U.S. Firms Seize Innovations to Tackle Payroll Complexity

Enterprises boost preparedness for growing data privacy risks by quickly adopting new, AI-enabled features, ISG Provider Lens™ report says

Enterprises in the U.S. are adopting new payroll technologies and services to solve increasingly complex problems, in some cases faster than companies in other regions, according to a new research report published today by Information Services Group (ISG) (Nasdaq: III), a leading global technology research and advisory firm.

The 2024 ISG Provider Lens™ Payroll Solutions and Services report for the U.S. finds that changes in enterprise management and employee experience, such as the rise of remote work, make payroll a more strategic function and introduce new challenges. Facing new requirements with limited internal resources, many enterprises are outsourcing components of payroll to gain access to the latest technologies.

“Employees and governments both are demanding more from payroll departments,” said Stacey Cadigan, partner, ISG Human Capital Management and Enterprise Transformation. “Service providers continue to develop new ways to address and anticipate new requirements, especially using AI.”

AI and ML are central to many advances in payroll technology, introducing greater accuracy, efficiency and intelligence, the report says. As in other regions, U.S. enterprises are starting to deploy AI in all business processes, including customer-facing functions.

Increasing regulation is shaping payroll challenges and solutions. In the U.S., equal pay legislation has led companies to prioritize pay transparency to attract new hires and maintain good employee relations, ISG says. They expect systems to accurately update pay data in real time and make it available on easy-to-use dashboards.

U.S. enterprises have sharpened their focus on payroll data privacy over the past year, though most remain less aware than firms in Europe, where penalties for unsafe data handling are higher, ISG notes. As U.S. laws grow stricter, providers are prioritizing encryption, secure data storage and access control methods, including multi-factor authentication and role-based permissions. Providers’ toolkits also include incident response plans and regular employee training.

“The U.S. market is increasingly savvy about payroll privacy,” said Jan Erik Aase, partner and global leader, ISG Provider Lens Research. “Enterprises are embracing new tools and expect providers to use best practices and regular testing.”

Companies in the U.S. have been quicker than others to adopt some tools that give employees more visibility and control of payroll, ISG says. On-demand pay, which lets workers receive partial payment before the pay period ends, has seen slower-than-expected adoption in most of the world but more acceptance in the U.S. Likewise, the U.S. market shows greater interest in apps that let employees check and correct their pay stubs before payroll is processed.

The report also explores other trends affecting U.S. payroll organizations, including the growing importance of predictive analytics and AI-powered personalized financial insights for employees.

For more details on payroll challenges U.S. enterprises face, including the integration of new platforms with legacy systems and the risks of offering on-demand wage access, see the ISG Provider Lens™ Focal Points briefing here.

The 2024 ISG Provider Lens™ Payroll Solutions and Services report for the U.S. evaluates the capabilities of 16 providers in one quadrant: Managed Payroll Services: U.S.

The report names ADP, isolved, Paychex, Paycom, Paycor and Strada (formerly Alight) as Leaders in the quadrant.

In the area of customer experience, EY is named the global ISG CX Star Performer for 2024 among payroll solutions and services providers. EY earned the highest customer satisfaction scores in ISG's Voice of the Customer survey, part of the ISG Star of Excellence™ program, the premier quality recognition for the technology and business services industry.

The 2024 ISG Provider Lens™ Payroll Solutions and Services report for the U.S. is available to subscribers or for one-time purchase on this webpage.

About ISG Provider Lens™ Research

The ISG Provider Lens™ Quadrant research series is the only service provider evaluation of its kind to combine empirical, data-driven research and market analysis with the real-world experience and observations of ISG's global advisory team. Enterprises will find a wealth of detailed data and market analysis to help guide their selection of appropriate sourcing partners, while ISG advisors use the reports to validate their own market knowledge and make recommendations to ISG's enterprise clients. The research currently covers providers offering their services globally, across Europe, as well as in the U.S., Canada, Mexico, Brazil, the U.K., France, Benelux, Germany, Switzerland, the Nordics, Australia and Singapore/Malaysia, with additional markets to be added in the future. For more information about ISG Provider Lens research, please visit this webpage.

About ISG

ISG (Information Services Group) (Nasdaq: III) is a leading global technology research and advisory firm. A trusted business partner to more than 900 clients, including more than 75 of the world’s top 100 enterprises, ISG is committed to helping corporations, public sector organizations, and service and technology providers achieve operational excellence and faster growth. The firm specializes in digital transformation services, including AI and automation, cloud and data analytics; sourcing advisory; managed governance and risk services; network carrier services; strategy and operations design; change management; market intelligence and technology research and analysis. Founded in 2006, and based in Stamford, Conn., ISG employs more than 1,600 digital-ready professionals operating in more than 20 countries—a global team known for its innovative thinking, market influence, deep industry and technology expertise, and world-class research and analytical capabilities based on the industry’s most comprehensive marketplace data. For more information, visit www.isg-one.com.

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