Payroll World Blog

Outsourcing payroll

Neil Lagden, Head of Bond Payroll Services

The business of paying people used to be a relatively straightforward process. But over the past 20 years or so, an almost continuing raft of legislative changes and shifting business requirements have made calculating payroll anything but straightforward.

Simultaneously, demand for increased labour market flexibility has seen a growing dependency on job-sharing, part-time and temporary working and a corresponding change in working time patterns. The way that people are rewarded has become more creative with increased emphasis on flexible benefits.

All of this activity places additional pressure on the payroll function and the required technology. In-house payroll teams need to ensure that the service they are buying matches the requirements of the department, business and legislators, but that it is also sufficiently adaptable to react to any future changes as the industry and market develops.

Upgrading payroll systems is a major undertaking and cannot be underestimated. Before committing to what will likely be a complex implementation project therefore, it makes sense to consider the alternatives, which could even involve taking payroll out of house.

Are you in or out?

Set against the increasing tide of increased rules and regulation, outsourcing payroll can seem an extremely attractive proposition. Using a reputable and established provider means clients are guaranteed a reliable and accurate service and have access to advanced levels of payroll expertise ‘on tap’, reducing administration and shifting the burden of compliance.

A fully-blown outsourced arrangement removes the worry and costs associated with keeping up-to-date with new technologies, as outsourcers are able to invest in the latest sophisticated technological infrastructure. They will also be geared up and sufficiently agile to modify their processes to reflect market conditions.

There are several different types and levels of outsourcing – indeed, a fully blown solution might be right for one company, but for someone else a hybrid between an in-house system and outsourced solution will be best. Outsourcers must be chosen primarily on flexibility and a willingness to work through the options to tailor the service delivery to meet the client’s needs.

Establishing a fruitful working relationship requires an ability to foster and maintain a spirit of trust and not to be overly prescriptive when it comes to specifying requirements. In this way, the client can be certain of receiving the precise service required, and be left to concentrate on its core business. In the meantime, the outsourcing partner can take charge of all the changes that will inevitably occur as the workplace continues to evolve.

Salary sacrifice: businesses must be diligent when implementing schemes

Paul Tooth, general manager at Sage HR & Payroll

Salary sacrifice should be part of an organisation’s armoury but there are some key considerations that firms need to take into account

Nick Clegg’s announcement that measures will be taken in the New Year to improve transparency and curb excessive pay packages for executives has put remuneration firmly under the spotlight. At a time when cost of living has reached unprecedented heights and salary increases have stalled, employees are demanding more support from their employers. It comes as no surprise then that salary sacrifice has shot up the corporate agenda, but if they are to reap the full benefits then businesses must do their due diligence before implementing such schemes.

Back to basics: How earning less can give more

Schemes that give employees the opportunity to forego some of their salary in return for other – often more appealing – non cash benefits, significantly reduces the tax liability for organisations and their employees. By paying for these benefits out of their gross salary, an employee can reduce their liability to income tax and national insurance. In turn, the employer also benefits through lessening its National Insurance responsibility; the savings from which can either be reinvested in other schemes or absorbed back into the company’s P&L.

Tax relief?

Salary sacrifice initiatives provide a route to ‘bump up’ savings that offer substantial benefits in periods of economic instability for employees. Indeed, by entering into a salary sacrifice arrangement that could keep earnings under £100,000, high earning employees will not only significantly reduce their personal tax liability, but can also protect some of their £6,475 personal allowances if they hit ‘the sweet spot’ – earning between £100,000 and £112,950.

Yet while sacrificing salary can unquestionably form part of an effective tax planning strategy, the benefits of salary sacrifice do not extend to everyone, nor will they apply to those earning over £150,000 per annum. This clearly reiterates the need for employers to be vigilant in ensuring any salary sacrifice arrangement is fully compliant with HMRC guidelines and beneficial for both the organisation and its people.

Beyond financial gain

The tax savings offered through salary sacrifice are indisputable, yet the benefits are more than just financial. These schemes are also an effective way of boosting morale among your workforce as they show the business cares about its employees’ remuneration.

Employers need to invest time to educate their people on the benefits and drawbacks associated with salary sacrifice. Not only can this help to drive employee uptake by helping to show how the business has invested in its people, but also gives employees the flexibility to select those tax breaks that will benefit them long-term.

Businesses should also look to invest in payroll software that takes care of PAYE regulation and can accurately track what has been paid against what has been saved. This means firms can track a running total of the tax savings made, and also benefit from administration and calculation efficiencies that will reduce the burden on payroll.

RTI consultation – The result is a rubber stamp

Matt Boyle, campaigner at Research for PAYE

Well HMRC has now published its summary of responses to Improving the operation of Pay As You Earn (PAYE): Collecting Real Time Information.

The introduction of Real Time Information (RTI) is a major change to the business processes surrounding payroll as operated by some 1.1 million employers and it is interesting to note that this document runs to 15 pages, four of which detail the names of those that contributed to the consultation and two of which consist of the title and the Index.

The findings are unsurprising to many in that they would appear to support the original proposals of HMRC, but one has to question if such a small survey really does reflect the views of those involved in the operation of payroll.

One surprising comment in the document is that “The majority of employers told us that they are unable to record the number of hours worked during a pay period with any degree of accuracy.” Unfortunately we are not told who these “majority” are or given any statistics to support this view. This would seem to imply that the vast majority of employees are not paid on an hourly rate and that payroll is not effective in computing gross pay based on a knowledge of hours worked. This information is based on 187 formal responses some of which came from organisations not actually involved in payroll processing on a day-to-day basis.

Many issues

This “finding” appears to means that employers will now have to make a report of “Hours worked will be reported in bands of normal weekly hours worked broadly reflecting the current Tax Credit legislation. These bands will be: up to 15.99 hours, 16-29.99 hours, 30 hours or more, or ‘other’, which will be used when these categories do not apply, e.g. for pension payments.” This means additional information that employers will have to factor into their business processes for RTI operation.

We are told that “Analysis shows over 90% of employees are paid through a Bacs channel” but again we do not know if this is 90% of 10 or 90% of the 30+ million employees in the UK.

There are many other issues that need to be properly reviewed, which will be discussed at a later date, but it would seem that we are stuck with this simple “rubber stamp”.

Is it acceptable that such a major change to the operation of payroll for so many employers and payroll teams is apparently given such a poor analysis on the effects of the proposed implementation?

Riots in the UK: Business travellers caught in the middle

Readers in the UK will be very aware of the riots that took place across London and other major cities recently. The violence and speed with which it escalated, spreading across the capital and other parts of the country, was alarming.

For those working in London, whether commuting into the city on a regular basis or making ad hoc visits, the riots caused special challenges. During the week of rioting, public transport routes were disrupted and roads were closed, making travel around and out of the city more difficult and even dangerous. Buildings were damaged, looted and in some cases, set on fire, so many shopkeepers as well as owners of bars and restaurants boarded up their properties to avoid a similar fate.

Duty of care
Employers have a duty of care to ensure they are not placing their staff in harm’s way when these kinds of incidents happen, but what is the best way to help business travellers in all this chaos? With rioting beginning in daylight hours, during the afternoons, workers were sent home early and advised to avoid trouble hotspots. And in those situations it is crucial that worried employees can change their travel arrangements quickly and easily. Mobile apps allow users to do this on the go.

The last thing you want to be doing as a business traveller is getting stuck in a trouble hotspot where public transport is shut, roads are closed down and rioters are claiming the streets. In this uncertainty, it is usually best to err on the side of caution and cancel any non-essential meetings or work engagements to opt for calls or video conferences instead.

Mobile apps
Mobile travel management apps allow companies to keep tabs on where their employees are -something that is particularly useful in times of crisis. Through this kind of app, users can share their travel itineraries with friends and family, meaning those closest to them will have visibility into their plans, as they adapt to changing circumstances.

While we are relieved the violence has subsided quickly and hope that those communities affected by the riots continue to recover, it is necessary to be as prepared as possible in case tensions ever flare up again and business travellers are caught in the middle.

David Vine is senior director, compliance at Concur Technologies

Concur UK

Payslips – how do you want yours?

Over the last year or so we have seen a significant increase in the use of electronic payslips and according to a survey from the Chartered Institute of Payroll Professionals (CIPP), electronic payslips were the most popular method of payslip presentation in 2010. However, it seems that for some people nothing beats the printed word and they still wish to receive the traditional paper payslip.

So what does this tell us? Well to me this shows that the delivery of payslips simply echoes the thirst for multi-channel communications and, above all, choice. Today we live in a society where we expect to be able to choose how we receive our bank statements, phone bills, promotional communications, receipts, so why should payslips be any different?

Of course from an employer’s point of view there are many advantages to delivering ePayslips. For a start the hike in Royal Mail charges earlier this year could be enough for many organisations to switch to electronic payslips. Not only can ePayslips have a significant financial impact but without the requirements to print, seal, batch and distribute they will also increase staff efficiency. As employees are able to review and print previous payslips they can also significantly reduce the amount of queries that payroll departments have to deal with so they are free to do the important stuff.

So as a forward thinking payroll department are you offering your employees the choice they expect? Payroll software today can offer you this flexibility so your employees can view their payslips online and print them off whenever they wish, view them on mobile devices or have them mailed as the traditional paper based payslip.

Adele Bennett is marketing programmes manager at Sage
Sage payroll software

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