This month's cover story

Professional progress

Roll up for Payroll World's great moments in payroll history. Scott Beagrie finds that Lyons Corner House was the first to pay staff using a computer.

1944 Pay As You Earn introduced
The severe drain on the country’s coffers as a result of Second World War effort meant the Treasury had to collect tax from a significantly larger number of people. As a result, the Pay As You Earn (PAYE) scheme was introduced by the Inland Revenue in 1944, following a pilot in 1941-42. Replacing the previous method of annual or six-monthly collections, it placed for the first time the onus on employers to deduct the money from workers’ wages. A short time later, 15 million people had received their new tax code.

1953 First payroll business application
It’s an unlikely setting for the start of a payroll revolution but teashop chain J Lyons & Co holds such a distinction. Nearly 60 years ago, the first computerised business application in the world went live to produce the payslips for 1,670 bakery workers. The 16ft Lyons Electronic Office or LEO computer, housed in an admin block at the company’s HQ, cut the average time taken to calculate an employee’s pay from eight minutes by an experienced clerk to just 1.5 seconds.

1963 First payroll bureau service
When enterprising computer programmer, Ian Evans-Gordon at Perkins Engines, Peterborough had the brainwave of using additional capacity on his company’s mainframe to perform payroll calculations for other companies, he was probably unaware of the ramifications. In establishing one of the earliest payroll bureau services, Peterborough Data Processing, he helped kick-start the whole outsourcing movement.

1963 Repeal of Truck Act
Pay cheque or little brown envelope stuffed full of cash? The repeal of the Truck Act which forbade employees to be paid in anything but the ‘coin of the realm’, gave way to non-cash payment for British workers. Employers, who were concerned about the additional workload for payroll departments and the great British workforce didn’t initially warm to the idea.

1970 Equal Pay Act passed
The Equal Pay Act, outlawing pay inequality between men and women, marked a turning point in UK employment relations. As well as being the oldest anti-discrimination law, it paved the way for a raft of further family and equality legislation over the ensuing decades including the National Minimum Wage, parental leave and the right to request flexible working.These regulations have an enormous impact on the working lives of payroll professionals and the calculations they perform.

The regulations were also good news for software developers as the changes allowed them to sell more products. Although the Act was passed in 1970, as a mark of its potential impact employers were given five years to comply.

Early 1980s Rapid march of globalisation
Globalisation is the biggest issue in the world for multi-nationalcompanies. Alongside it, we’ve seen the emergence of multi-country payroll and the technological, cultural and organisational challenges within these firms.

The key to going global for payroll lies in sharing experience and this is being aided by the Multi-Country Payroll Forum, launched in 2005 to do just that.

1980 The Association of Pensions and Superannuation Administrators (APSA) created
The UK’s first every payroll association. Congratulations to founder Greg Merrylees who also printed the first ever payroll newsletter,APSA News.

1985 British Payroll Managers Association set up
It was to be the forerunner of the Institute of Payroll and Pensions Management and today’s IPP. It was also to herald the publication of an early payroll work, David Lewis’s Payroll Management: An Essential Guide for Every Business, in 1991.

1987 PeopleSoft founded
PeopleSoft’s launch marked the beginning of the end for mainframe-based payroll and HR systems and moved software into a new, far more userfriendly era. Company founders Dave Duffield and Ken Morris developed the sector’s first clientserver application and in doing so put both power and flexibility directly into users hands. The seismic shift in the business software market can be likened to what we’re seeing today with client-server being replaced in many organisations by web-based services.

1990 The Payroller magazine published
November saw publication of the first issue of The Payroller, the industry’s first commercial trade magazine. Launched by Chris Fitzgerald, it ran to 20 pages and editorial included comment from Peter Blackhurst, then chairman of the British Payroll Managers Association, and an article on the impact of nonimpact printers on payroll. The magazine’s first columnist was Norman Green at software firm CMG, who became known as the Payroll Guru. Rebranded as PaY in 1993, it subsequently became Pay Magazine following its acquisition by Gee Publishing.

1995 Inaugural payroll awards
Every sector has its heroes and the nature of payroll means that it has more of the unsung variety than most. In 1995 though, payroll took a bow for the first time via the Gee Pay Awards ceremony which took place at the five-star Radisson Hotel, Heathrow. The awards presented were of metal in the shape of a continuous stream of paper slips, complete with mandatory holes for use with a dot matrix printer (a great idea but a nightmare to produce, says Chris Fitzgerald then editor of Pay).

Now branded The Pay Awards and in their 15th year, they have evolved as a key date on the payroll calendar and the awards night culminates in the prestigious Strathearn Award for Lifetime Achievement.

1996 Explosive growth of the Internet
Without the Internet there would be no e-filing, no e-payslips, no e-HR nor any of the other ‘e’ phenomena that have become part-and-parcel of working in payroll this decade. It’s also responsible for bringing a shift in the way companies buy and access software with hosted and Software-as-a-Service solutions bringing greater flexibility and freedom than traditional clientserver models. Clearly, the internet is not done with payroll by any stretch of the imagination.

With six in 10 UK homes using broadband, and 24-7 employee portals a reality, it is likely to change the way the function interfaces with its ‘customers’ forever.

Mid-1990s Emergence of Software-as-a-Service
SaaS is possibly the buzz acronym of the moment and rightly so since Software-as-a-Service, for which it stands, is liberating companies from the costly upfront fees – and attendant hassle – associated with traditional business software distribution.

The application is hosted by a provider and the client typically accesses it across the internet from a standard browser, paying for the service via a subscription. The security required by payroll means that some believe client-server software will still be around for years to come but there is little doubt of business’s growing appetite for SaaS.

1998 Formation of the Institute of Payroll and Pensions Management
Against the backdrop of increasing regulation, the merger of the Institute of British Payroll Management (IBPM) with the Association of Pensions and Superannuation Administrators (APSA) created a larger professional body with a more authoritative voice. Under the leadership of Trevor Lakin, the policy and research department was also instituted which has been campaigning on the profession’s behalf ever since.

1999 BP trailblazes large scale outsourcing
At the time, oil giant BP Amoco’s mega-deal, which would see outsourcing start-up Exult take on its HR administrative functions, was by far the largest of its kind.Worth £360m over five years, it not only completely overshadowed the previous year’s £2m landmark arrangement between Westminster Council and Capita but was deemed significant as it paved the way for rapid expansion of what was to be termed the end-to-end HR outsourcing market.

Late 1990s Employee self-service
It is difficult to pinpoint the exact origins of employee self-service but Cisco System’s implementation of self-service tool METRO, which allowed employees to submit their business expenses via the intranet by 1999 is perhaps one of the first – hardly surprising since this is the company which provides the technological foundations of the internet. Reportedly, the use of METRO delivered a 96 per cent reduction in costs annually. Since then, the use of employee selfservice for everything from changing employees’ personal details to selecting flexible benefit offerings to accessing an electronic payslip has helped drastically to reduce payroll’s administrative load and free it up to focus on strategic delivery.

Early 2000s payroll leaders take up executive positions
With executive titles and five-figure salaries a measure of success and standing, it is a mark of the payroll profession’s upward mobility that a wave of people from the function have moved into executive positions over the last 10 years.

Margaret Evans, head of payroll at UBS, Richard Bishop-Laggett, HR services and development director of ISS UK, and David Nichol at Deutsche Bank, are just a few names from payroll who are bringing their influence to bear in the boardroom and demonstrating how payroll can be an effective business partner.

2001 Lord Carter’s Review of Payroll Services
In June, the then Patrick Carter was tasked with reviewing payroll services. The resultant report and recommendations published in November were to trigger a sea change in how employers and payroll departments would conduct their business with HM Revenue & Customs.With a view to reducing administration, Mr Carter announced the introduction of compulsory electronic filing of employer’s end-of-year returns, in three phases. His second report in 2006 (Carter 2) broadened the regime to include in-year forms, among others.

2003 O’Donnell Review calls for merger of Inland Revenue and Customs & Excise
Treasury Permanent Secretary Gus O’Donnell’s investigation into revenue administration concluded that the most effective way to collect taxes would be to merge the departments. The new agency, HM Revenue & Customs, was announced during the March 2004 Budget. From that moment on, the payroll community faced a period of massive uncertainty — the true implications of which would only transpire when one of the largest ever UK mergers had taken place.

Mr O’Donnell’s review acknowledged the potential risks to ‘business as usual’ but asserted these could be minimized by ‘strong management’.

2004 The Alabaster ‘recalculation’
If pregnancy and maternity rights weren’t already time-consuming and complex enough for payroll to administer, a ruling by the European Court of Justice on 30 March 2004 was to make matters a whole lot worse. Its landmark finding in favour of Michelle Alabaster, who claimed her employer had underpaid her during maternity leave, led to widespread confusion about how to interpret the court’s decision. As software was also not programmed to deal with the change, payroll departments across the country had to roll up their collective sleeves to perform the difficult calculation, manually.

2005 First Sarbanes-Oxley audit performed
In the first decade of the 21st century, one of the biggest headaches for payroll managers proved to be the dramatic rise in compliance-related legislation. The thorniest of these is arguably the 2004 Sarbanes-Oxley Act which demands that US public companies and their subsidiaries are held to the most exacting standards of auditing and accounting practices. Such is the forensic detail involved, that the first UK payroll manager to perform a ‘SOX’ audit in 2005 likened it to an ‘anatomical autopsy’.

Mid-2000s Take-up of benchmarking
For all payroll departments continuous improvement should be a key driver. Since the mid-2000s there has been growing acceptance that to do this effectively payroll’s operational performance needs to be meaningfully measured and then compared with external benchmarks to identify best practice. If the holy grail of payroll is paying people 100 per cent accurately, one 100 per cent of the time and with ‘excellent’ satisfaction ratings from employees, this must take us a step closer.

Implementation of the world’s Largest payroll system completed
Eight years after the project began, the NHS Electronic Staff Record (ESR), the world’s largest integrated HR and payroll system, was completed. ESR, part of the NHS’s pay modernisation, was intended to set a new benchmark in terms of technology performance.All 1.3 million national health employees, around 7% of the working population of England and Wales, are being paid via the system.

The £300m ESR, which replaced multiple legacy payroll and HR systems, was provided by a group led by IT healthcare specialist McKesson.


Payroll World - July 2009