The following is a conversation with IPS President John Feaman:
What key trends do you anticipate shaping the payroll services industry in 2025, and how should businesses prepare for these changes?
“As the workforce continues to evolve, especially with the shift toward distributed work environments, I believe the focus will be on enhancing the employee experience and integrating more advanced technologies. Features such as flexible pay options—like wages on demand—will become more common, allowing employees greater control. Additionally, income verification solutions will become a necessity for many businesses, improving efficiency in both hiring and compliance processes.
“We will see increased use of technology to streamline HR tasks. This will help employees with essential functions like requesting time off, checking benefits, and even assisting with benefit selection. For businesses, adopting these technologies now will be key to remaining competitive and responsive to the needs of their workforce.”
With a new administration entering the White House in 2025, what proactive steps should businesses take to align their payroll processes with potential policy shifts?
“I lean toward a “wait-and-see” approach. Right now, we are operating under the existing rules and regulations. However, it’s important to stay informed about what the new administration might propose, especially on topics like the Affordable Care Act (ACA), Paid Family Leave, and new regulations surrounding tipping and taxes.
“In the meantime, businesses should keep their eyes on policy discussions and be ready to adjust if needed. Flexibility will be key in responding to new laws as they are enacted.”
What significant IRS updates or regulatory changes should businesses be aware of in the coming year, and how might these impact payroll compliance?
“One major update that businesses should prepare for is the Secure Act 2.0, which significantly impacts the 401(k) industry and, by extension, payroll services. This new legislation introduces several important changes, including options for employer Roth contributions, provisions for long-term part-time workers, and increased catch-up contributions. Additionally, deferral limits have been raised, and auto-escalation features are being integrated into retirement savings plans.
“These changes will require businesses to adjust their payroll systems to handle new contribution limits and manage the complex retirement savings options. Compliance will become more intricate, and businesses will need to ensure they are properly tracking and implementing these changes.”
How can businesses leverage payroll services to navigate economic uncertainty while maintaining efficiency and compliance?
“In times of economic uncertainty, payroll services become even more critical for businesses looking to maintain efficiency and compliance. As payroll laws and regulations grow increasingly complex, businesses will need to rely on both technology and strong customer service to stay ahead.
“The demand for simple, user-friendly technology solutions is growing. Companies can leverage automated payroll systems to streamline processes and reduce the chance of human error. These systems can also help businesses stay on top of new regulations, ensuring compliance and reducing the risk of costly mistakes.
“In addition to technology, customer service-driven solutions will be essential. Businesses that provide ongoing support, guidance, and training for their HR and payroll teams will be able to adapt more quickly and manage the complexities of changing regulations with greater confidence.”