10 Payroll Industry Trends for 2024

Paying employees is an essential and continuous function of running a business, but changes and evolution in the payroll industry have resulted in some notable new trends in payroll. Payroll platforms have become dynamic tools for companies to support multiple work environments and types of employees, accommodate various and increasing compensation arrangements, and meet employees' requests for faster access to funds and pay-related information.

When paired with the right mindset, HR technology and innovative payroll solutions can help companies continue to adapt to new and emerging payroll trends. As the end of the year is upon us and 2024 begins, it's an excellent time for employers and HR to familiarize themselves with the following payroll outsourcing trends.

1. Return to Office

While the past few years have seen a rise in remote and hybrid work models, some businesses have mandated that employees fully or partially return to the office (RTO). Here's how this shift could impact businesses in 2024:

• Businesses in locations with a higher cost of living may no longer be able to recruit and employ staff in areas with lower costs of living. As such, employers may have to contend with employees' and new hires' location-based pay expectations.
• ADA-compliant attendance metrics may be directly tied to performance reviews and merit-based pay increases.
• Businesses may need to revisit their recruiting and retention strategies, which may have previously included hybrid and flexible schedules.

2. Family Support Benefits

Considering that RTO may impact employee compensation and incentives, businesses are taking a closer look at their benefits packages. Recognizing that the demand for enhanced family support during the pandemic has now translated into the desire for long-term parental benefits, employers are increasingly offering family support and leave benefits to retain and attract talent, according to a Society for Human Resource Management report. The SHRM survey indicated that employers are more inclined to offer paid leave for the care of immediate family members compared to previous years. Paid adoption leave is also on the rise.

3. Wage and Hour Regulations

Wage and hour regulations related to overtime and minimum wage increases do not pertain solely to payroll but are timely compliance matters that business owners must fully understand. For instance, 2024 may see the U.S. Department of Labor announce the final overtime rule, which is expected to increase the white-collar exemption salary threshold significantly. Employers should understand how the final rule could impact employees, business budgets, procedures related to payroll, and even morale if wage compression comes into play.

4. Challenges Meeting Pay and Business Demands

As you think about business budgeting in 2024, you may be concerned about economic uncertainties, including inflation, rising costs, and the potential for lower profits, making it challenging to meet compensation expenses and other business demands. The possibility of layoffs and continued questions about inflation may disincentivize business owners from offering sign-on or retention bonuses, as well as significant compensation increases for employees.

Regardless of economic outcomes in 2024, it's imperative for employers to keep a careful watch on their financial metrics and have a plan in place to help avoid challenges in meeting payroll obligations. Some payroll providers may provide payroll protection that postpones the collection of payroll funds from your bank account.

5. Faster Payroll Processing

The acceleration of payroll technology and automation have enabled companies to process payroll faster. Those who take advantage of this growing payroll technology trend can, for example, leverage same-day pay for employees and the availability of shorter payroll cycles. Quicker processing capabilities also provide management with timely reporting. With faster access to current data, HR and leadership can work together to spot trends or payroll errors at an earlier stage and respond as needed.

6. On-Demand Pay

On-demand pay continues to gain popularity as a new trend in payroll among today's workers. This is a payroll service where employees can access wages as they are earned before payday. The service typically comes with a small fee paid by the employee.

This option empowers employees to manage cash flow challenges better, thereby potentially improving their financial management processes, reducing stress, and increasing productivity and engagement at work. Providing on-demand payroll is one way to demonstrate that you are committed to helping your employees safeguard their financial wellness.

7. Paying Multiple Types of Workers

Whether you have employees, independent contractors, or a mixture of these, you have many obligations in how you pay individuals who work for your business. If you've chosen to bring on contract-based workers this year, you must ensure you have the systems to pay them correctly. For example, you aren't required to withhold taxes from independent contractors who are correctly classified or pay the employer portion of Social Security, Medicare, and state unemployment taxes, as you do with employees. However, you must keep track of independent contractors' earnings and report that information to the IRS on a 1099-NEC tax form for all contractors who earned more than $600 in a calendar year. You must also send out Forms 1099 to independent contractors on or before January 31 each year for the prior calendar year.

Correctly classifying and paying your workers can protect your business from penalties. A reputable payroll services provider that offers robust payroll technology can help your business handle many types of workers and payments to them and help with compliance with IRS rules.

8. Pay Transparency

To remain competitive in today's hiring landscape, employers may foster open dialogue around pay transparency and help employees understand how the company's compensation plans apply to them. Equal pay laws exist in nearly every state, but the enactment of laws that require companies to provide pay transparency is a relatively recent phenomenon.

You may choose to share pay ranges or general guidelines for pay based on position, seniority, length of service, and other factors. While a company may have valid reasons to keep individual pay figures private, some organizations are moving toward full transparency as a show of good faith to employees looking for fair and equitable pay. A worker's clear understanding of their compensation, along with what steps can be taken to increase their pay over time, may help mitigate pay inequity and the perception of bias.

9. Using Technology to Increase Payroll Accuracy

Payroll accuracy is vital. Rather than processing batches of checks and finding errors on the back end, which takes time to correct, the growing payroll trend of building in more proactive, front-end reviews can help ensure that payroll is accurate before it goes out the door. Allowing employees to review their pay information before releasing funds is another way to confirm accuracy. Using Paychex Pre-Check^SM, employees can be involved in the payroll review process and confirm that their earnings and withholdings are accurate before payday. Regular access to this information can also help them make necessary adjustments in withholdings or contributions to pre-tax accounts to take full advantage of their benefits package.

10. Innovative Payroll and HR Integration

While you can choose basic payroll runs from a third party when you outsource payroll, there are significant benefits to outsourcing additional HR tasks; among them is developing a solid partnership early in the process to make payroll management easier and more cost-effective down the road. Integrated payroll and HR technologies and payroll delivery systems can also play a pivotal role in your business strategy. Fundamentals around pay — recruiting and providing pay transparency, offering benefits that cater to work-life balance, or allowing employees to get paid faster — may go a long way in establishing employee loyalty and retention.

Prepare for the Future of Payroll

As you wrap up your year-end payroll requirements and set the foundation for the year ahead, keep the payroll impacts mentioned above in mind. If you're ready to put the latest payroll solutions to work for you and your employees, Paychex can help you turn payroll into a business strategy for long-term resiliency and success.