Top tips for managing school payrolls
The opportunity for accountants and payroll bureaux to work with schools has never been greater.
Schools and academies have been able to buy their services from commercial suppliers for some time, however the Payroll service is often one of the last to be changed. School business managers increasingly look to the market for the best value service at the best price. They may still be with the Local Authority or changed to one of the larger national suppliers and just don’t get the flexible personal service they hoped for.
1. Establish a service level agreement
Providing a range of services will help a school or academy to transition to your bureau. A school newly converting to academy status will appreciate additional help with registering with HMRC, template letters for employees to understand the change in PAYE ref, obtaining a Bacs service user number from the bank and help completing the TPS start and leaver notices for teaching staff. An existing academy will need to be assured that you and your payroll team have an understanding of education payrolls. You will both need to know the responsibilities for events in the education payroll calendar like pay awards, incremental progression and mandatory reporting. Establishing an SLA early on will ensure expectations are met.
2. Adapt your on-boarding process
Data migration is always the single most critical point in any project. Data coming from a local council might not be in the format you’d normally work with, maybe even printed reports so you’ll be stuck with keying data. Have a conversation about this as early as possible so the school will be aware how to prepare. There will be different data too, especially the pay and pensions, so make sure your payroll software has the capability to manage this or whether the school will be managing this themselves and simply reporting the salaries to you.
3. Check how they pay salaries
The two main groups of staff, teachers and support staff, have clearly defined rules around how the pay is calculated and their membership to pension schemes. In time academies may depart from national scales but for now most still use them. The structure of the pay scales consist of a Pay Spine of salary values, with grades of max and min points on the Spine. Some schools have developed these Pay Spines to a salary banding, awarding the pay based on skills and experience, as well as the traditional length of service evaluation.
An employee could have more than one contract of employment with the school, each with separate pay rates, overtime rates and pension membership. So you can see not only the contractual pay but any additional pay needs to belong to the correct contract to ensure the right rates and pension are used.
Each year there are generally two changes to the pay structure. There’s a pay award; the cost of living increase. These pay awards are nearly always agreed after the effective date and so back pay calculations are needed. The other is an incremental increase up the employee’s pay grade until they reach the maximum point. Teachers’ increments changed from being awarded automatically to being appraisal based in Sept 14, so these often require back pay adjustments too.
Look out for occupational sick and maternity pay schemes and determine whether the school will be monitoring this or if it becomes a part of your service level.
4. Understand the pension schemes
You’ll be managing both the Teachers’ Pension Scheme (TPS) and Local Government Pension Scheme (LGPS). Contribution percentages are determined by salary bandings for each contract and could change every pay day. The reports and returns for these can be complex, especially LGPS as each Local Authority will ask for something a little bit different. The Teachers’ scheme does have a national standard for reporting and if you can encourage early adoption of Monthly Data Collection (MDC) for TPS and you will save yourself and the school a huge amount of administration. It replaces forms TR6/TR8 (joiners/leavers) and the Annual Service Return.
Auto Enrolment doesn’t have as much impact because there is already contractual joining for both schemes. The employees will still need to be sent worker notices though and re-enrolment means those opt-out dates need to be maintained too.
5. Create an effective education payroll team
Once you have understood your school client’s needs, won their hearts and their business, you’ll want to ensure you nurture that relationship. That means more than ever that your payroll team should be aware of industry specific news and developments to pay and pensions. If you can recruit staff with a public sector background, they will of course bring their experience and knowledge with them. Allow your staff time to upskill if it’s new to them and the schools will see you as a partner and advisor rather than simply a payroll supplier.
6. Grow your school payroll service
Thankfully most schools have extricated themselves from the tedious and time-consuming tender exercises for procurement, so becoming a new supplier usually involves a straightforward competitive bid.
Finding schools to work with may be as simple as discussing the service with the partners or marketing team in your firm. Many accountants provide audit and other services to schools while not necessarily promoting payroll. A little internal marketing can go a long way, especially if you are already a trusted provider to the sector.
School Business Managers really do talk to each other too, so your reputation will spread quickly when you have your first school on the books.