10 December 2021

Mathew Akrigg ACIPP, policy and research officer at the CIPP discusses the impacts that flexible working requests can have on the work of payrollers

The pandemic (yes, two words in and it’s already been mentioned – forgive me) has changed many things but has had particular impacts on conversations around flexible working. With many companies forced to adopt working from home in some capacity, it has opened the eyes of many to the possibilities available to them. There is no denying the positive impact that offering flexibility can have, and if implemented correctly, it can lead to a win-win situation for employees and employers alike.

While it may seem like flexible working sits firmly within the remit of human resources (HR), it is important to note the ‘domino effect’ it can have on payroll teams and processes.


What is flexible working?

“Flexible working is a way of working that suits an employee’s needs” – from GOV.UK: http://ow.ly/SeAc30s1ytL.

It is no longer the case that flexible working is just a change to start and finish times, for example, to allow parents to collect children from school. The legal right is available to all employees who wish to make a statutory application, should they meet the eligibility criteria.

It can cover a range of changes, including:

  • start and finish times

  • job sharing

  • working from home

  • part-time work

  • compressed hours

  • flexitime

  • phased retirement.

All the above can be requested for a variety of reasons and this is not an exhaustive list. If an employee can think of an alternative way to work, they can request it.


The ‘domino effect’

So, how does flexible working affect payroll? The most obvious answer is where a change in working hours is requested, a salary recalculation would be required. Fairly straight forward, but what about any salary sacrifice arrangements, does this bring an employee below national minimum wage (NMW) levels? The implications on holiday entitlement and pay also need to be considered in detail.

Working from home is another complex issue. On the face of it, nothing changes for payroll – same hours, same job, same pay. But is the employee now due a home-working allowance that will be paid through the payroll? If employers cover any costs exceeding the £6 a week this will need reporting to Her Majesty’s Revenue and Customs and becomes subject to tax and National Insurance contributions.

Hybrid working is the new buzzword in recruitment and is another area where a simple idea can become a bigger conversation. Contracts of employment and specific working arrangements will need to be explored when establishing whether travel from home to a workplace will be eligible for tax relief.

How open does a payroll team need to be with the employees about the ramifications of flexible working? In an ideal world, the payroll team would work out all the finer details before responding to a flexible working request, letting the individual know exactly how it will impact them. For this to happen, payroll must be integral to the flexible working decision-making process, not just involved at the final step. Completing this additional work, only for an employee to retract their request, isn’t something anyone wants to do. But with more focus than ever on financial and mental well-being, businesses need to support workers wherever possible.

There are other, less obvious, implications of flexible working that need to be considered. Where a worker is signed up to a cycle-to-work scheme, and subsequently requests to work from home, how do they continue to meet the qualifying journey criteria for the remainder of the scheme? This isn’t currently factored into legislation or guidance and could place further administrative burdens on businesses to ensure they remain compliant.


What is the future of flexible working?

Now that the collective workforce and employers are becoming more open to the idea of flexible working, the department of Business, Energy and Industrial Strategy (BEIS) has opened a consultation, which can be located here: http://ow.ly/S2OF30s1yAO. BEIS is considering changing legislation to make flexible working a day one right and changing the requirements for requesting arrangements. By the time you are reading this, the consultation will have closed, as it ended on 1 December 2021.

First, let’s look at flexible working being a day one right. It may seem strange to allow an employee to request changes to their agreed working pattern on their first day, however, this change encourages these conversations to happen at the recruitment stage. Realistically, it is best to have this open conversation before work has started so all parties can set their expectations. This may reduce payroll’s workload as retrospective changes need not be made if the accommodations are implemented from day one. The intention to influence employer behaviour is clear and aims to ensure businesses view flexible requests as something that all are entitled to, not something that is earned.

The consultation also seeks to identify if the business reasons given for denying a request are still valid, and on top of that, should employers be required to provide an alternative? Many employers may already be taking this approach, working with employees to reach a desirable outcome, rather than sticking to the statutory minimum requirements. While these changes could bring up the standards for all employers, it will also bring with it a substantial administrative burden.

The payroll team may need to be involved in alternative recommendations, especially if they pertain to benefits or budgeting. This raises ethical questions regarding recommending something that could negatively impact the finances of an employee. Should you need to consider the full impacts of any changes and make sure the employee is fully aware? We would say yes, having this open communication is essential, but it will undoubtedly take up time and resource.

Current rules about making temporary arrangements are also explored. This seems to be an underutilised option and may help many workers, as well as employers who may only be able to approve flexible working arrangements for a short period of time.

Finally, BEIS is looking to see if one request per twelve-month period is sufficient, or if this needs to be amended. This change could potentially have the greatest impact on resource, should the move be to allow more requests per year.

If employees can request changes to their working patterns more frequently, payroll may need to calculate and adjust wages, benefits and systems more regularly. This would contribute to the ‘domino effect’ and drastically increase administration for flexible working. Changes such as this would need safety valves to control abuse, while allowing legitimate requests to be handled within reasonable timeframes.

Allowing more requests, as well as reducing the time employers have to respond to such requests, is necessary to stop employers abusing the system on their end. Currently, where one request has been made and denied, an employer has no legal responsibility to respond to an additional request, outside of the appeal process. Allowing individuals more flexibility when it comes to requests will restrict employers’ ability to refuse reasonable requests without valid justification.

As with any workplace practice, reality is nuanced and complex. What works for small businesses may not scale well to large corporations and vice-versa. Finding the balance of what works for each business is essential to make it thrive and to keep staff engaged and happy. The questions asked in the consultation prompt the much-needed conversation about businesses’ responsibility to promote and encourage flexible working. However, some of the potential changes will need fine tuning to strike the right balance between business administration and employee well-being. 


Featured in the December 2021 / January 2022 issue of Professional in Payroll, Pensions and Reward. Correct at time of publication.