The State of payroll—how capacity, compliance, and employee support is changing
Not long ago, payroll was done by hand. Can you imagine? Reams of paper in filing cabinets, punched timecards, and handwritten paychecks. They probably even stamped and mailed everything by hand too. My Goodness.
Of course they didn’t have much choice—payroll is an essential function, and while we have the luxury of all sorts of technology to get the work done, that wasn’t always the case.
Even today, some payrollers are still doing manual inputs into Excel sheets—a practice that will soon seem just as antiquated as ink on paper seems to us today.
And for the most part, all of this advancement hasn’t changed much for workers—sure things are a bit more accurate, and maybe a bit more timely on average, but payroll is still just payroll (it’s not as if they’re getting paid before payday!).
And so it’s worth asking—
- How has technology changed the world of payroll, and how can companies keep up with those changes for a rapidly evolving workplace?
- How do you adapt to more remote workers, and more employees in different countries, each with different legal considerations?
- What is going to happen with casual and gig worker whose employer is basically an application on their phones?
The State of Payroll—2025
Prior to the extensive use of automation, there were practical limits that companies had to run up against when trying to payroll large amounts of people.
If you were going to payroll 10,000 people, you needed to make sure there were an adequate number of customer service reps, with an adequate number of phones, to solve issues when something inevitably goes wrong on payday.
Ditto for processing payment—it used to be that you would need a sizable team, all working in the same office, in order to process all those checks and benefits and expenses on time. And more workers on your payroll meant more team members, bigger offices, and more computers and phones.
In the last 5-10 years though, many of these limits have been removed, and businesses are finding massive efficiencies and a newfound ability to scale quickly. Platforms that can be used from workers’ phones (like the Raise app) allow workers to do much of the work of payroll themselves, without being bottlenecked by the size of your payroll department.
Add in automations that scan your payroll database for errors and inconsistencies, and all of a sudden those 26/year, caffeine fueled all-nighters for your payroll team start seeming a lot more manageable—with technology doing much of the heavy lifting, there is less of a burden on humans to do piles and piles of manual work (like data entry) for a looming and inflexible payday deadline.
The Rise of 3rd Party
About 12% of companies outsource payroll, and within certain industries that number is much higher. The benefits of using a vendor to handle your payrolling needs really depends on the complexity of those needs.
With a small workforce limited to one or two countries, running payroll internally can make sense. There’s very little risk to employers because the processing volume is manageable—any exceptions that could cause compliance risks, like Independent Contractors, T4s and W2s can be handled case by case (provided you’ve got someone on the team who understands the difference!).
But in today’s workforce, with large amounts of remote workers in various jurisdictions, and a greater reliance on technology to manage the size and complexity of payroll projects, it starts looking a lot riskier. For small or medium businesses in particular, misclassification and consequent lawsuits could be a huge problem. And rather than create internal compliance teams, more and more employers are starting to look at outsourcing their Payroll and Employee of Record EOR)/ Agent of Record (AOR) services.
A quick look at the gig economy illustrates why this is such a big deal right now. You’ve probably seen some of the news about classifying gig workers, since in some ways they work like employees and in other ways they don’t.
And because so much of the typical HR function of Uber and the like are run primarily through tech rather than people, there are some pretty big gaps between automation and customer service for folks who need it. Just ask the lady who’s Uber accidently drove off with her 5 five-year old, and was told that Uber wouldn’t provide contact info for driver without a standardized form submission.
It’s worth noting that many of these issues stem from a conscious decision that businesses are making—trying to reduce the costs of payroll and EOR burdens without making a consequent investment in trained and qualified support personnel.
Blame my AI
Systems that automate human processes can be highly exposed to risks without proper human oversight; and businesses that try to cut costs in an attempt to be competitive may do so at the risk of the companies that hire them.
With increased capacity to onboard more contractors faster, comes more exposure to problems and risks—that contractors aren’t using self-serve systems correctly, or have found ways to game them; that your AI has encountered a situation it doesn’t understand and makes a critical error; or that your contingent workers are running into technical problems and are stuck waiting for hours for an artificially small, overworked support team.
But at least so far, blaming your AI isn’t a real legal defence—employers are on the hook for any shoddy decisions their technology makes. Which means that for many businesses, programs that blend human and technical power are often best at scaling operations while mitigating risks.
The costs of not being 100% sure
Just last year, a Californian trucking firm paid out $4.2 million in a lawsuit for worker misclassification relating to ICs.
While that’s a dramatic example, smaller scale lawsuits are quite common—as technology continues to alter the employer/employee relation in new and complicated ways, more and more businesses are finding value in outsourcing their EOR and payroll needs.
If you’re interested in learning more about how a trusted payrolling partner can make a difference, check out Raise’s Payroll Services—whether you’re looking for ideas on how to organize your payroll, or starting to connect with vendors who can derisk your payroll operations, Raise is here to help you meet today’s payroll challenges.
