13 April 2016

Stuart Price, of MHR’s legislation team, contends that in light of the radical reporting changes under RTI it is now the right time to review the need for the ‘payroll report’

With the introduction of real time information (RTI), we saw the reporting of data to HM Revenue & Customs (HMRC) change from annually to periodically; but have the tools and processes we use to reconcile and report the data improved? And are they still fit for purpose?

A long time ago I started working in payroll, busily manually entering data into a green screen payroll system using the F2 key to save and F4 to exit. The payroll calculation generally took overnight and sometimes even over the weekend to run. When finally completed, then came the mammoth task of printing the abundance of reports (on continuous green bar listing paper for those who can remember this). Once printed I would begin, highlighter pen and calculator in hand, to balance all the totals back to various other summary reports to satisfy myself and my finance manager that the payroll had balanced and was good to go.

Once all was balanced and signed off I would lock the reports away in an ever-increasing filing cabinet, comforted in the knowledge that the reports would safely stay there until well after I had changed jobs, got married and had three children. And don’t get me started on end of year balancing!

Looking back, I wonder why I did the same process month on month – in honesty, it was a habit and it was just the way we always did it. Did it actually achieve anything? Probably very little.

Advances in technology have seen electronic reports replace paper reports, but there has been minimal change to the content and volume of the reports. Many still contain tax year to date values, but with the introduction of periodic reconciliation are these values still required? What purpose do they serve and if they could be replaced, what should they be replaced with?

The process of reconciliation usually includes the balancing of the same value against multiple reports. These reports often contain data for the entire payroll, but why is this needed when the single value being checked is simply the report total? For this reason alone, do we need a report and does the additional data not complicate and delay the process? In any case, all the reports are probably sourced from the same data so it would be surprising if they didn’t agree with one another.
But why should we not challenge this historic and antiquated way of working and embrace the technology that is available to us? In everyday life we take technology for granted, so should payroll be any different? For instance, when was the last time you went to an automated telling machine to print a paper statement? All we do these days, is withdraw our cash then look at our balance onscreen (or on a smartphone). Only if we believe there to be a problem do we investigate, usually online through internet banking. Should payroll not follow the same principle?

Could the reports we use be replaced with a single interactive online summary, displaying only the minimum information needed to perform a successful reconciliation? Could this summary take the form of a graphical dashboard, accessible to anyone with security clearance and allowing the interrogation of the summary data via drilldown functionality within the same dashboard? Could the dashboard include comparisons between periods and predict values based upon previous trends? Would it be unrealistic to ask the dashboard to self-reconcile and identify any discrepancies and present potential causes and solutions?

I can hear you already: we still need payroll reports so they can be hand-signed by finance and retained for audit purposes. Going back to everyday life again, we are all quite comfortable paying for groceries using contactless cards and watches; why should payroll be different? After all, if HMRC are now happy for expenses to be paid electronically and authorised in the same way, why should we be different? With this approach the audit trail and signature would still be present but electronically and not paper. Not only would this negate the need for printing and filing cabinets but it could be argued that electronically is actually safer.

In summary, are we now in a period where historical processes and habits should be questioned and technology become the driver for change? We are in a period where we could see the death of the payroll report.