Payroll provider smart technology is an obvious route to employee communication and engagement, says F&TRC director Ian McKenna
From Airbnb to Uber, digital services continue to influence almost every aspect of our lives. So where will the challenges come from for corporate advisers and employee benefit consultants?
Last month I looked at why corporate advisers are perfectly positioned to provide automated financial advice to their clients’ employees. It is an enormous opportunity, attractive to new entrants as well as to financial services companies. This month’s column takes an example of a business outside the advice community that is well placed to build similar relationships.
Xero is a cloud-based accounting software provider primarily focused on the SME market.
In just 10 years, the business has grown to more than 600,000 subscribers globally, with over 100,000 based in the UK. Some reports suggest it will unseat Sage sometime this year as the most popular accounting software package for UK small businesses.
The company is a latecomer to the auto-enrolment market. It extended its software to include payroll only last year, with AE support added this February. This includes member assessment, opt-outs, postponement, contribution calculation and the necessary employee communications. Automated integration is in place to provide contributions seamlessly in the right file format for The People’s Pension, Nest, Now: Pensions, Smart Pensions and Aviva, JLT and Legal & General.
The part of Xero’s proposition that I find most interesting is not its AE support but an app called Xero Me, which was launched at the same time. This allows any employee of a firm using Xero’s payroll package to receive their payslip via the app. It can also be used to request holidays.
These are both relatively simple functions but ones that all staff will use many times a year.
One of the key factors in building a digital relationship is regular contact. That such content canbe aligned with things that users will feel positive about, such as being notified that
they have been paid or their holiday has been approved, should engender positive reactions.
At this time the app appears to be branded as Xero. The opportunity to co-brand with the employer is obvious and may be a great way to further reinforce trust.
Although it is used for business account integration, Xero software already includes a feed from Yodlee – the same type of integration being used to power Intelliflo’s personal finance portal, Aon Bigblue and Mercer Harmonise. It is not hard to see how this could be extended to provide personal financial management capability to individual employers using Xero Me.
Adding pension benefits projections and, in time, a pension dashboard-type capability would be an obvious way for Xero to provide significant added-value content to employees. Equally, total-reward statements would be a definite next step and are, arguably, a natural extension of the payslip. The more important Xero makes the app to employees, the more this will cement Xero’s relationship with employers.
To be clear, at no point in my discussions with Xero did it suggest it was looking to provide financial education and guidance to employees. However, if it is delivering payslips electronically, helping staff understand how to make better use of their income would be a natural extension.
Xero works closely with accountancy firms and has acquired a number of accountancy practice management software suppliers. So there is an obvious synergy with accountancy firms that also wish to provide financial advice.
Xero is clearly a very focused business so perhaps it may see this as a diversion from its core strategy. If it does not choose to move in this direction, other accounting and payroll suppliers may do so. AE has created an element of competition between payroll and the pensions industry; services such as this can identify opportunities for either collaboration or rivalry.
Consumers increasingly run their lives around their smart devices. As workplace advisers and product providers build their digital propositions, it is important to acknowledge the role of payroll and to work out how to incorporate this information in the services provided.