With many Payroll Managers still reeling from the impact of Real Time Information (RTI) and Shared Parental leave (SPL), not to mention Auto-Enrolment (AE), most would agree that the changes introduced over the last five years of parliament have added huge complexity to the payroll function. How many, however, are prepared for what is going to come next?
If the polls are to be believed, the UK is likely to face five more years of uncertain and inconsistent policies, as minor parties use new found power to influence legislation. From headline grabbing policies such as the end of zero contracts and extended paternity leave, to the less publicised plans to increase National Insurance contributions and raise the Minimum Wage, the potential impact on both payroll and the overall cost of employment look set to be significant. Can businesses and Payroll Managers prepare?
Neil Lagden, Head of Bond Payroll Services, insists that however the general election pans out, organisations need to be ready for change.
Unprecedented Change
The last five years have seen unprecedented levels of change that have drastically affected every aspect of the payroll function. On the legislative side we have had the introduction of Shared Parental Leave (SPL), Real Time Information (RTI) and, of course, pensions Auto-Enrolment (AE). At the same time, HMRC has introduced new systems and new ways of working which have caused more than a few headaches, as well as tightening some of the tax loopholes.
In fact payroll related issues have been real headline items in recent times – from the political furore about zero hours contracts to concerns regarding the new pensions freedom. But given the uncertainty surrounding the outcome of the next election, the very real likelihood of another coalition and growing influence of minority parties, it might be fair to say ‘you ain’t seen nothing yet!’.
The payroll impacting ideas that have been bandied around over the past few weeks include extending paternity leave, ending zero hours contracts, and paying employees three ‘charity work’ days each year. Other, non-political organisations are promoting ideas such as merging National Insurance (NI) and Pay as You Earn (PAYE) contributions, and creating the ‘Living wage’.
These are just the headline grabbers. Behind the scenes are some far more serious changes that none of the political parties are prepared to actually debate but may well come into being over the next five years. From increases to NI contributions to upping the employer contribution to Auto-Enrolment pensions, the potential additional cost of employment facing organisations over the next term of government is significant.
And that is without considering the ‘Europe question’. The Conservative party is promising a referendum on EU membership – what would be the impact on employment regulation and payroll if the UK left the EU? How would that affect the growing numbers of organisations running international payrolls? The potential upheaval for any payroll function could be overwhelming.
Changing Role
From a payroll perspective it is clear that over the past government term the focus has shifted. Today the demand is not just to meet the routine challenge of successfully making the weekly and monthly payment run but also to be in a position to deliver board level insight into the potential financial implications of near continuous legislative change.
Organisations simply cannot afford to be unprepared for these significant changes. Just consider – what happens if NI increases by 2%, PAYE increases by 3%, employer AE contributions rise 1% and the incoming government decides that the Minimum Wage must go up or, even more significantly, be replaced by the Living Wage? Taken one at a time, with clear planning and good management, the change and associated business cost can be managed. For those organisations lacking preparation or insight, what would be the impact of having to implement all of these changes one after the other? That one off, huge spike in the cost of employment could be devastating.
But where does the Payroll Manager turn for information on change? As the Chartered Institute of Payroll Professionals (CIPP) continues to insist, the level of information available on both the HMRC and gov.uk websites is simply not good enough to support payroll managers in either day to day or strategic planning. Yet without confidence in the implication of legislative change, how can any business prepare?
Furthermore, many companies are experiencing not only growth that is adding employees but also a spike in employee turnover as individuals feel confident enough in the economic situation to look for change. These essential day to day processes therefore, including managing leavers and joiners, are potentially overwhelming for an in house team. Who then has the time to discover the impact of legislative change; to understand what adjustments have to be made to payroll; and to provide management with an accurate financial and strategic overview of the implications?
Conclusion
It has never been more important to have access to trusted reliable information. Organisations need to have confidence that every change, from legislation to technology, is clearly communicated and supported in a timely manner. While growing numbers of companies have recognised the importance of outsourcing payroll in this increasingly complex environment, how many are gaining access to the depth of resources required to support the business long term. A good payroll partner will brief the business in advance of change and include seminars and events to provide a forum for discussion and understanding.
Is the provider planning ahead for AE changes 12, even 24 months hence? Does the Payroll Manager have direct access to HMRC and CIPP experts, directly on the phone or by email Is the payroll partner helping to deliver relevant business reporting – or simply delivering payslips?
Change is a certainty; and those organisations that are not up to speed now will not be in a position to effectively plan ahead when the next parliament introduces new changes and legislation. Without doubt they may struggle to react quickly and effectively. As the country goes to the polls, how many Payroll Managers can truly claim to be fully prepared, or have a trusted payroll services partner in place to guide the business through the next era of change and complexity?
