When I first joined the payroll profession it was seen very much as a ‘push-button’ function — an unloved department that only received attention when something went wrong. But fast forward two decades and payroll has transformed from an undervalued function attached to either finance or HR, to a recognised and stand-alone trusted service and the “Control Room” for a significant amount of key business data.
This evolution has been the result of several factors combining in a powerful way to create a profession — technology, data, service levels and advisory services have come together to provide insight over how a business runs not just its payroll function but also how it manages its workforce. And this is as it should be when one considers that payroll can often be a business’ largest expense and holds the vital data surrounding this expenditure.
In recent years, the payroll function has become increasingly important in an employee’s journey through the business, from joining to leaving and at all points in between. Add to this the increasing complexity in areas such as pensions, benefits, maternity, paternity and shared parental leave, national insurance and devolved income tax, and you can see why payroll professionals today need to be at the top of their game.
Specialist knowledge and understanding are now part of the payroll professional’s armoury. Without the right expertise, businesses face considerable risk of making incorrect staff payments. The profile of the payroll function has increased considerably — when staff have questions, the payroll team need to have the answers, and these change as government policies evolve.
Proof, if needed, came during the pandemic. Furlough — or the Coronavirus Job Retention Scheme, to give it its full title in the UK — was rapidly introduced, and payroll professionals were expected to process millions of payments based on whether an individual had been furloughed rather than laid off during the height of the COVID-19 pandemic.
But had the role already changed? Definitely. So much more over the years has fallen into payroll’s responsibility, bringing in more complexities, including the introduction of Real Time Information (RTI) and electronic filing requirements, pension auto enrolment, holiday accrual schemes and global mobility regulations. Payroll professionals have expanded their knowledge and expertise in these and many other areas, while the information held by the teams has been recognised by the business to support strategy and insight.
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Technology has, of course, assisted this transformation. Technology is not only driving the efficiency and effectiveness in how payroll services are delivered; it gives individuals immediate access to their ‘remuneration dashboard’ so they are able to keep track of their salary and check important details such as tax codes and overtime payments.
Technology is the driving force behind the capture and analysis of data, which in turn provides greater insights for the business and highlights better ways to manage staff costs.
Technology has been critical in developing client engagement portals and data transfer programs, along with robotic process automation (RPA) and artificial intelligence (AI). It has provided the power behind moves towards more flexible ways of working. Had we not adopted new technology at a very early stage, then we may not have been able to operate as well as we did during the pandemic. It allowed us to work remotely while at the same time ensuring we protected our clients’ data, remain fully compliant with GDPR requirements and, perhaps most importantly, deliver the same high-quality service expected of us.
New technology has enabled the greater use of data, which gives businesses much greater knowledge about their most important asset — their people. This is why more businesses are turning to workforce management solutions. Payroll can now give the business greater understanding of all elements of the employee journey, and their costs in real time, not retrospectively.
Data will become increasingly important if we see a downturn in the economy. Data captured at source can provide businesses with key information if they need to exert greater control over their costs – they can see immediately the hours that are being put against tasks and operations.
Payroll can, in effect, become an important control room for the entire business.
The advent of Real Time Information (RTI), a government initiative to collect tax data in real time, is another indication of the demands placed upon payroll — the government wants to collect data, and tax, at source, and it comes down to payroll to supply the data, accurately and securely. As an aside, it is worth noting that the ability to use technology and data in this way helps minimise the level of human intervention, and therefore the risk of human error.
But these are just a few examples of the many ways in which the payroll team can provide a service for the business and its people beyond simple payment processing. It’s a service that still requires the human touch — technology and data allow greater clarity, flexibility and accuracy, but is a delivery tool. Payroll can provide that all-important link between the numbers and the people.
For instance, as employees become more concerned about the cost of living, businesses can look to help staff access a percentage of their pay early, so that staff do not have to wait for the monthly pay cheque to arrive in their bank account if they face cash flow difficulties. This means staff don’t have to turn to loans or other high-cost options. This will go a long way in ensure the financial wellbeing of staff.
More generally, many employers offer flexible benefit packages to their staff – the payroll team can help individuals understand the pay and tax implications of certain options and ensure that payments are correct.
The payroll team can also help a business and its employees understand the full implications of modern working practices, as businesses adjust to a new working world where staff can, quite literally, be based anywhere in the world. But with this flexibility comes responsibilities to ensure the correct tax is being paid in the correct jurisdiction, and that a business doesn’t inadvertently create a taxable presence in another country.
All these factors mean, in effect, that payroll professionals now need to have a detailed understanding of tax issues and be able to give employees and employers alike the right information so that they can make informed decisions. An increased focus on training and qualifications, such as those offered by the CIPP, is going some way to professionalising payroll services, and the payroll team can now work alongside the finance function and human resources on an equal footing. Critically, the ability to gain qualifications goes a long way in helping to retain the best talent within the payroll profession.
With this increased understanding comes the ability to advise the business – payroll is able to deliver data, but it doesn’t just expect others to act on the data, it can offer advice, recommendations and solutions. Payroll act as a control centre — time, attendance and pay data, collected through payroll and workforce management systems can be analysed against other business data points such as sales, the insights from which can be deployed to influence short- and long-term business plans.
And with companies looking to retain and attract staff in a turbulent recruitment market, professional payroll teams can advise businesses that are looking at ways other than salary to recruit the right people.
It also plays an important role in ensuring the business is compliant with the many regulations it now faces. Compliance has always been important, but directors of a business value the added reassurance that a professional payroll team is able to offer.
It has taken a long time for payroll to earn the recognition it deserves, as it moves from processing payments to position itself strategically to support business objectives, and now it needs to work hard to retain this recognition. Payroll professionals need to be open to change and open to new technology in order to remain as trusted advisers to the business. Not only that, but in today’s rapidly changing landscape, we need to be ahead of change.
This post was written by BDO LLP, they are an exhibitor on the Payroll Time & Attendance floor of the HRTech247 Technology Hall here.