Changes that follow digitalization must be addressed immediately. Source: Shutterstock

Changes that follow digitalization must be addressed immediately. Source: Shutterstock

How digitalization impacts payroll management and staff’s taxes

DIGITAL and automation solutions are increasingly available in the market, attracting more businesses to transform their operations for greater efficiency and productivity.

From simple administrative workloads to complex processes, technology solutions have helped to digitalize functions and automate systems in the workplace.

This is inclusive of how employee management systems are designed and the tax implications that follow once automation solutions are deployed.

When a company digitizes to enable certain functions and processes, there are tax implications that are relevant to the jurisdictions that the operations fall into.

The increased utilization of solutions may result in tax incentives — but also change the tax status of an employee as some roles change as a result of digital developments.

Further, as businesses go digital, the option for staff to work in different settings or with greater flexibility will be more common, and directly impact how payroll is managed for such employees. Some might choose to work as contractors, others as full-time staff, and yet others via freelance arrangements.

In short, the human resource (HR) function of businesses needs to be aligned with the changes that happen within an organization.

However, these issues are not to be mistaken as drawbacks that businesses may face in light of digitalization.

Rather, they can be seen as operational gaps or interaction flaws that need to be attended to because these employees may not have the best HR experience.

What businesses need to do is to integrate these systems together to enable a seamless and digitally-enabled HR function.

This is especially vital for digitally-reliant employees who generally navigate themselves using technology capabilities – justifying the need to develop an interconnected, digital HR function that would track changes that happen and respond accordingly.

Cognitive technologies, intellectual machines, and robots can be leveraged to significantly enhance and improve employees HR experience.

Though automated, connected systems within a function would still allow customization of HR capabilities and enable relevant payroll support.

May it be an employee’s tax status, salary changes, payslips, leave application or expense claims, a digitally-enabled HR function can dramatically elevate the way changes are managed within a business operation.

In sum, the process of going digital is not always as easy as it seems. Not because the technologies are difficult to deploy, but simply because of the changes that take place within an operation once digitalization and automation are leveraged.

Nevertheless, with proactive technology-driven policies and measures, businesses can rest assured knowing that the shifts and changes that occur can easily be managed.