What Revolution in Payroll?
The Quiet Revolution, part 2
The changes taking place in payroll today are nothing short of revolutionary and the impact upon payroll bureaux is huge. It’s my opinion that this is fuelling totally New Dynamics within the payroll arena generally and the bureau marketplace in particular. The primary purpose of my articles is to shed some light on these developments and offer my personal views on where payroll is heading, basing these largely upon my experiences managing around 100 clients who, between them, handle around 25,000 payrolls. Much of what I have to say might not be news to a skilled payroll person but, importantly, I wish to help the Partner/Director/Manager responsible for managing payroll within the firm of accountants or business to better understand the scale and nature of these changes.
“So what’s all the fuss about?” I hear you ask. “We coped with RTI and we’re getting used to AE, so what more do I need to know?”
The simple answer to that question is that Real Time Information (RTI) and Auto Enrolment (AE) are only the proverbial ‘straws’ for the camel. The last 25 years or so have seen a sustained increase, year-on-year, in new payroll legislation and placing the extra burden of AE on top of all that has proved to be the catalyst for unprecedented change. For a useful analogy of the evolution of payroll consider this image:
Just like payroll in the 1980’s, we are looking at a pretty complex machine, but one with relatively few parts and one which even the untrained might attempt to work on. You don’t need to be a motor mechanic to recognise a battery, four spark plugs, a radiator, an oil filler cap and possibly even the air intake for the carburettor. And, accordingly, you might attempt to carry out some basic work without taking the machine to a garage.
Equally, in those days, someone reasonably conversant with accounting fundamentals or just with a bit of nous and a head for numbers, could open a piece of payroll software, enter a few employees, set up their pay details and run the thing with some degree of success. (I am not saying they would get it right, but if they got a payslip per employee at the end of the process they’d be happy. In the same way you’d be happy if the old car started again after you’d tinkered around under the bonnet.) Well things have been changing, bit-by-bit and year-by-year and the payroll professional has quietly (OK, fairly quietly!) got on with it. Until now!
Perhaps we can trace back the evolution of payroll into the complex thing it is today to the introduction of SSP in 1983 and SMP in 1987, it was possible to operate payroll back then using paper, pen and a simple list of the ‘rules’. Today, one look at the CIPP ‘Payroll factsheet’ gives an idea of the huge weight of detailed regulations and complexities which the payroll person is responsible for managing (I recommend that you download your own copy and have a look – https://www.cipp.org.uk/asset/0774BA2F-43EF-4B72-BC7D26A6C6F531CB/)
I mean, just look at it!! LEL’s, UEL’s, UAP’s, UST’s each applied at 12% or 13.8% or 0% or 2% or 10.6% or whatever percentage, and that’s just the National Insurance aspect (and only part of it). There is also the Taxation side to deal with: various rates (forever changing) applied with differing thresholds and, while we are at it, let’s throw Statutory Adoption Pay, Additional Statutory Paternity Pay (Birth) and (Adoption), Shared Parental Leave and National Minimum and Living Wage into the mix and it’s a truly mind-boggling array of detailed rules and regulations. I could add many more things to that list, but you get my point.
Now don’t you dare suggest that the software ‘does it all for you’ because it simply doesn’t. It can’t. It needs a person to run it. A person who knows what they are doing.
So, by 2011, the payroll professional was that person. He or she was just about managing to cope with all this stuff and then, in their wisdom (?), our great political leaders went and added RTI and Pension Reform on top (I didn’t want to say “auto enrolment” for fear of sending any distraught payroll professional with frayed nerves over the edge!).
What we end up with today, to continue with my car engine analogy, is an extremely complex, highly technical and extremely sensitive machine like this:
Now I think I recognise a windscreen washer cap there (it’s in the top right corner I think, not the one middle right with the pink liquid, however I could be wrong) but other than that I would not dare touch a single thing for fear of inflicting expensive damage to it and to my wallet. And it’s exactly the same with payroll, I wouldn’t touch it at all, I would send it to a specialist who knows what they are doing, someone fully trained in dealing with this incredibly technical piece of wizardry.
To summarise, in 2016 we have a profession and a service under a massive strain and, if you read my previous article (if you didn’t, you should!) you’ll appreciate that we cannot continue valuing it as the poor relation of other accounting services, as a service to be delivered by the least well paid employees to the unappreciative customer (be they a business or an employee). We need to deploy ‘New Dynamics’ to cope with the changes already in place and with the continued growth of payroll legislation (Apprentice Levy next year, for example). So in future articles I will look at how my clients are responding to these changes and report on key success factors (and failures!) in the hope that you might benefit from their experiences.