Four Staffing Payroll Challenges to Leave Behind in 2020

In part 2 of our series on improving operational efficiency and candidate experience for staffing companies, we’ll dive deeper into the top payroll challenges for 2020. Throughout the article, you’ll see insight and opinions from payroll managers, operations leadership, and firm owners in the staffing industry. If you missed part 1, you can find it here.

When it comes to the back office, there’s an important intersection between technology and people. What are some major causes of inefficiency and risk, and where can better staffing software technology and processes help?

1. Legislative Changes and Local Regulations

Greek philosopher, Heraclitus of Ephesus, famously said the only thing that is constant in life is change.

This certainly rings true when looking at the myriad laws and regulations that impact payroll.

Staying on top of changes is a massive task. Simply look at data from Bloomberg and you’ll see that new guidelines and legislation are introduced seemingly every week. Understanding what’s coming down the pike, what gets instituted, and then determining how to deal with it requires constant attention. Not to mention hope that your payroll technology will be equipped to handle it.

One payroll manager mentioned to us that while the payroll solution they use is a well known company, it doesn’t get updated frequently enough. This requires their team to constantly perform manual work and workarounds to handle new legislation. In addition, their compliance department needs to run reports on a consistent basis to make sure there are no oversights.

Not exactly the ideal picture of efficiency, and one that could be remedied with the right technology.

Even ignoring new legislation, the laws already on the books are difficult to keep track of when accounting for local municipalities. Seventeen states allow local city taxes, and in states like Pennsylvania and Ohio tax rates can change from rooftop to rooftop.

That’s a complicated tax matrix of 235 cities and 331 villages in Ohio and most of the 2,560 municipalities in Pennsylvania. For staffing firms, where employees move worksite locations much more frequently, this creates even more complexity.

“Since we often don’t know where placed employees might be working on a daily basis, its difficult to keep up with which local taxes,” remarked the same payroll manager. “Our system has no way of taxing on multiple locations within a week and we need to manually put worksight location into it. Our #1 wish is that the system could automatically lookup and apply the appropriate tax based on employee and worksite address.”

Tax change is constant, which means your payroll technology and services need to constantly evolve as well.

2. System Integrations and Data Accuracy

Recent staffing firm research from Bullhorn’s Global Recruitment and Insight Data project noted that 57% respondents expected their operating budget to increase in 2019. In the same report, 63% expected their investments in technology to increase.

What does it mean? Firms are expecting it to cost more to run their business, but they’re also looking to technology to ease some of the operational burden.

Whether it’s time tracking, benefits, deductions, or a host of other items, manually retrieving and rekeying information leads to a loss of time and increase in errors. Across the board, everyone we spoke with commented on the desire to reduce manual work and increase the level of integration their systems have with each other.

About half of the staffing professionals we spoke to had changed payroll providers in the last two years. Here are a few of reasons why they changed:

  • Incorrect payroll went out for a couple weeks and their provider couldn’t handle it
  • Nagging issues with system that caused poor efficiency
  • A major system crash made them realize they needed a more modern/supported system
  • No Application Programming Interface (API), handcuffed in improving efficiency because they can’t integrate with other systems

What processes are you doing manually that shouldn’t need to be? Does your technology have an API and a robust partner ecosystem that allows it to be integrated with a variety of other systems and processes?

3. Vendor Support

Whether its technology or technology + services, dealing with vendors is often a thorn in the side of many professionals. TMF Group’s payroll survey in 2018 listed vendor management as one of the top challenges for payroll professionals.

This certainly rang true for another staffing payroll professional we spoke to. “It feels like all payroll applications do the same thing, they just do them in different ways,” she pronounced. “A big problem is the customer service. Half the time when I call, I know more than the person I get connected with. I’ll call multiple times to try and get a different person who can actually help me.”

An additional perspective came from a staffing firm owner we spoke with. “Plenty of companies provide payroll services,” he said. “However, staffing is nuanced. If you don’t understand it I don’t want to have to teach it to you. I think there’s very few that understand staffing and how it works.”

On the other end of the spectrum, we asked a Human Resource Outsourcing (HRO) company who services staffing firms to provide their view. “Our payroll services come backed with an entire office of knowledgeable staff to assist with any unusual situation our clients may have. Our payroll technicians work personally with clients from start to finish each week to make their payroll processing easier.” They added, “Success is when all of our clients have their payroll processed perfectly and on time, when all of our clients feel listened to and appreciated, and they feel like their needs have been met.”

Whether you’re working with software only or a service provider, it’s worth exploring how you can avoid frustrating and time consuming support encounters. Look for a partner whose technology is modern and updated frequently (reducing the need for support calls), and offers a truly personalized and knowledgeable human response when you do need to call.

4. Payroll Diversion Fraud

Cybersecurity is a broad topic, but one that deserves inclusion due to its growing impact on payroll.

The FBI posted a public service announcement on the explosion of payroll diversion schemes. In these attacks, cybercriminals seek to change employees’ direct deposit information to an account that the attacker controls.

Per the FBI:
Cybercriminals target employees through phishing emails designed to capture an employee’s login credentials. Once the cybercriminal has obtained an employee’s credentials, the credentials are used to access the employee’s payroll account in order to change their bank account information. Rules are added by the cybercriminal to the employee’s account preventing the employee from receiving alerts regarding direct deposit changes. Direct deposits are then changed and redirected to an account controlled by the cybercriminal, which is often a prepaid card.

An alternative approach for attackers is to target HR and payroll employees. The attacker, posing as an employee, emails HR with a request to change their direct deposit information. In many cases, the HR rep is not trained enough to recognize something ‘off’ about the request and proceeds to make the change.

In light of this, some companies have resorted to enforcing all payroll changes be submitted via paper forms…not exactly the most efficient process.

These social engineering attacks require both technology that can protect employees from themselves, and proper knowledge and training across affected functions.

Work with a partner who has strong security policies, practices, processes, and technology in place to reduce the risk to your company and placed employees. Things like multifactor authentication (where the employee is sent a text message with a code whenever they attempt to login and change payroll information) can greatly reduce the chance of becoming a victim.


One way to address these challenges is by partnering with an HR service provider. Beyond just payroll, they can take on a host of back office tasks – enabling your firm to be more efficient and focus on revenue-generating activities.

What should you look for in potential partners?  What do you need to think about within your firm? Download the 9 Things to Consider When Outsourcing Your Back Office checklist and set yourself up for success.