Technological Disruption: Digitising Tax, Legal and Payroll
Payroll, tax and the legal sectors have been traditionally resistant to automation and digitisation. With COVID-19 and the sudden shift to decentralisation, digitisation and remote work, are these industries finally ripe for technological disruption?
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Digital transformation is a process that involves the adoption of digital technology to replace manual processes while helping to increase exponentially the efficiency of a business or its services.
Although inevitably all organisations will shift toward the digital world eventually, digitisation has affected some industries more than others. For instance, the so-called “pure” or “native” sectors are those that have been born digital while other industries, such as music, entertainment and media have been recently revolutionised by new technologies, having now completed their digital transition.
Looking back at the end of 2019 and the predictions for 2020 in terms of digital growth, we expected the year to look a lot like previous ones: digitisation would be slow, sustained and on a stable upgoing trajectory.
But then the pandemic came, and it subverted all our assumptions: not only did COVID-19 alter the modus operandi of several organisations; it also led many of them to fail.
Governments’ measures, ranging from lockdowns, social distancing, border closure and quarantines, have obliged companies to rethink their business models at brief notice and in two main directions:
Externally: how businesses interact with customers, clients, supplies and stakeholders
Internally: the way companies manage employees and internal processes
Source: McKinsey & Company
Both internally and externally, companies around the world had to speed up their digitisation, shifting both commercial activities and internal processes - such as how and where we perform our work - from offline to online.
The Shift to Remote Work: the Winning Model of Distributed Companies
Technologies enabling remote work have existed for a long time, with several companies adopting this framework successfully way before the pandemic: GitLab, Protocol Labs, Automattic… these are only a few of the names that have adopted a fully remote structure since the very first day of their existence. However, more traditional firms have been reluctant to adopt such a model, with concerns ranging from loss of productivity and control to not trusting workers to exercise their autonomy responsibly. Yet whatever the level of managerial reluctance, the pandemic has forced the majority of organisations around the world to embrace emergent technologies to shift to remote working and learning. In responding to travel restrictions and quarantine measures around the globe, remote working has become acceptable to multinationals that previously had been wedded to industrial-scale business travel.
Since the onset of the pandemic, the term “distributed company” has become more and more mainstream: also known as “remote-first”, this new model promises greater access to talent, increased productivity for individuals and small teams, lower costs, more individual flexibility, and improved employee experience.
The Future of Work & The Next Big Thing in Tech: Digitising Payroll, Tax and Legal
Managing a distributed company can lead to a happier, more productive and fulfilling work environment. But from the employer's perspective, it can be a daunting task. Dealing with bureaucracy, HR management, payroll, and taxes across multiple countries is a challenge, even for experienced managers or entrepreneurs. Technological disruption has been subpar in these fields for years, but that’s about to change.
PAYROLL
Practically every aspect of business has somehow made use of technology and innovations to boost efficiency, decrease error rates, and provide useful, actionable data to stakeholders. These solutions haven’t just improved processes—they’ve redefined the roles, responsibilities, and expectations of different business functions.
Then there’s payroll.
The way companies pay employees has remained very much the same for decades. A lack of automation often leads to time-consuming errors and delays. Some companies have automated existing processes, optimized the back-end side of things, or outsourced manual tasks. But payroll is yet to be disrupted.
Meanwhile, work changed dramatically. The gig economy and work platforms enable anyone from carpenters to coders to offer their services for a fee. Startups have gone global right from the start and skipped the “brick and mortar” headquarters. And the median tenure at a job for millennials hit an all-time low of just 3 years. But payroll could be on the cusp of fundamental disruption. Take EoR or Employer of Record services, for instance. EoR allows companies to hire and pay people in compliance with local legislation, through a local intermediary. This means taxes and social security are taken care of for the customer company.
Another route for payroll disruption is through automation. The pandemic nudged businesses towards payroll automation, to pay employees on time, manage leaves, and provide insurance while enabling employees to access all their information in a few clicks.
At last, crypto wallets and blockchain are yet another source of technology disruption for payroll. Several companies are paying workers in bitcoin and other cryptocurrencies. Take UnitedMasters, a US music distributor, that recently partnered with Coinbase to give independent music creators the option to get paid, in full or in part, in cryptocurrency for their streaming royalties.
Solution: Payroll is one of the most important HR processes of every business and it’s about to change. At BRIDGE IN, we are currently working on an app with a dedicated payroll module. This app allows you to run payroll and check the salaries’ payment history, manage employees’ benefits and expenses anywhere in the world. See it in action.
TAX
Taxes are remote work’s no-man's-land.
Tax presence or nexus, as it’s known in accounting circles, is at the heart of determining how states levy companies. Telecommuting employees could subject the company to state payroll tax registration requirements and corporate income tax obligations.
Another common tax question is whether a company has employees, contractors, or consultants. Some countries view contractors as employees, which may inadvertently create a tax presence for the company in those foreign jurisdictions.
Adding to the complexity, some states have pacts with other jurisdictions in the area to minimize duplicative taxes and non-resident returns for cross-border workers.
Although initially many countries offered temporary tax relief to employers during the pandemic, the rules aren’t consistent across all countries, and it’s unclear how long the relief will remain in effect.
Solution: adopt a tool that integrates data from every country. With the BRIDGE IN app, companies will be able to create and manage subsidiaries around the world and generate an aggregated view of financial forecasts and cash flow needs. See how it works.
LEGAL
The law as a profession has been slower than other industries to embrace technological change.
Take cloud computing, the use of remote storage, software and infrastructure to build better, faster and cheaper information management systems. As long ago as 2014 the UK Law Society pointed out that cloud computing offered extensive advantages for lawyers.
However, only 38% of lawyers use cloud computing for law-related tasks versus 51% of all businesses in the EU. All the while, a recent report from the Centre for Policy Studies shows that hourly rates at leading law firms in the UK have risen by a factor of almost ten over the last two decades.
Solution: The potential for technology to up-end the established legal order is clear. Technology reduces cost, and human-centred legal costs have spiralled upwards in recent years. The new solution provided by BRIDGE IN can simplify and automate key legal tasks, such as the creation of a subsidiary in another country. Sign up for an early version of the app.
As the future-of-work shifts, organizations are learning the perks of having a distributed company: from access to a wider pool of talent, to an increase in diversity, productivity and employee satisfaction. Businesses around the world are transitioning to a new organizational model. Still, managing taxes, legal issues and payroll remains a challenge. Our product will allow you to automate 80% of your business management related tasks, from employing a global workforce to running a subsidiary through a self-service app and RPA. It reduces risks, increases predictability, efficiency and compliance by standardizing a series of manual processes.
Start building a new Legal/Tax/HR-tech operating system to fully manage your distributed company from anywhere, anytime. Sign up for our waiting list to get the first release of our product.
