Executive Roundtable: Emerging Issues and Opportunities in Payroll and Employee Benefits

Driven by massive regulatory and technological changes, finance and accounting professionals are grappling with a tidal wave of change and complexity in payroll and employee benefits.

To gain some insight into the issues and opportunities, the Journal of Accountancy gathered several leading executives to join a virtual roundtable discussion. Here, they talk to Editor at Large Rick Telberg about the new regulatory landscape, changing technologies, and how they and accounting professionals are seizing new advantages amidst change.

Regina Lee, President of Major Account Services and Small Business Services, ADP Inc. A 28-year veteran of ADP, Ms. Lee has held numerous senior-level positions, most recently serving as President, ADP National Account Services and Employer Services International, where she led an organization of 13,000 associates to offer human capital management outsourcing services to the largest organizations worldwide. Visit ADP.com

Charlie Lathrop, Chairman, CEO and President, CompuPay. Mr. Lathrop joined CompuPay in 2005 and, with a focus on organic growth and acquisition, has more than tripled the size of the company, currently the fourth-largest payroll provider in the U.S. Prior to joining CompuPay, Lathrop was CEO of Advantage Payroll Services, where he took the company from $12 million in annual revenue in 1997 to more than $75 million before managing the sale of the company to Paychex in September 2002. Visit CompuPay.com

Delbert Humenik, Senior Vice President, Sales and Marketing, Paychex Inc. Prior to joining Paychex in September 2009 as a member of the company’s executive team, Mr. Humenik was senior vice president and general manager for R.H. Donnelly Corporation (now Dex One Corporation), a leading national Yellow Pages and local search company. Additionally, Mr. Humenik’s 20-year sales and marketing career includes sales management and executive leadership positions with Verizon Communications, Inc. Visit Paychex.com

Because of new reform and regulatory legislation (health care, financial services, etc.), we’re facing an avalanche of new rules and regulations. Which of the changes are the most significant to accounting and finance professionals?

REGINA LEE, ADP: “The tax credit for small businesses resulting from the Patient Protection and Affordable Care Act and the HIRE Act could have the most significant effects on accounting professionals this year, and for many years to come. Not only is there a plethora of new rules to understand, but also implementation of these rules will take place over multiple years. In addition, the administration that is needed to determine client benefits could be onerous and time-consuming.”

CHARLIE LATHROP, COMPUPAY: “The new regulations involving employment tax credits will be most significant to accountants because of the impact to small business. These credits can be of great value, with an immediate impact to cash flow in many cases.”

DELBERT HUMENIK, PAYCHEX: “The regulatory environment is more demanding than ever for accounting and financial professionals whose job it is to make sure their clients stay in compliance. Of course, health-care reform legislation looms large, including the Small Business Tax Credit available to some businesses; new W-2 reporting rules; and the expansion of 1099 reporting requirements. New disclosure requirements for retirement plan fees and auto-IRA legislation should be top of mind on the retirement side. These are all at the federal level. At the state level, we expect to see more tax and regulatory changes in answer to big budget challenges.”

How does your company’s solution help to cope with the new rules and regulations?

REGINA LEE, ADP: “ADP acted quickly to the new regulations, making resources available to help clients understand these complex laws. We also provided clients and accounting professionals with reports to help them manage the changes.”

CHARLIE LATHROP, COMPUPAY: “CompuPay was proactive in communicating with our clients and partners about the HIRE Act incentives, developed a HIRE Act savings calculator located on our company website and completed programming within our payroll systems to track pay for eligible workers, calculate the credit and report it on Form 941. We also offered several HIRE Act and health reform webinars to partners and clients to help them understand how the new legislation affected their businesses.”

DELBERT HUMENIK, PAYCHEX: “On the Accounting Professionals section of our website, we offer free tools such as our Accountant Knowledge Center, which delivers a wealth of federal and state resources, as well as a variety of CPE seminars. We also produce and provide educational webinars – at no cost – to help educate accounting professionals and employers about new regulations that impact them. Some of our topics have included the HIRE Act, health-care reform, and the economic stimulus package. Last year, Paychex shared its expertise with over 10,000 accountant participants in CPE seminars.”

There’s quite a debate within accounting firms and finance departments about whether payroll should be outsourced or in-sourced. What criteria should be applied to make an intelligent decision?

REGINA LEE, ADP: “A firm needs to decide if they want to make payroll a profit center or simply an accommodation for their clients. Many clients still want their accountant to handle their payroll because of the trusted advisor role an accountant plays in their businesses. However, this is not typically a profitable enterprise for the firm. Cloud computing and a reliable revenue model can make in-house payroll an attractive service for accounting professionals.”

CHARLIE LATHROP, COMPUPAY: “Our accounting partners find that they can leverage our expertise and still maintain a level of control over their client’s payroll and reporting that fits their needs. It really offers a way for our partners to enhance their relationships with their clients by conveniently providing yet another essential business service.”

DELBERT HUMENIK, PAYCHEX: “CPAs and accounting professionals must be proactive, acting as a trusted advisor to their clients, identifying those most in need of help – and offering the right solution, one that is provided by an industry expert delivering top-quality service. The accounting professional can then rest assured that their clients are absolutely going to be taken care of by an end-to-end, single-source provider with an impeccable reputation.”

What trends are you seeing in new technologies and workflows?

REGINA LEE, ADP: “The explosive growth of smart phones is driving demand for business applications that provide users with the ability to access and transact information anytime / anywhere. Small businesses, in particular, can take advantage of new applications such as ADP’s Run Mobile to run payroll while on the go.”

CHARLIE LATHROP, COMPUPAY: “Increasingly, we are seeing a growing acceptance of online and paperless payroll. Generally, companies with 50 or more employees are also seeking employee self-service options, manager self service and HRIS capabilities all integrated with their payroll offering. Expense management is a new technology that we now offer our clients to help streamline what is typically a very manual process.”

DELBERT HUMENIK, PAYCHEX: “Leaders in the payroll industry are trying to provide a more complete payroll and HR management solution. They want to identify the “pain points” in the employee management space and relieve them. The focus is on integrating the user’s experience – ensuring that all functions work together and talk with each other. The integration is executed in a way that supports the natural work flow. In the past, the applications dictated work flow; now, we observe how clients are functioning and develop technology that matches their work flow.”

Looking into the not-too-distant future, what should accountants and finance managers expect from payroll solutions vendors in terms of new innovations in service and technology?

REGINA LEE, ADP: “Cloud computing will come to dominate the industry. There is no significant cash investment and back-end software changes can be implemented immediately. The use of the cloud allows firms to offer more products to their clients, creating greater revenue and greater loyalty. And in these uncertain economic times, when clients are shopping around for less expensive services, offering a broader array of services makes your firm a more attractive choice. Look for more mobile apps too. People want to perform business transactions anywhere and anytime. As an industry leader, ADP will help lead payroll and HR outsourcing with these and other new tools.”

CHARLIE LATHROP, COMPUPAY: “For smaller businesses with simple, automated payrolls, mobile technology will become more and more prevalent. Payroll, HRIS and time and attendance offerings will be more integrated and provided as a single solution for larger employers.”

DELBERT HUMENIK, PAYCHEX: “Innovations will continue around a simplified user experience that’s Web- and mobile-based. Accountants, financial managers, and employers are growing more and more confident doing payroll online – and they want accessibility from multiple locations. Technology continues to be exploited to provide more applications to end users, both employers and employees. The integration of those applications is essential, and the speed to market for these solutions is accelerating. Leading providers need to keep pace and respond accordingly.”