5 Payroll Trends To Look Out For In 2021

Jonas Bøgh
5 minutes

As 2021 comes into focus, digitisation, the need for greater flexibility, and increased competition for higher-skilled workers are all key drivers for the top payroll trends for next year. 

For finance and HR teams, it will be essential to ensure that contracting, payroll and benefits solutions are as up-to-date and integrated as possible to keep attracting and retaining the staff you need in what is looking set to be another challenging year. 

From accounting to cash flow, expense management to challenger banks, digitisation has become indispensable to so many essential business processes in recent years. But payroll has been left behind, with disjointed and inefficient systems making it a time-consuming and expensive process for many businesses. The good news is the tide is changing, and in 2021 smart, streamlined payroll solutions will be essential for businesses across the board. 

Clever new payroll software will see many businesses moving away from the convention of outsourcing and will herald a new era of better integrated payroll and HR systems, making information sharing and reporting far easier and more efficient. 

With this comes an ever-increasing need for companies to attract the right talent with the right incentives. We’re set to see more companies offering equity as well as salary compensation, and widespread changes in employee benefits packages that reflect the changing priorities of an increasingly remote workforce post-COVID. 

1. The decline of outsourced payroll 

In recent years, the trend for small and medium enterprises (SMEs) has been to outsource payroll to an external specialist. While this offered many SMEs the opportunity to save on in-house payroll expertise, not to mention training, software and security costs, there are potential pitfalls. 

The problems many companies face with outsourcing payroll is: 

  • They are tied to strict input deadlines, often more than five days or more before payroll, which can make last minute changes and onboarding new employees impossible to accommodate. 
  • The process is often handled using email, spreadsheets and PDFs, which are slow, prone to human error and not always GDPR friendly. 
  • The outsourcing provider often doesn’t have the full business context, leading to mistakes and a lot of back and forth to ensure the right changes are made. 
  • There can be a lack of clear communication between a company’s HR, payroll and accounting systems, which can mean that keeping records up-to-date can be an extremely slow and manual process leading to inaccuracies and problems with reporting. 

Pento offers a new, smarter and better way to run payroll. We’ve created a software platform that automates and streamlines the process so businesses can run payroll in minutes rather than hours and days. Pento customers spend up to 80% less time on payroll - there are no deadlines or cut-off dates and you can get fast and reliable support with an average response time of just two minutes from our payroll experts. Our innovative system can connect payroll to your HR and accounting, which means you never have to make manual updates again and you don’t have outdated information in different systems. You can check out a 4-minute demo of Pento here.

2. The rise of smart services to streamline remote payroll 

Ensuring contracting and payroll are accurate and timely across all markets has never been more vital in maintaining employee morale and trust, especially as more and more companies shift to a remote working model long term. But it can be a challenge while meeting today’s complex and ever-changing tax and payroll compliance obligations when employing staff across multiple countries. 

New digital services like Deel offer a smart way to handle the complications of hiring, contracting and paying staff around the world. Deel’s software and extensive database can help get your remote workers set up in line with local regulations, draw up contracts which comply with local labour laws and receive timely compensation that complies with local tax, using multiple methods and currencies. 

3. Integrated HR and payroll solutions 

Against an uncertain economic backdrop, 2020 has seen employers more cautious about overall hiring plans, while also continuing to face skills shortages, especially in industries like technology. Many employers are turning to contractual and temporary workers to fill the gaps and this looks set to continue as employees favour flexibility and part time work. 

This, along with ongoing government job support schemes in response to the pandemic, mean that hiring and paying staff is becoming increasingly more complex. As we go into 2021, it will be essential for businesses to ensure their payroll and HR solutions are better integrated, with strong communication between departments. 

Smart solutions like Pento and BambooHR, HiBob and Personio are designed to integrate with each other, automatically sharing and transferring data to avoid time-consuming manual data entry and human error. 

Integrated solutions will also save finance teams time collecting, cleaning and analysing disparate data in order to piece together a holistic, accurate view of a company’s financial and HR situation, leaving them more time to spend on strategic, high-value activities. 

4. Company equity to boost employee investment 

As companies compete to attract and retain higher-qualified talent, especially in industries like technology, they are seeking out new ways to compensate staff beyond just a salary. Giving employees equity share in your business has been found to increase motivation among staff to work harder and provide a sense of collectively pursuing a goal that benefits everyone, contributing to team spirit. 

Historically the only catch has been that employee share schemes can be complicated and difficult to maintain, but now there are smart solutions like Capdesk that can offer a streamlined solution to help keep track. On Capdesk your company ownership records are digitised for greater accuracy, automated compliance and accessibility, with features that support funding rounds and employee share schemes so that you can effortlessly manage your equity as your business grows. 


5. Changing employee benefits to reflect the new working culture 

With the trend for increased remote working set to continue into 2021, many companies are reviewing their employee benefits packages, with a greater emphasis on wellbeing programmes, mental health and stress management services and enhanced annual leave policies. 

For businesses looking for a support programme, companies like Spill offer all-in-one mental health support through Slack. Spill also offers video therapy sessions with qualified therapists and has a range of tools and content on offer for employees to use at any time. 

With benefits packages offering a way for employers to attract and retain higher-skilled staff, choosing benefits that reflect the new working culture could offer employers a competitive edge. Pento makes it easy to keep track of bonuses and benefit-related deductions, like private health care or the cycle to work scheme, with our incredibly clear and simple digital payslips. Gone are the days of the indecipherable paper slip at the end of the month!