01 June 2022

Find out how payroll managers and professionals can fulfil their roles as compliance enforcers, Jerome Smail, freelance journalist, sought the views of experts in the field


This issue, Jerome spoke to:

Liz Lay MSc FCIPPdip FHEA ACIPD, chair of the board of directors, the CIPP

Dougie MacInnes, payroll manager, Midland Heart

Maria Mason MCIPPdip, partner, BDO

Tom Spencer ACIPP, data and compliance manager, Moorepay.


Who should be responsible for compliance? Should it sit with senior management or be clearly defined within the remit of the role, regardless of seniority?

Liz Lay: Compliance should start at the top, with companies promoting it through every level. Some companies have a dedicated compliance officer or an internal audit function responsible for ensuring compliance and best practice.

Dougie MacInnes: There’s a difference between ‘responsible for’ and ‘accountable for’. All colleagues are responsible for compliance. Compliance is a key behaviour that can be learnt and should be part of your role profile, moving from a responsibility to an accountability as you progress into more senior roles.

Maria Mason: Regardless of the role an individual carries out within the payroll arena, everyone involved holds a responsibility to ensure compliance is carried out throughout the payroll process. At BDO, we appreciate that we have differing levels of skillsets among our team, so to accommodate this, we ensure all payrolls processed go through several system checks. Payrolls must also be checked by a secondary individual.

Tom Spencer: The responsibility for compliance needs to sit with all staff in an organisation. It’s the role of senior managers and compliance teams to ensure we’re providing staff with the correct information, and to provide simple channels of communication for them to raise any issues. We must refresh this message to staff regularly and back it up with a thorough and consistent internal audit process to ensure compliance.

 

How can payroll managers become confident they’re handling off-payroll working correctly, and where can they turn to for help?

LL: Reading articles, undertaking research and attending forums, training events or webinars will enable a payroll manager to increase their knowledge in this area. It’s important they know who they can turn to for help and have confidence the information being provided is accurate. Of course, the CIPP’s Advisory Service is at the top of the list for members to turn to. Her Majesty’s Revenue and Customs (HMRC) also provides guidance, which is online. Payroll managers may belong to a network within or outside of the organisation that they can reach out to for advice and support.

DM: Off-payroll working has been around for long enough now that most businesses should have robust measures for dealing with the processes which dictate how the rules need to be implemented. The check employment status for tax (CEST) tool isn’t that difficult to follow, and the CIPP’s advice line is also super helpful.

MM: I believe payroll sits well within the accountancy arena because the relevant taxation expertise is available to support the payroll team and our clients in this area and with other specialised taxation elements, which can also be extremely complex. In addition, the BDO national payroll team relies upon support and guidance from professional and recognised bodies, such as the CIPP, to ensure we’re managing these complex areas correctly for clients. It also guarantees our team is always up to date with the latest legislation and regulations.

 

Who’s ultimately responsible for national minimum wage (NMW) compliance – in-house payroll managers / outsourced payroll bureaux, the client / human resources (HR), or someone else?

LL: Ultimate responsibility for NMW compliance sits with the company. It will depend upon the company as to where NMW sits, where payroll is placed and how it’s processed for the organisation. Payroll managers must ensure payments made to employees are compliant, based on the information they have. They should provide instruction to the organisation about the information needed to check and monitor that at least NMW is being paid. Clients of outsourced payroll bureaux can’t hold the bureau responsible if they haven’t provided all the relevant information. However, the payroll bureau should ensure the clients know what information they need to provide.

DM: Again, this goes back to the difference between responsible for and accountable for. I believe that NMW compliance sits with the team signing off the payroll. However, no matter where it’s processed, in-house or outsourced, across teams where segregation of duties are in place, there’s a duty of care within those teams to identify where this could be an issue.

MM: All parties, from the employer through to the payroll processor, whether provided in-house or outsourced, hold responsibility for ensuring that all regulations, including NMW compliance, are managed accordingly. Most outsourced payroll processors hold data processor responsibility for many elements surrounding payroll. This would typically see the employer retaining responsibility for ensuring the regulations around the payment of NMW are being applied, but a good outsourced provider should be able to give support and check reports to assist clients. It’s difficult for employers to determine the position prior to the payroll being processed and calculated, leaving exposure.

TS: Ultimately, this is the responsibility of the client. However, as a payroll provider it’s in our interests to help customers with this, be it reporting within the payroll software, or via methods of education, like blogs, workshops and webinars.

 

How do you ensure there’s consistent compliance when operating multiple payrolls across large teams?

LL: Some larger organisations have dedicated compliance officers to review, maintain and introduce policies and procedures that adhere to legal and operational requirements. The audit function in some organisations also encompasses the role of reviewing compliance and recommending changes or improvements, where required. Without a dedicated resource, teams need to work together to review policies and procedures to ensure they’re usable by both new and current team members. Regular training and legislative updates should be provided in areas in which it’s identified the teams don’t have strong knowledge.

DM: This starts and ends with how the teams operating those payrolls are managed – managers (at all levels) should know their people, discuss performance, ask for more and ensure there’s consistent, robust compliance in operation. This involves:

  • documented processes, that are easy to follow so anomalies are clearly visible and can be spotted

  • a skills matrix to track the team’s knowledge levels and how effective cross-training is

  • having awareness of other business areas that hand off to payroll and those that transactions are passed onto.

This can all be achieved by regular one-to-ones and giving your team feedback, particularly when processes are being adhered to and you’re confident in their abilities – so, feedback for doing a job well. You should also coach your teams, so they don’t always have to come to you for the answer – instead, they’re empowered to answer questions and have that consistent approach with compliance. Finally, delegation – mould future payroll managers within your team, build their capability and reinforce the behaviours you expect from them.

MM: BDO rely heavily on training, technology and centralised processes and systems, alongside dedicated client management teams, to ensure we can deliver accurate and timely payrolls. We ensure our staff are trained to the highest level, utilising payroll assessment tools covering all areas of payroll, to enable us to build tailored training for everyone. Staff also gain recognised payroll qualifications, to ensure they have the expertise to deal with the multitude of complexities surrounding payroll processing.

TS: Delivering a consistent service is all about having documented processes and procedures in place that all staff are working from. However, we cannot become complacent with this approach and need to continually improve our service offering with technological and operational innovations.

 

In which ways can payroll professionals work with businesses in order to share knowledge and ensure compliance is achieved?

DM: Have processes in place that are easy to follow, particularly for colleagues in the business who don’t have any payroll knowledge. Have processes as automated as possible, and make sure they can be audited to highlight where transactions are going wrong. Make it obvious when something stands out, instead of having to rely on that payroll ‘spidey sense’ when it just doesn’t look right.

If you don’t have a risk register, set one up. Be on the front foot with operational changes in the business; be interested in the operations managers on the frontline and their challenges. This gets you an early head-up on future business changes. Keep your team up to speed with changing legislation – the CIPP yearly updates in January and February are priceless for this. You must then take these changes and explain them in layman’s terms to colleagues.

MM: Within BDO, we have a strong focus on the training and development of our staff, to ensure they remain up to date with legislation and compliance changes. This enables them to process payrolls correctly and to share their knowledge directly with their portfolio of clients. We appreciate it’s difficult for clients to gain clarity on the wealth of changes that impact their business, so we provide information in many differing formats for clients’ specific requirements.

TS: We offer lots of avenues for interactions with our client base and potential customers on a whole range of topics from the payroll and HR world. These interactions include articles, blog posts, webinars and topic-specific workshops. These all help in knowledge sharing and educating the wider business community, by putting a subject matter expert in front of them to discuss our work. All these interactions can help us as a payroll bureau, and the wider community, adhere to best practice.

 

How can payroll use its role in compliance to increase the profile of the function?

LL: By building relationships and working with other departments across the business to provide and obtain relevant information in a timely manner. They should also consult with the business when changes occur, to inform of any additional costs, identify the risks of non-compliance and use key performance indicators, to support the business and ultimately, raise the profile of the payroll function.

DM: Payroll needs to take the lead in ensuring processes and transactions are engineered to be as easy as possible to complete. This needs to take users in mind – moving processes online improves compliance and reduces submission error, but you also need to consider that some users aren’t tech savvy, so may need extra support. Build guides, produce crib sheets and, if necessary, video tutorials to help them. Payroll needs to evidence that audits and checks are completed, and colleagues understand what’s being audited and checked. Payroll should take a holistic view around compliance and, particularly, non-compliance. This should lead to a more connected approach across the business, highlighting potential training interventions for staff where compliance isn’t being met.If it’s not being met in one area, is it just that section or are there issues elsewhere? Is there a high attrition rate in that area, or lots of absence in that team? Helping the business to look at the bigger picture of compliance helps use resources more effectively and definitely adds to the function’s credibility.

MM: With the constant changes during Covid and the introduction of the furlough scheme, payroll professionals were pushed to the maximum in trying to understand the rules. There’s no doubt this raised the profile of payroll, as not only did payroll professionals have to manage these changes, but also had to continue working to ensure these rules were applied on the payroll each month, highlighting the pressure and importance of the role they carry out. This didn’t stop, because then there were changes to National Insurance and so on, along with the high level of staff changes across all business sectors, further impacting the payroll process.

Due to the penalties and time attached to managing issues, payroll professionals work hard to ensure high levels of accuracy are achieved every time. This hasn’t changed recently, but it’s great to see that professionals are finally getting the recognition they deserve for all their hard work. Payroll professionals have a wealth of expertise and experience, and work with the data that not only typically controls the highest level of spend within any business, but that can help to assist businesses with future plans. This is particularly true in areas such as:

  • workforce incentivisation

  • business planning

  • flexibility of resourcing

  • staffing trends.

All this information should be available from the payroll reporting, so with good technology and expertise, payroll is key to the future of a business’s success.

TS: As payroll is a rule-driven practice, with changes being provided primarily from a single source and an active professional body that interprets this legislation into best practice, we’re in a prime position to extol the virtues of compliance to the wider business community. Also, what we do is something that affects every household in the UK, so we’re well-placed to confirm how important compliance is. 


 

Featured in the July-August 2022 issue of Professional in Payroll, Pensions and Reward. Correct at time of publication.