Risks and complexities affecting UK payroll
01 November 2019
This article was featured in the November 2019 issue of the magazine.
Caroline Garstang, of NGA Human Resources, and co-author of the 2019 Global Payroll Complexity Index, presents key findings and the observations of industry leaders
You’re likely reading this article because you have a vested interest in UK payroll. It might therefore surprise you to see the relatively low ranking of the UK at 34th in the 2019 Global Payroll Complexity Index (http://bit.ly/2qgV2Wo) (‘the Index’). We were initially surprised considering the intricacies we know go into each payroll run.
A deeper dive into the feedback of nearly 2,500 payroll professionals highlighted UK payroll as established. Processes are mature and increasingly standardised. Technology is often in place to reduce admin and maximise accuracy. Laws are in place and changes well-communicated and usually run to a calendar. Across much of Europe this is not the case and explains why the top ten is dominated by countries including France, Italy and Spain where multiple external influences including powerful works councils and regional variances make managing payroll far more challenging.
Further to this, 2019 saw for the first time the rapid rise of countries considered to be growing economies. Where once there were few rules and little employee protection in order to compete in the global market, countries across Eastern Europe, South America, Asia and Africa have had to implement major reforms, putting them ahead of the UK as major cultural changes come into play.
Recently, I had the opportunity to sit down with Jason Davenport, CIPP chair, who shared his thoughts on the findings of the research. To paraphrase, Jason explained that across Europe, and further afield, change can come much quicker and governments make tax changes with little warning. The full conversation with Jason Davenport, part of a webinar with Dan Wilson, who heads up the UK business as NGA HR, can be watched here: http://bit.ly/2OWYDTJ.
The top five UK payroll complexities as we move into the 2020s are discussed below.
Data and GDPR-led changes
What the General Data Protection Regulation (GDPR) has done is highlight the ‘vulnerability’ of data and the handling of it. The pressure is set to only get greater as we all become aware of our digital rights. Through the readiness process, organisations had to pull together companywide PII (personally identifiable information) handling and storage policies and processes. As a result, many respondents to the Index reported heightened awareness of the liabilities around data handling and this has added more stress. What controls and measures are in place? How are these being monitored and checked? Am I liable?
If it were not arduous enough, countries have layered their own data protection rules on top of GDPR and many more outside the European Union are adding their own GDPR-like legislation. The blog ‘GDPR is Going Global’ (http://bit.ly/31qQoBX), by Sascha Schneider of NGA HR’s legal team, goes into detail.
Scenario planning and legislative change management
By the time this article is published we’ll know the outcome of the 31 October Brexit deadline. The payroll and human resources (HR) complexity impact is yet unknown.
Jason Davenport provided a quick explanation: “If we leave with a deal we have until 2020 to look at what data and legislative changes there might be. If we leave without a deal, it’s off the table. There might be more regulations imposed as a result of this.
“The Information Commissioner’s Office is working hard to get as much data together as possible for organisations to outline what might happen.”
There are more immediate challenges, as highlighted by NGA HR’s Dan Wilson: “Multiple clients are asking the same question. In fact, I have this challenge in my own team; what happens with employees on short-term international assignments where on appointment to the role they had the right to live and work in the UK – do they still? What happens to the application process now? Does it change the employee’s status? Where does their contract sit – in the UK or elsewhere? Under which payroll legislations do they come?
“These are not just process challenges, but real GDPR and PII data protection risks.”
As with any change scenario, business planning is crucial. In most organisations workstreams will be in place to cut potential Brexit workforce scenarios, but there is no clarity to the true impact on the workforce. Besides the emotional factors, there are legalities to be untangled. What percentage of the workforce will be affected in instance A or B? will support be required for applications such as indefinite leave to remain? What’s the cost of repatriation? What future travel be more expensive, not just financially but in terms of time? Will employee contracts and salaries need to be changed?
For those organisations where payroll data is accurate and analytics can deliver clear business intelligence, this will have been easier. For those without single data source, the process of workforce mapping has and will continue to be high risk and highly challenging.
...heightened awareness of the liabilities around data handling...
Salaries and rewards review
There has been a fundamental shift towards employee-driven salaries. According to Index feedback, people don’t just want cash. They want to be rewarded for personal contribution and in a way that supports their individual circumstances – often frequently changing circumstances.
Furthermore, people want to move away from the standard working day and contract statuses. Not so many years ago the response might have been, “if you don’t like it here…” However, today, there are employers that see the benefits of opening the workplace, and coupled with greater salary transparency and compensation options, are draining talents from organisations still employing outmoded pay and rewards models.
The findings of an independent HR industry research study sponsored by NGA Human Resources, will be published next year. Already, the ‘HR2025’ findings suggest that the move is faster than we thought, but this is not the end of the office, which we might think more outdated.
There are interesting times ahead for sure. And, challenging times for HR and payroll teams who will need to get used to the challenges these will bring. Already, many organisations are running retrospective payrolls almost of the norm now.
Employee leave entitlement
Most of us now consider ourselves as equals. Gender pay gap reporting called on huge resource from the payroll and HR departments. Shared parental leave is having the same impact. It’s incredibly complex to administer.
According to the Index, take-up in the UK is on the up and paternity leave take-up increased by 15% in the past two years. This very much turns on its head the expectation that the traditional primary carer earns less than the traditional ‘bread winner’. It also points to the reality that a man is as likely as a woman to be the primary carer.
This change in workforce dynamics has also been positive for the profile of the payroll department. There’s now clear understanding in the boardroom that the business intelligence needed to keep a workforce performing comes from the payroll process. The data is accurate and can be cut to reveal any retrospective, current or future impact of change there might be. Let’s hope now that we will start to see more investment in payroll processes.