01 November 2024
Simon Parsons MSc FCIPPdip MBCS, director of UK compliance strategies at SD Worx, offers advice on how to go with the flow when it comes to increasing compliance complexities
This year is set to be a landmark one in payroll. In the last parliament, we saw significant shifts in the national minimum wage (NMW) and a flurry of announcements concerning flexible working and paid or unpaid leave. Now, with Labour at the helm of the employment law agenda, the world of work is gearing up for a whirlwind of manifesto commitments set to bring sweeping changes.
While these changes spell good news for employees and society, for business leaders this evolving legislation brings a whole new level of complexity to payroll compliance. As employers look ahead to a raft of new legislation to navigate, payroll professionals must use this time to get up to date with financial planning and ensure that compliance is top of the agenda.
Marking the United Nation’s International Equal Pay Day in September served as an important reminder on navigating legislation and payroll compliance. So, which policies are likely to have the greatest impact on payroll teams, how can they adapt to evolving legislation and what can organisations do to apply a proactive approach to compliance?
The current state of payroll compliance
Historically, compliance has not been straightforward. The many intricacies of payroll make this an area where businesses can fall short, without necessarily realising it. One factor that has already tripped up many British organisations is the NMW and national living wage (NLW).
For instance, in February 2024, the government named and shamed more than 500 employers that had failed to pay their lowest-paid staff the minimum wage, with 39% of them failing to meet NMW obligations. Affecting 172,000 workers and leaving them almost £16 million out of pocket, not only did this deeply impact employees, but brought lasting damage to employers’ reputations and hefty fines.
Even large employers with in-house human resources (HR) and payroll teams can be guilty of breaching payroll rules. So, what compliance challenges are on the horizon and how do businesses ensure that they avoid the serious consequences of a breach?
The plan to make work pay
Under Keir Starmer’s new Labour government, it’s expected that employers will have a new challenge to contend with – the Single Enforcer. In contrast with the previous government’s approach of long waiting lists and slow outcomes through the courts, this proposal seeks to shake up employment law and bring faster results for employees. This means businesses need to get their payroll up to scratch, and fast.
The government’s plan to ‘make work pay’ (see https://ow.ly/QjMe50Tvoa3) sets out key goals that seek to strengthen the rights of workers.
Employers should expect changes to the NLW, a crackdown on age discrimination and a new focus on holiday pay – a part of payroll that currently shows high levels of non-compliance. The plan also states that employees will have basic rights from day one to parental leave, sick pay, and protection from unfair dismissal, further changing the face of employment law in the UK.
These changes will be a steep learning curve for many organisations as the new government sets its sights on payroll, with the new plan setting out an ambitious agenda to ensure workplace rights are fit for a modern economy, empower working people and deliver economic growth. So, how can businesses both get to grips with the human element of payroll and implement changes that satisfy new laws?
A proactive approach to compliance
The key thing employers need to do now is ensure that they are up to date with current legislation and prepared to quickly adapt to any new changes. With the exact future legislation yet to be set in stone, payroll teams need the right tools to make sure they can change their processes once legislation comes in. This is where payroll technology matters.
A proactive approach to compliance means that businesses should actively monitor finances to prevent potential breaches before they become a reality. With little room for error and increasing legislative complexity, leaders must continuously improve the payroll processes and technology that their employees use to stay ahead of the game. Soon, blaming outdated technology and administrative issues for wage errors will not fly. Proven tools and robust, comprehensive technological support will ensure that no compliance challenge is too great for the payroll team and compliance oversights are eradicated.
Solutions such as digital payroll applications and automated processes not only support compliance automatically, saving time and minimising human error, but also offer real-time reports to power improved forecasting and payroll-related insights. Amid ever-changing legislation, this technology can prove vital to guarantee legal compliance with built-in rules embedded into the software, alongside the guidance of experts in local geographies. For further efficiency and compliance gains, some cloud-based payroll solutions integrate seamlessly with HR, absence management and time and attendance systems, giving leaders a 360-overview of employees.
Whatever the future holds in payroll, businesses must remain compliant. Navigating this blockbuster year of employment law and pay changes will prove a challenge for many businesses, but with the right technological tools and proactive approach to payroll, they can sail through with their employee wellbeing, and reputation, intact.
This article featured in the November 2024 issue of Professional.