We speak to CIPP expert, Samantha O’Sullivan to explore the current landscape of payroll and how businesses can avoid costly pay errors.
Who is Samantha O'Sullivan?
Samantha O’Sullivan is a self-confessed payroll enthusiast and one of today’s leading voices on the topic of payroll policy in the UK. She holds a CIPP Foundation Degree in Payroll Management and a CIPD Level 5 Intermediate Certificate in Human Resource Management.
Having worked as a payroll manager in private industry and also in a payroll bureau environment for over 11 years in total, it’s fair to say Samantha knows a thing or two about industry best practice and HMRC compliance. We spoke to her for our latest instalment of ‘Five Minutes with…’ to discuss the ins and outs of payroll management and outsourcing.
What are the biggest challenges facing businesses today in terms of keeping their payroll function efficient, accurate and always delivering on time?
The payroll industry has always been an arena of constant change, but this year the number of changes has been drastic. The 2022/23 tax year has seen a vast amount of change, including:
Five new NI categories (F, I, S, L, V),
Two new secondary thresholds,
The introduction of the health and social care levy,
A mid year increase to the primary threshold
And an increase to the employment allowance.
Keeping up to date with changes is one thing, let alone businesses needing to ensure their systems, processes and the knowledge of team members are up to speed too.
With costs rising pretty much across the board in today’s business world, what are some ways in which companies could optimise payroll in order to improve their balance sheet?
Businesses could look at making some simple changes, which in turn can advantage their workers too. All employers must offer an automatic enrolment pension scheme to their workers. If businesses were to switch their scheme to a salary sacrifice arrangement, they would save the employers’ National Insurance on the amount of the sacrificed pay.
More and more businesses are outsourcing their payroll to a third party than ever before. Why do you think this is?
We did hear reports of increased payroll outsourcing during the pandemic, but the CIPP’s Future of Payroll Survey Report also indicated that this worked both ways, as some organisations who previously outsourced brought their payroll function in-house.
This will have been largely dictated by the huge changes seen in that time, so for those who outsourced, they may not have had sufficient resources to process the COVID-19 job retention scheme as well as business as usual activities. They may have also had staff off sick with coronavirus, again, creating a staffing issue.
In fact, the recent Payslip Statistics Survey saw an increased number of responses from individuals who work in a team that deliver payroll as a service on an outsourced or bureau basis. 33% of respondents were acting on behalf of a client, compared with 25% from the previous year. This shows a substantial increase and signifies an important step in ensuring that CIPP data represents the whole of the payroll industry.
We’ve read a lot over the last couple of years about businesses who have been ‘named and shamed’ for breaking National Minimum Wage laws. What are some of the ways this can happen, and what is the impact of this?
Yes, fortunately most businesses are aware that if they don’t adhere to paying their workers the National Minimum Wage (NMW), they will be published on the Department for Business, Energy & Industrial Strategy (BEIS) naming and shaming list.
Not only do businesses get published on this list, but they also have large penalties to pay out. That’s on top of paying the underpayment to workers. There’s a bigger picture here though; if you aren’t paying your workers accurately, they could be suffering financial hardship. We’re all aware of the current cost-of-living crisis, and businesses should be doing everything in their power to support workers through this time.
NMW is a complex area of payroll processing and, with anything that’s complex, errors can happen. Often, businesses fall foul of NMW due to a lack of understanding, which can lead to back pay owed to workers, HMRC penalties and employment tribunal for unlawful deduction of wage.
Do you think it’s important for organisations to review their payroll function and, if so, how often?
One of the things I love about payroll is that it’s always changing. There will always be a more effective way of performing a process, and payroll professionals are adept at continuous improvement.
Processes will always need to be reviewed, due to the fact legislation and guidance is constantly changing. And let’s not forget that domino effect in payroll, so, when one thing is amended, this has a knock-on effect on a multitude of other areas.
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