HR and payroll service center infrastructure to fully exploit the potential advantages and efficiencies.

Financial Services Payroll Issue #3: Mobile Money

As payroll software features expand, more and more vendors are bringing out mobile payroll apps for both employee and manager self-service, catching the wave of mobile access and the current workplace BYOD (bring your own device) trend. A 2011 Bloomberg Businessweek report, Leaders and Laggards in Mobile HR Apps examined usage in a variety of industry verticals and found that 65% of respondents provided payroll and benefits information to employees via a smartphone or other type of device equipped with a Web browser. In terms of numbers of employees that were given access to such information, the figures differed according to position within the organization, with senior executives being the most ‘connected’ at 81% and clerical staff the least with a still respectable 43%. The report concluded that, “The financial services industry is the most aggressive in enabling employee access to corporate information via mobile devices, with an average of 64% of employees equipped to do so. Stockbrokers need fast access to changing financial data; claims adjusters need to assess damage at customer sites.”

Managing Payroll in the Financial Services Sector – Final Thoughts

On the one hand, it may seem obvious that an industry vertical concerned with money will be one of the most advanced when it comes to handling payroll. However, the simplicity of that observation – however likely – belies the widespread commitment of the sector to engaging its workforce in payroll management via self-service, mobile access and various other supporting initiatives, such as dedicated HR/payroll help desks for employees (CedarCrestone once again found the financial services industry to be a “higher than average adopter” in this area). Certainly, any payroll service provider or software vendor aiming their services at this sector will be required to demonstrate a vanguard product. End

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From a strategic perspective, payroll and benefits must offer flexibility and be attractively packaged; including increasingly innovative reward scenarios that must be paced by an organization’s payroll and accountancy software.”



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