5 salary trends to watch in 2023 and beyond
Payroll has a reputation for being a slow moving sector. But while it seems that not much is happening in the world of pay – apart from continuous legislative changes – the sector is not left untouched by relentless advances in technology.
Jeff Ryan, MD of AWCape
In addition, new ways of working and a dynamic tax and regulatory landscape also keep payroll administration teams on their toes.
Here are some of the most important trends that will shape wages in 2023 and beyond.
1. The fluid workforce
The world of work has changed for the better. Hybrid work is here forever, with many working remotely all or some of the time. Many companies source external talent across the country or even across the globe. And many employers are embracing more flexible ways of working, such as using contractors and freelancers more extensively, or offering more flexible arrangements for people who want to work part-time.
Trends such as the four-day week promise even more changes to come. Payroll teams need to adjust their processes to accommodate a wider range of working models.
2. Vision 2024
Every February, payroll teams wait to hear about upcoming PAYE changes for the new financial year in the Chancellor of the Exchequer’s Budget speech. These changes usually only involve small adjustments to salary calculations. Beyond 2023, however, we can expect more significant changes as the government and SARS begin to move forward with long-delayed items on their agenda – National Health Insurance being one.
SARS’ ambitious Vision 2024 envisions doing away with the filing season in favor of a more real-time approach to personal income tax. Vision 2024 expects to use third-party data from third-party returns to pre-populate an “assessment” for the individual through a SARS app where near-real-time tax liabilities will be displayed.
Employers may be expected to withhold payroll tax (PAYE) based on this data. For example, if an employee contributes to a personal annuity policy or generates income from interest on a bank account, employers will be required to adjust withholding tax accordingly. It is not clear how close this vision is to being realised, but it is something payroll managers should be thinking about already.
3. Seamless workflows
Medium-sized companies are likely to increasingly follow the example of large companies by adopting solutions that enable close integration of finance, human resources (HR), self-service of employees and payroll. This helps them reduce costs and improve efficiency by working with consistent data across the business and eliminating the need to capture the same data multiple times.
Organizations that integrate HR and finance with payroll spend less money and use fewer resources, improving the overall business performance of the company. Furthermore, they have accurate business information in real time to support better decision making. Integration between payroll and HR systems also enables self-service experiences that empower the workforce.
4. Data-driven decision-making
Most businesses want to use analytics to drive better decision-making, and payroll is a potential gold mine of data. Data on absence, overtime, departure and employee retention, compensation, job costs and budgeting can provide powerful insight into employee well-being, commitment and satisfaction.
The data becomes even more powerful in a business with an integrated view of HR, pay and finances. For example, it can also paint a picture of organizational KPIs such as productivity or income per head. We can expect to see payroll teams increase their use of analytics this year, moving beyond basic reporting to collaborating with other functions on strategic growth.
5. Artificial Intelligence (AI) and Robotic Process Automation (RPA)
It’s early days for AI and RPA in payroll, but we’re starting to see some interesting use cases emerge. We could envision AI playing a role in data validation and anomaly detection, helping companies further sharpen accuracy and more quickly spot potential fraud or errors.
RPA, meanwhile, can help streamline manual processes such as capturing data from scanned documents. An example of this is the “intelligent time” recording software that analyzes past timesheets as well as your calendar to pre-populate timesheet entries.
The cloud is the basis for the next generation of wages
Many payroll teams find it difficult to stay ahead of admin at a time when employee and tax rules are becoming more intricate. They also recognize that strict privacy rules mean they must be careful stewards of employees’ personal information. And of course, the pressure to become more efficient never ends.
This is why we are seeing more and more payroll departments using manual/on-premise systems move to the cloud. A cloud-based system allows HR and payroll staff to work online and collaborate wherever they are – crucial in these times of remote and hybrid working models. It is also the basis for seamless workflows, data-driven decisions and AI adoption.
