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Kate Wadia

Phase 3 Consulting

Managing Director

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Payroll: why it’s more than just ‘the click of a button’


If you’d like to press emotive buttons in the world of HR and Payroll this is a great way to start. At the heart of this comment are some of the “them and us” misconstructions of the two professions.

My personal suspicion is that this is aided and abetted by the HR professional's concern for (unnecessary!) self-justifications all round. The HR system vendor then adds fuel to fire by promoting how easy payroll software is to use – try searching as I did on “payroll…click of a button” to prove the point.

In this article I offer some reasons why I’m not pressing that magic button to replace the payroll professionals just yet – not least because I haven’t found it – and why the suggestion might just press theirs. In my next article I'll say why there might just be some truth in the assumptions surrounding HR and payroll.

Headscratching HMRC

Let’s start with HMRC. Tax rules are tricky. National Insurance (NI) rules have a nasty habit of being slightly different. Both change at least every tax year and budget day can interferes in the interim. With even the best of configurations, no system is capable of making all the right decisions. And tax is an area where typically there is a right answer.

HMRC are not about to go away either, and the cost of a poor HMRC audit can be high. Your greater cost may not be the unexpected bill to make things good, but the time factor – PAYE inspections are time-consuming and if errors are found, expect the next one to come round again sooner. RTI has shifted the balance of payroll burden away from year end and to an increased focus on monthly submissions, but this is a shift, not a reduction.

Moving swiftly on to retirement I find pensions impossible to understand. Auto Enrolment (AE) added another way to get pensions wrong on process alone. So if your software is AE-compliant, why not the click of the button?

Auto Enrolment added another way to get pensions wrong on process alone.

Firstly, someone has to know when to click which buttons, which reports to run, which check-boxes to tick in its configuration. Secondly, someone has to spot when the rules change and when new deadlines loom – and this is just the basics. The public sector, in particular, faces year-on-year attempts to make good any schemes in crisis, hitting employers with complex changes to master to tightly prescriptive return requirements. HR systems experts feel like ducking out.

So far the regulators and their big sticks. But there is also really tricky maths to do.

More than just the tech

It is fair to say that the optimum payroll solution will deliver automation in many a case. But this assumes again that someone has understood the right configuration, carried out the right testing and continues to edit. Who is that professional? The chances are payroll are involved.

A sum on part-month calculations, for example, can return alarmingly different results. I respect the brain that can handle term-time only working and the associated public holiday sums. Forgive payroll for taking pains (and pain!) to stress there really is detail here.

HR tech may offer the toolbox, but that’s half the story.

The payroll professional is guardian of process. HR tech may offer the toolbox, but that’s half the story. “Best practice” is a phrase that leaves me a bit cold, but I’ve worked with a range of organisational cultures and come to appreciate that there is for sure such a thing as “best practice for you”.

This means applying a know-how of compliance rules, software potential, organisational culture, resourcing and appetite for risk, to derive a process that not only achieves accuracy and efficient compliance, but feels right for those around you.

Getting pay right

These days the payroll professional has a new skillset to grasp, and that is the technology. I’m a firm advocate of that investment, but a healthy respect for its power is wise.

We need to spot, communicate and deal with cases where the software doesn’t appear to play ball. This might mean the payroll team dealing with down-time, reporting bugs, planning timely upgrades or carrying out test scripts; it’s a new language between payroll and IT.

And whilst the tech can be wayward, so can the people, with which HR folks will identify! Remember that the job is about paying people; those people have their input too, and people are not desperately good at performing consistently. They might well tell you when stuff late or wrong, or forget altogether about their pensions choices, dates of work, leave plans or FTE change. Over-payments aggravate and cost; under-payments hurt hard.

Payroll is a big ticket item – most likely the cost of wages are the organisation’s biggest cost, for sure approaching the 50% mark and quite probably at 70% of operating expenditure.  This alone has got to be one reason for an honouring of those whose chosen profession is to safeguard this outgoing – to mitigate its risk, to ensure its accuracy and to just plain make sure it happens.

A lesson from Novopay

The case of Novopay is a moralistic tale from 2012. Implemented for nearly 2,500 schools in New Zealand, Novopay within a few months was seriously failing to pay teachers accurately or in some cases at all in 90% of schools. In the “Novopay debacle” at least one Education ministry head rolled, and the government had to take back responsibility for the service from the provider. A Deloitte investigation commented that payroll error rate should be “consistently below 1%”.

I leave you to work out the difference between an error rate of 2% and 1%, or 1.5% and 0.5% on your organisational cost. And on impact, consider timing too. This is not a discipline where a lax attitude to deadlines is an option.

This is not a function to be left to the amateurs, nor relegated to the basement office.

The organisation’s payroll may be big, but the financial transaction and banking systems are bigger and there really are deadlines. Shifting BACS deadlines or faster payment options help, but you can’t cut steps out of a payroll process and you can’t ask the banks and the technologies to whir any faster.

In payroll, timing is everything and numbers are big. This is not a function to be left to the amateurs, nor relegated to the basement office. I’ve not found that magic button to press and I’ll be at pains to avoid pressing buttons real or emotional between HR, IT and Payroll.

But next time, some more comment to address why button-clicking gets a mention and why the mention deserves just a degree of defence.

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Kate Wadia

Managing Director

Read more from Kate Wadia

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