CIPP future of payroll research report 2019

The CIPPs future of payroll report has been made possible through the collaboration of a high number of payroll professionals within the United Kingdom, and the support of Datagraphic and Workday.

Future of payroll Research survey report 2019

The CIPPs future of payroll report has been made possible through the collaboration of a high number of payroll professionals within the United Kingdom, and the support of Datagraphic and Workday.

THANK YOU TO OUR SPONSORS

CIPP FUTURE OF PAYROLL REPORT 2019

Contents

CIPP FOREWORD

APPROACH AND CONTEXT

ABOUT THE CONTRIBUTING AUTHOR

DEMOGRAPHICS AND ADDITIONAL DATA

KEY ISSUES FACING YOUR PAYROLL DEPARTMENT NOW

11 11 14 14 14 17 17 18 19 19 20 23 23 24 25 25 26 27 27 29 29 30 30

What are the key issues?

BLOCKCHAIN AND PAY ON DEMAND

What is blockchain?

What is pay on demand?

IS PAYROLL A STRATEGIC OR OPERATIONAL FUNCTION? Is payroll represented at board level within your organisation? Do you think payroll contributes to your organisational goals?

CUSTOMER FACING PAYROLL

How many enquiries does the payroll team receive on average per month? What are the most common types of enquiry into the payroll department?

PAYROLL TEAM RECRUITMENT AND SUCCESSION PLANNING

Attributes of payroll professionals

Do you have a succession plan within the payroll department?

PAYROLL SYSTEMS, SOFTWARE AND ANALYTICS - SPONSORED BY WORKDAY

Workday foreword

How satisfied are you with your existing payroll software? How does your payroll software integrate with your HR systems? What are the top three issues you face with technology currently?

PAYSLIP DISTRIBUTION - SPONSORED BY DATAGRAPHIC

Datagraphic foreword

Has your payslip distribution method changed as a result of GDPR?

How do you normally distribute your payslips?

CONCLUSION

CIPP FUTURE OF PAYROLL REPORT 2019

CIPP foreword

Now in its second year, the future of payroll report has delved further into trends and technology enhancements which could impact on the future of our profession.

Payroll is such a fundamental business function, but typically has had a ‘if it ain’t broke don’t fix it’ attitude from outside of the department within business. There are risks associated with updating software and this leads to organisations often using dated legacy systems. However, we are in a time of change. Technology is advancing quickly and payroll is embracing the advancements. People coming into our businesses have different attitudes towards pay, and that is influencing the way we pay people and the solutions we are looking to in order to automate payments. Terms such as ‘pay on demand’ and the ‘gig’ economy are becoming widely used and accepted, and this is challenging the traditional pay system. Whilst these things won’t change things overnight, they are certainly providing payroll with food for thought and ways of making their pay and reward package more attractive to the new employees entering the workforce.

KEN PULLAR CHIEF EXECUTIVE OFFICER, CIPP

The changes to technology will also lead to changes in the skillset required of payroll professionals. Whilst software will enable more automation, the number of enquiries coming into the payroll department will not decrease, and payroll professionals will need to understand the calculations and legislation behind the software to answer these queries. The future of payroll will become more people focussed, those working in the department will need to be educated, skilled and knowledgeable so that they can answer queries and support their organisations employees in understanding their pay and reward. As we look to the future it would be remiss not to mention ‘Brexit’; but it was interesting that this was not a current concern for the payroll department. Presumably as there is still so much uncertainty so it is not a priority until things have been clarified? This report will provide some insight into the direction of payroll for the future, and over the coming months we shall delve deeper into some of the topics contained within this report, so make sure that you visit cipp.org.uk and follow us @CIPP_UK on Twitter for further content and updates. I would like to take this opportunity to thank all of the payroll professionals who took the time to respond to this survey, your feedback and views have helped to shape the report and provide some context around the predictions. I would also like to thank our sponsors, Datagraphic and Workday who have provided their own insights into the future of payroll, specifically aligned with technology and payslip distribution. Finally, I would like to thank Chartered Member Glenn Jones MSc, FCIPD, ChFCIPP, our contributing author who has taken the time to analyse the results and provide insight into the results.

CIPP FUTURE OF PAYROLL REPORT 2019

Approach and context

The survey launched during National Payroll Week 2018. Like last year it was distributed to the UK payroll community through the CIPP News Online , standalone marketing emails and through social media. The survey was sent to over 5,000 people and it achieved a 10% response rate which was on par with 2017. The CIPP would like to thank those who did respond as this enables a greater understanding of where payroll is in the 21st Century. The CIPP is passionate about the future of payroll, and this report will explore the survey results and industry developments to provide payroll professionals with some ‘food for thought’ regarding what the future may look like, as well as how they can start to think about new developments which may lead to a more strategic role within their organisation. For the profession to continue to grow it is important to recognise that things will need to change to ensure that payroll takes its rightful place alongside the other business functions. An example of this may be that actually payroll as a function needs to be in the middle of HR and finance departments to ensure that there are the correct controls in place and it is recognised as a strategic function rather than a purely operational one.

CIPP FUTURE OF PAYROLL REPORT 2019

About the contributing author

Glenn G Jones MSc, Chartered FCIPD and ChFCIPP Glenn is a freelance HR consultant (MSc, Chartered Fellow of CIPD and Chartered fellow of CIPP) and has worked with Bank of America, HSBC, Ecolab, Imperial Brands, CIPP and XL-Catlin SE in multi-discipline strategic and operational roles across the world. Prior to this, he was employed Eversheds LLP, Accenture, Koorb (NZ) and EON as well as numerous other companies. He is working his way to his DBA, becoming a future CEO and evolving his HR consultancy business to ensure that he continually adds value to his clients, now and in the future.

Glenn is passionate about people, coaching, emotional intelligence, making a difference and company evolution.

His new book ‘ Human Resources Changes The World ’ aims to shake-up the HR function via a critical look at where it is today, what needs to change together with real actions for its evolution. It’s a real look in the mirror book. In addition, Glenn looks at if people are truly important to companies then why don’t HRD’s, on the whole, become CEO’s.

CIPP FUTURE OF PAYROLL REPORT 2019

Demographics and additional data

Gender The payroll profession appears to be still dominated by females ( 71% ). This percentage is consistent with the Office for National Statistics which states that 75% of individuals in the profession are female. In an age where diversity and equality are important, it is encouraging to see that 40% of women who responded are in payroll manager positions, versus 38% of men who responded. Sector Almost all the sectors were covered in the answers to the survey. The highest percentages (rounded) came from: ● ● Accountants/auditing/book-keeping/tax consultants (16%) ● ● Manufacturing ( 7% ) ● ● Education ( 6% ) ● ● Retail/wholesale/distribution ( 6% ) ● ● Local government ( 5% )

This was cross-referenced against the CIPP membership and industry data and is typical of the demographics overall.

CIPP FUTURE OF PAYROLL REPORT 2019

Number of employees paid Over six million employees receive a payroll service and customer experience from the survey respondents. With the rise of the ‘Gig economy’ i.e. the movement away from the traditional permanent employment to ‘Gig’ short- term contracts and freelance workers, it’s expected that whilst the way that people are contracted will change, they still need to be paid as per the relevant legislation. This could change how they are paid and by whom, which is touched on later in the report. Job titles of the respondents There were 29 different job titles which came out of the survey with the highest number coming from: ● ● Payroll manager ( 39% ) ● ● Payroll officer ( 12% ) ● ● Payroll supervisor ( 7% ) Ratio of payroll staff to employees The survey looked at the payroll department team size compared to the number of employees serviced by them. As a result, it’s clear that for the majority ( 50% ) team size is a maximum of five people, followed by ‘it’s just me’ ( 31% ) and ‘six to ten’ ( 7% ). In relation to the 31% of ‘it’s just me’, it would be interesting to understand their contingency plans in case of illness or holidays. Is this something that you would be impacted by? who in your organisation would look after payroll should you be unable to? Do you have colleagues in other departments who would pick this up? Or would you look to work with recruitment agencies to bring in temp staff to accommodate this?

However, when you compare that to the circa 4.5 million employees serviced by in-house payroll teams it was impossible to derive a ratio from this set of data to determine payrolls that were best in class versus below the bar.

Of course, there are many factors to consider when deriving this e.g. the complexity of payroll, number of payroll frequencies etc but there should be a set of criteria that should examine this. The CIPP offers a benchmarking exercise which explores how your payroll performs against others within the industry, the results of the latest benchmarking are being released in January 2019 and the benchmarking exercise for the 2018-19 tax year will commence in the summer of 2019

CIPP FUTURE OF PAYROLL REPORT 2019

International payrolls This year’s data reported that the payroll function continues to include international payrolling in its role; this equated to 26% which was up from 21% from last year. Amazingly, this covered over 70 countries ranging from Canada to New Zealand, but the assumption is that it’s probably a lot more than just 70 . This is a very specialist area and fraught with risks and issues if not executed correctly; are you promoting the fact that you do this with your stakeholders and if not, you should be? Also, how good is your set-up and control around this area; one to consider if you are not already? Outsourced versus in-house The survey this year was very similar to the results that were returned last year. The overwhelming majority ( 72% ) are still being operated completely in-house. The remaining elements were split by either partially outsourced (partially managed) ( 22% ) and completely outsourced (fully managed.)

It appears that even companies around the world who are increasingly cost conscious still value the ability of having their payroll performed by in-house professionals.

Last year the survey stated:

“WITH UK PAYROLL TRAINING BOTH ACCESSIBLE AND FREQUENT, THERE IS MORE CONFIDENCE AND KNOWLEDGE WITHIN THE INDUSTRY TO SUPPORT ORGANISATIONS OPERATING THEIR PAYROLL IN- HOUSE”

Furthermore, the report stated:

“TECHNOLOGICAL ADVANCEMENTS THROUGH CLOUD COMPUTING HAVE ALSO MADE RUNNING PAYROLL IN-HOUSE MORE EFFICIENT.”

Is this correct or has payroll become something you just don’t touch unless it’s broken? Yes, technology has made things more efficient but has it really? We asked respondents how effective technology enables them to be compared with how effective they want to be, 50% of respondents stated that their technology makes them less effective. This could be for a number of reasons, some of which can be explored within the software and technology section of this report.

Furthermore, we will also look at systems and software as the trends for 2019 and onward will be all about digital transformation i.e. adopting emerging technology faster.

Human resources or finance? Whilst there is still a divide on the above question, there has been a slight change in the picture from last year’s return. Finance ( 45% ) still appears to be the main place where payroll resides compared to last year where it was 64% ! However, it appears that there is a new player on the block which is the standalone payroll department ( 16% ) with the remainder sitting in HR.

The CIPP is recommending that payroll is a standalone department within a business, which works closely with both HR and finance. Reasons for this include:

1. Controls - inherently today most of the employee data comes from HR and invariably the payment comes from or is sanctioned by finance. It would make absolute sense to ensure that there are control points between the three functions to reduce payroll fraud (UK Fraud Bill for 2017 estimated at £17 Billion with ghost employees being the main point of failure.)

CIPP FUTURE OF PAYROLL REPORT 2019

2. Payroll investment – to improve payroll’s influence there should be a change of focus so that payroll managers and their teams, actively look for best-in-class technology, processes and automation. All too often the decision makers aren’t payroll professionals and it’s either the HR director or finance director who have the final say. 3. Role clarity – to ensure that HR, payroll and finance are clear about their roles when it comes to changing legislation. For example, the focus on working hours for instance. Payroll frequency Not much has really changed over the last few years regarding how often employees are being paid; however, with the potential advent of people being paid on demand on the horizon (which we will address later), it’s possible that over the course of the next few years this will change. Looking at the data from the survey it appears that the primary payroll frequency is still ‘monthly ( 87% ), closely followed by ‘weekly’ ( 7% ), ‘four weekly’ ( 2% ) and ‘fortnightly ( 2% ). Keep a close eye on the fifth placed item which was ‘daily’ ( 1% ) as the CIPP will keep one eye on the trend and continue to advise and guide you on this

Payroll frequency pay dates Taking this a stage further it appears that there hasn’t been much change over the years from the traditional pay days:

Frequency First, second and third top answers Monthly *

Last working day of the month (35%), 28 of the month (20%) and 25 (20%)

Weekly

Friday (84%), Thursday (28%) and Wednesday (12%)

Fortnightly

Friday (80%), Thursday (25%) and Monday (5%)

Four Weekly

Friday (82%), Thursday (18%) and Monday (7%)

NB - You probably have noticed that the percentages add-up to more than 100% but this is because some employers have multiple payrolls that operate a different frequency in their company and this has never been aligned for whatever reason.

CIPP FUTURE OF PAYROLL REPORT 2019

* Over the years the move for the monthly pay date has shifted towards the end of the month to enable the removal of mistakes being made to employees pay and to give payroll greater time to check multiple things before sending the final payroll. As you can see from the data in the table over 75% (last day of the month, 28 and 25) of companies are still following this model, but again how will ‘pay on demand change this?’ Watch this space.

* One point to note was that 38% of the respondents said that they pay before the 16 of the month; is this causing any issues when you look at the time to create the payroll and the accuracy of it etc?

As the roll out of Universal Credit continues it is possible that the interaction between pay periods and Universal Credits will impact either the pay date or pay frequency or both in future years.

With a recent court case calling for a judicial review, it is of course possible that the DWP may amend its rules but if this does not come to pass, employers may decide to change either the pay frequency or pay date to ease the impact on their workers.

CIPP FUTURE OF PAYROLL REPORT 2019

Key issues facing your payroll department now

What are the key issues?

GDPR and the Data Protection Act

38.50%

Automatic enrolment

32.50%

Holiday pay calculations

31.75%

Expenses and benefits

29.50%

Automation of business processes

28.75%

Gender pay gap reporting

24%

Implementing a new system

21%

Given the recent excitement around the implementation and go-live of GDPR on 25 May 2018, there was no surprise that GDPR was at the top of the list (38.5%). With the impact of substantial fines (up to € 20million or 4% of global turnover, whichever is greater) payable by companies if there is a non-report of data leak/breach e.g. sending an email with personal data which is un-encrypted to a wrong email address, someone receiving the wrong payslip; ensuring that your data is protected and controlled is now more critical than ever to every payroll team. The second-place issue is ‘automatic enrolment’; this is surprising given that this is not a new government initiative. The former Work and Pensions Secretary Esther McVey recently stated in her online article (https://www.gov.uk/ government/news/automatic-enrolment-breathing-new-life-into-britains-retirement-prospects) that membership of occupational schemes has gone-up by 49% in the last five years with a staggering membership of those schemes being 41.1 million in 2017. Is it the sheer volume of people now having the opportunity of joining the scheme/s or , is it the complexity around the mechanics of understanding if someone is in or out or , is it that the payroll systems aren’t helping payrollers by reducing the issues around automatic enrolment? It could be both the phasing of contributions and that employers are not aware of their obligations, especially when outsourcing that has resulted in automatic enrolment still being a key issue for payroll departments. It could also be a key issue for organisations now facing their three year re-enrolment and having to enrol employees who have previously opted out. This will cause additional administration, particularly around communications to assist employees in understanding why they have been put back into a pension scheme which they previously opted out of.

Holiday pay calculations ( 31.75% ) was the next most common cause of concern facing payroll departments, unsurprising given the number of Employment Tribunal cases which have affected the rules for making these

CIPP FUTURE OF PAYROLL REPORT 2019

calculations and the lack of clear guidance on how exactly these calculations should be made. We know there are also many employers who are reluctant to make any changes to their processes because they think (or hope!) that subsequent Employment Tribunal cases may change the rules again. We know that the Department for Business, Energy and Industrial Strategy (BEIS) is in the process of producing more detailed guidance, including case studies and scenarios which may help this uncertainty. Next came Expenses and Benefits ( 29.5% ) and the payrolling of benefits in kind. Again, as with holiday pay calculations this isn’t a new topic, so it is interesting to see this as the number four issue. Changes to salary sacrifice and the introduction of optional remuneration may well account for this uncertainty, and again, the lack of clear and timely guidance could well have been a factor in this concern. Automation of business processes ( 28.75% ) followed; this isn’t a big surprise because companies/businesses here in the UK and around the world are looking for lean and streamlined processes with as much automation as possible. This should be seen as a positive, as it should enable payrollers to really look at the strategic element of what they do and to add further value to their organisation. Here’s one of the respondents’ comments on this issue: “LIKE MANY OTHER COMPANIES WE ARE LOOKING AT EFFICIENCIES, COST-CUTTING AND HEADCOUNT REDUCTION. UNFORTUNATELY, WE HAVE MOVED AWAY FROM A DEPARTMENT THAT HAD A MISSION STATEMENT THAT INCLUDED EITHER “FIRST CLASS OR WORLD CLASS DELIVERY” BUT NOW ONE THAT IS “FIT FOR PURPOSE” BUT STILL THE FOCUS HAS TO BE ON PAYING STAFF CORRECTLY AND ON TIME BUT IN A MOST ECONOMIC AND EFFICIENT WAY” Gender pay reporting ( legislation that requires large employers to report and publish their overall mean and median gender pay gaps from 2017 ) continues to be an issue with 24% of the respondents still ranking it high on their list. This was a slight change up on last year’s where it was 22.58% . Back in July 2018 Personnel Today published an article (https://www.personneltoday.com/hr/up-to-one-in-six-organisations-have-misreported-gender- pay-gap/) which stated ‘one in six employers may have misreported gender pay gap’ so it’s no surprise that this was in the top issues reported by the respondents. Finally, in this section is Implementing a new system ( 21% ); tied to the comment above, it’s no surprise that companies are looking to improve their systems, the correctness of data and to automate as much as possible. Surprisingly given the other issues above you would have assumed that this would have been higher up the list. However, we touch on payroll systems and software later in the report. Before we move on, two things stood out from the answers which came back, and one was Brexit ( 0% ) and the second was Blockchain ( 0.5% ). Taking Brexit first, in the last survey Brexit was 8.47% (small yes but still there) so given that it is imminent you must question why this isn’t an issue for the respondents any longer? To explore this the CIPP put in a new question in the survey this year which asked ‘are you concerned about the potential implications Brexit may have on your payroll?’ The answers that came back were ‘yes’ ( 29.62% ) and ‘no’ (7 0.38% ); here are some of the comments that were received:

“NOT CONCERNED AS WE WILL HAVE TO DEAL WITH CHANGES AS THEY OCCUR LIKE WE DO FOR ALL OTHER CHANGES.”

CIPP FUTURE OF PAYROLL REPORT 2019

“MANAGING FOREIGN WORKERS, WORKING TIME REGULATIONS (DESPITE ASSURANCES THAT IT WON’T BE CHANGED I HAVE DOUBTS).”

“EUROPEAN STAFF. CHANGES IN LEGISLATION AWAY FROM EU. NECESSARY TAX RISES TO COVER THE MESS IT WILL LEAVE BEHIND.”

“CHANGES IN LEGISLATION THAT WE MAY NOT BE PREPARED FOR.”

“NO CONCERNS OVER IN-HOUSE PAYROLL. HOWEVER, WE RUN A PAYROLL BUREAU, THEREFORE, MORE LIKELY TO HAVE AN EFFECT ON CLIENT PAYROLLS. NOT ENOUGH INFORMATION ON HOW BREXIT MAY AFFECT PAYROLL.”

Overall, it looks like there is a positive outlook with regards to payroll but clearly there is some nervousness about what will happen next and the lack of real information.

Next, is blockchain (allows digital information to be distributed but not copied, plus by using Bitcoins you essentially deal in crypto-currency rather than sterling, dollars and euros). To do this justice please read the next section where we look more at this in more detail.

CIPP FUTURE OF PAYROLL REPORT 2019

Blockchain and pay on demand

What is blockchain? What is blockchain and how will it start to impact on payroll? The October 2018 edition of the CIPP’s magazine Professional in Payroll, Pensions and Reward includes an article that lifts the lid on blockchain. Please refer to this to deepen your knowledge of blockchain: https://online.flippingbook.com/view/351337/49/#zoom=z Have you heard of blockchain? Unsurprisingly, only 15.75% of the respondents have heard about blockchain and the potential impacts on payroll. For those who run international payrolls, the following may be something that you might be looking into (https:// www.balancepointpayroll.com/blockchain-will-impact-hr-industry/) “HANDLING PAYROLL OVERSEAS IS EXPENSIVE AND TIME-CONSUMING DUE TO THE CONSTANT CHANGES IN EXCHANGE RATES AND THE NEED FOR MULTIPLE BANKS. THE BLOCKCHAIN-BASED PAYROLL SYSTEM BITWAGE IS CHANGING THAT BY MAKING IT POSSIBLE TO PAY INTERNATIONAL EMPLOYEES WITH BITCOIN. THE FLEXIBILITY AND LOW FEES ASSOCIATED WITH USING CRYPTOCURRENCY REDUCES THE COMPLICATIONS AND COSTS.“ Blockchain being used as an alternative payment method in the future? Of the people who responded ‘yes’ to the above, only 13.7% saw this as a possible change whilst 50.68% stated that it might be a ‘maybe’. At this point in time this could go either way, but certainly there seems to be more and more evidence that it’s probably going to come in sooner rather than later in some shape or form; another one to watch. Certainly, 33.33% of the respondents stated a ‘maybe’ whilst the other response was a flat ‘NO’. What is pay on demand? As the name suggests, pay on demand is a service which enables workers to ask for payment as and when they ask for it, rather than on their contractual pay day. Currently more prevalent in the US, it is likely that pay on demand has arisen as a result of the increase in the gig economy where workers are paid as they complete each gig, or short-term contract. However, there is one important distinction that must be made here, and that is that under the gig economy, the workers are freelance contractors who can demand payment after each contract has been completed, rather than contracted employees, where their contract of employment will most likely include their payday and frequency. Although recent court cases may affect that employment status. There are several companies now offering this service in the UK, most describing how their services meet the growing change in approach to work amongst some workers, and their changing views on pay; these businesses also claim to offer financial education, awareness and wellbeing to employees. A true pay on demand arrangement would have a significant impact on payroll, which must meet the obligations placed upon it by legislation which requires a full payment submission to HMRC on or before the date payment is made to the worker. This would render pay on demand unworkable for payroll without a legislation change. Add For those respondents who haven’t heard of blockchain, you may want to investigate it further to understand the impact that it might have on your payroll.

CIPP FUTURE OF PAYROLL REPORT 2019

to that assessments for automatic enrolment and AEOs / DEOs along with NMW and salary sacrifice arrangements to name but a few and pay on demand brings almost insurmountable challenges for payroll.

But, looking at some of the services in more detail, it appears that many of the organisations are actually offering a type of loan service, either to the employee or to the employer, and then the service becomes more like a benefit in kind rather than actual genuine payment on demand. This puts a different perspective on the subject and may indeed prove to become more common in the future. But as with all loans, they must be paid back and there is always a charge for such services, with some charging the employer to give employees the benefit of being paid on demand, and others charging the employee to withdraw their money early. With many workers living from payday to payday, this service could indeed become more common, but may not necessarily offer the long-term financial well-being suggested, in fact, it could make matters worse given that loans always need to be repaid. If an individual finds they have a month left once the money has run out, the following month they will run out of money even sooner because they have paid off the amount they received early the previous month. To refresh your memory, the CIPP also wrote the following article back in June 2017 when Deliveroo were offering their riders pay ‘payment by delivery’: https://www.cipp.org.uk/news-publications/news/deliveroo-offers-workers- pay-per-trip.html Have you heard of pay on demand? According to the answers only 23.73% had heard of ‘pay on demand’ and out of those only 8.82% have considered it for their employees. As to how many plan to introduce pay on demand in the future, only 3.92% said ‘yes’ and 23.53% stated ‘maybe’. The ‘gig’ economy may change the way in which people are paid now and in the future. In addition, the flexibility offered by companies will invariably play a big part in talent attraction. Also, as more and more Millennials come out into the work environment they won’t want to wait until the end of the month/week to be paid and some could argue that as good corporate citizens that they shouldn’t have to. Consider also the rise of employee financial wellbeing that will eventually make a big statement in the UK i.e. companies taking the lead in helping employees understand their financial implications linked to their available funds/salary/wage. In the US, PWC (https://www.pwc.com/us/en/industries/private-company-services/library/ financial-well-being-retirement-survey.html) in their 2018 survey stated that: This is a subject that we need to keep a close eye on in the months to come.

“EMPLOYEES WANT HELP WITH THEIR FINANCES

MORE THAN HALF OF ALL EMPLOYEES WANT TO MAKE THEIR OWN FINANCIAL DECISIONS BUT ARE LOOKING TO HAVE SOMEONE VALIDATE THAT DECISION.”

In addition, they commented:

“54% OF EMPLOYEES SAY THEY WANT TO MAKE THEIR OWN DECISIONS, BUT WANT SOMEONE TO VALIDATE THAT DECISION”

CIPP FUTURE OF PAYROLL REPORT 2019

It may be that this will fall to the payroll/HR or finance functions.

Coming back to the survey, a question was asked about ‘do you see pay and demand being an attractive benefit for employees?’ Only 10.78% said ‘yes’ and 57.84% said ‘maybe’.

Can you imagine how HMRC will view this change? It will essentially mean that they get real-time-information even faster than they do today. Whether they could cope with that or not is another thing altogether; food for thought, yes?

CIPP FUTURE OF PAYROLL REPORT 2019

Is payroll a strategic or operational function?

Back in 2017 we asked the very same question and the results this year have come back with a slightly different view; in 2017 only 21% responded by saying that they felt payroll was strategic but, in 2018 the response came back with 4.98% saying that payroll was out-and-out strategic whilst, 59.24% said it was both.

OPERATIONAL 35.78%

BOTH 59.24%

STRATEGIC 4.98%

Earlier in the report, we talked about payroll standing as its own function and until it does it cannot really drive strategic thought. Why? Payroll will always be the poor relation to HR and finance and the air-time that will be given in the boardroom will centre around their strategic needs. Contentious, yes, but that is the truth of the matter. There is food for thought here, the more we continue to think/say this, the more it will be believed and will never change, think about what you can do to change this. CIPP agrees that payroll should be a standalone function, it needs to work with finance and HR but cannot be ‘part’ of either as it influences both. CIPP is seeing a shift towards pay and reward, which would indicate more focus on HR, as does a lot the legislation, BUT, payroll is still transactional and a large proportion of the budget for most businesses. It can report costs of absence, required by finance, but recommend ways of limiting those costs which impacts HR. Is payroll represented at board level within your organisation? Interestingly 36.45% answered by saying ‘yes’; however, what does this mean? Is there a specific payroll director who sits alongside the chief people officer and chief finance director or is it the latter roles that were mentioned? it’s one to dig into deeper next time around. Controversially, we think it’s the latter.

Interestingly 36.45% stated that payroll is represented at board level. When cross referenced with the job titles of those answering the survey, only 5% were payroll director. This suggests that the representation at board level could be through HR and/or finance director roles. The CIPP continues to promote payroll as a strategic function, and therefore will push for a voice at the board table. At a roundtable held during National Payroll Week, and alongside this survey, we committed to working with the industry to identify what this role looks like.

36.45 % said payroll was represented at board level

CIPP FUTURE OF PAYROLL REPORT 2019

Do you think payroll contributes to your organisational goals? There is no doubt that payroll plays a massive part in contributing to organisational goals. The fact that on the whole employees are paid as per the relevant legislations around the world by their contracted date, is a huge testament to the people that work in payroll. We all know that paying people incorrectly and not on time has an intrinsic human impact (motivation, engagement, retention etc) and getting it wrong has huge consequences for employees, pensioners, their families and employers.

79.43 % of respondents think payroll contributes to organisation goals

Therefore, it wasn’t surprising to see that 79.43% of the respondents said ‘yes’.

In addition to paying people, payroll has access to a huge amount of information that should be used to ensure that companies are protected from falling foul of new and existing legislation e.g. National Minimum Wage, gender pay reporting etc.

CIPP FUTURE OF PAYROLL REPORT 2019

Customer facing payroll

It never ceases to amaze how much interaction payroll has with internal and external customers when compared to other functions. In addition, the range of queries are often across many different areas ranging from simple questions to complex and time-consuming ones. It was great to see that this was reflected in the question set this year. For next year it would be great to see how these questions and answers are tracked i.e. are they on a spreadsheet, are they in emails or are they tracked via case management systems?

Further to this, to examine how much continuous improvement is enacted because of the query and the answer. For now, let’s look at the questions and answers received:

Howmany enquiries does the payroll team receive on average per month? Of course, there are numerous variables when looking at the following results e.g. the size of payroll, the number of accurate data sources, the frequency of payments and of course our good friends at HMRC.

More than a quarter of respondents (28.43%) reported that they received between 0-10 enquiries per month.

When looking at the number of enquiries in relation to the number of employees, there are hardly any surprises in the results. For organisations with up to 500 employees, most reported 0-10 enquiries, taking the largest numbers here, this indicates 2% of employees query their payslip. For organisations with 501-1,000 employees 31% reported 11-25 queries on their payslip; 1,001-10,000 it was 54% reporting over 501 enquiries, 10,001-50,000 stated that they received 101-500 enquiries (57%) and for organisations with 50,000-100,000 employees 71% reported that they receive more than 500 enquiries on average per month.

What is interesting, is that the percent of enquiries remains consistent. This report, therefore, recognises that typically a payroll department will receive enquiries on between two-five percent of their payslips each month.

CIPP FUTURE OF PAYROLL REPORT 2019

In the last 12 months, has the volume of enquiries increased, decreased or remained the same? No surprises that 26.5% of the respondents said that it had increased, 58.25% stated that it had remained the same. The first assumption that could have come to mind would have been the connection to GDPR and maybe gender pay. However, linking this to another question that was asked in the survey gives a different and historically unchanging view i.e. nothing has really changed and it’s just more of the same:

26.5 %

of respondents saw an increase in the volume of enquiries

What are the most common types of enquiry into the payroll department? It’s amazing what a great job payrollers do day-in and day-out. They demonstrate their skill in fielding queries and providing the answers to the question across the spectrum of different topics. This is backed by over 99.25% of the respondents saying that they could either always answer or most of the time answer the questions that came in.

Seeing ‘tax code queries’ ( 81.66% ) as the highest item is no surprise but, what else should be done to tackle this problem? What information is being put out by the payroll teams to employees to help them understand and what is HMRC doing to recognise that this is an reoccurring issue that is not going away? The number of tax code queries could potentially reduce if HMRC enabled employers to intervene on their employees’ behalf. Also, how much time is being spent in this area by payroll teams and imagine what you could do with that time if you had it back? By having a case management system, you could track this and see how interventions made would reduce the number of enquiries that payroll teams’ field. In addition, think of the other amazing data you can get to influence your strategic plans for x, y and z. The next choice was ‘Pension queries’ ( 62.06% ). This is interesting, but probably hardly surprising given that respondents stated that automatic enrolment was one of the key issues facing the payroll department currently. The third place choice was ‘new starters’ (49.5%) and this is probably a combination of multiple queries in relation to new employees being paid for the first time and the impact of receiving information from multiple sources which could be conflicting, or potentially be incorrect. One thing to consider here is what information is given to new employees in their onboarding/induction packs; also, if this doesn’t exist then is it time to create one? Is there a frequently asked questions document provided for example and are new employees aware of what they need to do etc?

CIPP FUTURE OF PAYROLL REPORT 2019

‘Overpayment or additional hours not paid’ ( 47.74% ); a number of different issues could account for this. It can be that the information provided to payroll is incorrect from the multiple sources it came from, it could be that the payroll systems are not automated and there’s still a huge amount of manual calculations that need to be undertaken and of course it could be that the HR system is not fully integrated into the payroll system etc etc etc. Again, as before how much effort is going into a) catching the overpayments or additional hours before? b) how much time and cost is going into sorting out these issues? Finally, in the top five was ‘queries relating to information displayed on payslip’ ( 42.46% ); the payslip is almost the shop window for payroll and with the advent of having more information in future (touched on later) it is concerning that this is in the top five. What’s going wrong? Is it that the payslips are just not clear and understandable by employees, is it that the time and attendance systems are passing over incorrect information, is it that the payroll system narratives are not simple to understand etc? More likely is that individuals coming into the work place are not exposed to the pay system until they come to work, and without education and awareness training on payroll, they are not going to understand the information provided to them, or the deductions from pay. This is something that the CIPP is tackling. We have an ‘understanding your payslip tools available on our website which organisations can share with employees (https:// www.cipp.org.uk/resources/payslip-tool.html) and we are delivering basic payroll training to students in schools, academies, colleges and universities across the country, with the help of various member volunteers. 21.89% of the respondents stated that they had received complaints/concerns from their workforce on the methods of distribution or the information contained on the payslip. Of those who responded in this way, 60.24% said many of the complaints were about the ‘method of distribution e.g. paper to online’. The second highest number of complaints ( 43.37% ) were that ‘employees require more information on the payslip’ and the third ( 38.55% ) stated that ‘employees want payslips sent to home address’. The point above is interesting given that most of the other complaints centred around ‘self-service security concerns’ ( 13.25% ), ‘postal system’ ( 12.05% ), ‘payslip recognition i.e. another person knows it is a payslip’ ( 10.84% ) and ‘identity fraud concerns’ ( 9.64% ).

Incidentally, the last two choices were ‘internal mail system’ ( 6.02% ) and ‘costs’ ( 3.61% )

If your payroll team is being inundated with queries regarding the payslip then what are you doing about it?

Can you imagine a business case written by you that looks at all the above and how much time, cost and energy might be saved and the impact on employees if you did? Also, imagine the credibility at the top table if you presented this.

For completeness here are the other choices answers:

28.39% 28.14% 20.35% 18.59% 16.08% 11.31%

Payslip not received

Reward and benefit questions

Other *

Student loan payments Bonus or commission

Late payment

CIPP FUTURE OF PAYROLL REPORT 2019

* Other – here are a few of the comments from those who responded ‘other’:

“PERSONAL TAX ISSUES, INCLUDING ASSISTANCE WITH SELF-ASSESSMENT”

“CALLS REGARDING FORECASTING PAYSLIPS FOR FUTURE CHANGES, CHANGE OF HOURS, FLEXIBLE RETIREMENT ETC...”

“QUESTIONS ABOUT RESTRICTED STOCK UNITS AND EMPLOYEE STOCK PURCHASE PLAN”

“A REAL MIX AND DEPENDANT ON THE TIME OF YEAR”

“WE PROCESS A LOT OF INTERNATIONAL BANKING PAYMENTS AND WE GET NUMEROUS QUERIES EACH MONTH AS THE MAJORITY OF EMPLOYEES ARE PAID IN USD, OMR OR GBP.”

CIPP FUTURE OF PAYROLL REPORT 2019

Payroll team recruitment and succession planning

One of the consistent themes in most payroll departments around the world has been the mantra of:

“PAYING EMPLOYEES ACCURATELY AND ON-TIME”

Whilst this is still important perhaps a more accurate mantra of the 21st Century payroll team could be:

“PAYING EMPLOYEES ACCURATELY AS PER THE RELEVANT LEGISLATION, ON-TIME PAYMENT AS PER THEIR CONTRACT, RAISING PAYROLL STANDARDS AND PROVIDING GREAT CUSTOMER-SERVICE”

With this in mind, let’s look at the current attributes that most people answered in the survey that are required of a payroll professional.

Attributes of payroll professionals

Accuracy A curacy Accuracy

Experience Experience Experience

Aptitude Aptitude Aptitude

43.96% 32.46% 26.37% 28.25% 25% 39.88%

Teamplayer Teamplayer Tea player

Qualications ualications Qualications

Autonomous Autonomous Autono ous

Accuracy A curacy A curacy

Experience Experience Experience

Aptitude Aptitude Ap itude

ACCURACY

EXPERIENCE

APTITUDE

TEAM PLAYER

QUALIFICATIONS

AUTOMATIONS

At the top of the list was ‘accuracy’ with 43.96% ; it was not entirely surprising to see this. It goes without saying that people must be paid accurately, but what does that mean? Well, it means that it can be as accurate as the existing legislation will allow the payment to be, or it’s as accurate as the current payroll system will calculate or is accurate based on the data that is received from the multiple sources. When was the last time you had to manually calculate a payslip or is it all system generated these days? When you hire someone do you still test that they can calculate and generate a manual payslip? ‘Autonomous’ ( 39.88% ) came next; meaning - having the freedom to govern or control one’s own affairs. No shock that this was in the list as payroll is quite often left to their own devices as there is a lack of knowledge and understanding from others within the business. Another point in support of the payroll department being standalone within the organisation. ‘Experience’ came next in the order of results with 32.46% of the respondents stating that it was the second most important attribute. The assumption here is that someone is joining a team who has been tried and tested, however, how is this determined and what are they experienced in? Also, does experience include the ability to look at the payroll with an eye of continually evolving it so that it is giving the maximum amount of quality possible? Teamplayer Qualications Autonomous Teamplayer Qualications Autonomous Tea player ualications Autono ous

CIPP FUTURE OF PAYROLL REPORT 2019

The third attribute was ‘aptitude’ ( 26.37% ) i.e. the natural ability to do something. Payroll is a very logical process and only becomes illogical when things disturb the natural order of it i.e. it goes wrong for whatever reason.

Next came being a ‘team player’ with 28.25% . Being able to roll your sleeves up and ‘muck-in’ is a very important element of any payroll team especially, as things get ‘interesting’ toward the relevant payroll closing dates, and critical times in the payroll calendar. This is something that most payroll people just do; there aren’t very many functions that do this organically every single day, week, month etc. Payroll should celebrate this and be very proud of the team bond that they have. The biggest surprise was the last item, ‘qualifications’ coming in at number five ( 25% ). If payroll people are to be taken seriously by business in general, then this must be further up the list and a differentiator. The ability to demonstrate that a payroll person is credible amongst their peers can only be gained by taking qualifications and of course being part of the CIPP. Coming back to the earlier subject in the survey, being influential in the boardroom and being strategic can only be improved if people who are presenting such items are backed with the necessary qualifications e.g. a finance director would have completed their ACA, ACCA or CIMA. There needs to be more of a push on people being qualified in payroll as the percentage is only circa 3.6% . This is something which the CIPP is working hard to address. We are continually working with employers, recruitment agencies and government to raise the profile of payroll and change perceptions, moving away from the ‘payroll just pushes a button’ way of thinking. But, what can you do within your own organisations to support this? Think about your role and how you can add value and raise the profile of payroll with your employer, this will assist the CIPP and the profession in recognising the value of payroll and the importance of having skilled, qualified and experienced payroll professionals.

Whilst the above is a good list of attributes, in our research next year we will be hoping to see such attributes as continuous improvement, customer service and tech savvy.

Before moving on one of the questions asked was “which of the following do you see as important factors when recruiting”, un-surprisingly the first three were ‘salary’ ( 87.23% ), ‘good working environment’ ( 86.97% ) and ‘benefits pension’ ( 58.24% ). However, the last one which is connected to qualifications mentioned above was ‘funding of training’ ( 52.39% ); once again if the profession and payroll is to be taken seriously the CIPP would like to see a greater emphasis placed on this in future years. It doesn’t need to be number one on the list, but it must be given a higher bar to drive payroll’s credibility in the boardroom and in business generally.

Do you have a succession plan within the payroll department? If you had to guess the survey response what would you have said; yes or no

Astonishingly, out of the 376 people who answered the question, only 43.88% said ‘yes’, leaving 56.12% saying ‘no’. This is similar to the 2017 survey which reported that 55% did not have a succession plan in place. Now, this could be because we had a lot of people who responded that are working on their own, however, coming back to one of the main controls that payroll should have in their risk control matrix this should not be the case. If this is correct, those people who answered ‘no’ should be speaking to their line managers today to get this mapped out ASAP. For any audit (non-statutory) into payroll, this would be a fail.

43.88 %

56.12 %

CIPP FUTURE OF PAYROLL REPORT 2019