PENSIONS
Payroll – the heartbeat of workplace pensions
Dan Donovan, Payroll Partnerships Manager, People’s Pension, discusses how the pensions industry can truly place payroll at the heart of its processes
S ince the dawn of automatic enrolment (AE), payroll has become the beating heart of workplace pensions. And it’s time the pensions industry gave it the recognition it deserves. When I started working in the pensions industry, administrative staff would input everything manually, from new scheme applications to new member sign-ups and monthly contributions. Today, two decades later (yikes!), such practices seem ridiculously outdated – now it all just runs at the click of a button… right? Wrong. With every UK employer now required to have a workplace pension scheme, pension administration has become more complex than ever, involving a continuous cycle of: l assessing the workforce l managing enrolment and opt-outs l paying contributions. Nowadays, it’s the responsibility of payroll to keep the whole system working, ensuring millions of employees are enrolled into their pension schemes, contributions are collected and compliance is achieved. I’ve been involved in initiatives which aim to navigate the grey space between payroll and pensions, proposing data standards and middleware solutions. Yet, I still find myself asking why the pensions
industry hasn’t done more to embrace the vital role payroll plays. Looking ahead, what changes can the pensions sector make to truly put payroll at the heart of its processes? Here’s my three key point plan for how we – the pensions industry at large – can, and must, do better in the future. Add value to payroll providers’ propositions It always strikes me as odd that every employer is required to have both payroll and a workplace pension, yet the two are often not connected by a shared value proposition. There are a couple of obvious ways we can change that. Firstly, we can ensure employers who choose to outsource their administration to specialist payroll providers benefit from reduced or waived administration fees. This recognises the skill and service delivered by the payroll professional, which in turn reduces the support burden on pension providers. Secondly, benefits can be built into the pension package, such as financial education, salary sacrifice implementation and member discount schemes. Pension providers are well placed to procure these types of benefits and make them accessible to clients of payroll providers. Providers like People’s Pension are already implementing this approach,
waiving our fees for employers who sign up through payroll providers and rolling out valuable pension benefits which enhance the offering for your clients. But we appreciate there’s still work to do. By working together on a joint value proposition, payroll providers can not only attract more clients and grow their business but also raise the profile of workplace pensions as a truly valuable employee benefit. Invest in payroll technology Traditional desktop software has long dominated the payroll bureau market. However, as existing software companies launch new cloud-based solutions and cloud-specialist companies enter the market, some of the older software is starting to fall behind. At the same time, advances in application programming interface (API) technology now make it possible to remove the need to manually download files from one system and upload them to another. APIs offer significant time and efficiency savings, while also fundamentally improving data security and accuracy, by creating a closed circuit where manual data handling is only required in exceptional circumstances. And yet, the widespread adoption of cloud software and pension APIs has been significantly slower than anticipated.
| Professional in Payroll, Pensions and Reward | September 2025 | Issue 113 58
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