Hell fest (https://bit.ly/32Px05I)
Mike NicholasMCIPP presents his experience of payroll hell, but asserts that even in dreadful circumstances there are lessons and experience to gain
H ave you experienced the payroll from hell, where everything that can go wrong does? A payroll so awful, so outrageously out of control, it almost defies comprehension. A payroll where everything you examine disintegrates, and nothing can be relied upon as accurate. A payroll heavily reliant on manual processes and intervention. A payroll function utterly dysfunctional and rightly mistrusted by everyone in the company – and by the local tax inspector. And now imagine not having any forewarning that you had been recruited to manage the payroll from hell… Well, in my first week in a new employment in late May I was buried in hundreds of errors in the two weekly payrolls, comprising payments to duplicated employments, missed payments, numerous overpayments and PAYE mistakes. Unsurprisingly, the managers of the weekly-paid factory operatives vented anger that production lines were slowing as staff queried their pay. It was horrendous, and so by Thursday I was struggling to comprehend the turmoil engulfing and overwhelming me. I had neither perception nor experience that payroll data and processes could be so inaccurate and unreliable. It is at fraught times like this when we doubt our own ability, knowledge and intelligence but discover our strengths – and weaknesses – and learn invaluable lessons that inform
rely on going forward. By mid-June, the weekly payrolls’ accuracy had improved immensely, and though for a short time some errors continued equilibrium had been established. With the ‘burdens’ of a new child and mortgage, I just had to succeed. It took many long hours of painstaking work, regularly working beyond midnight and at weekends for several months, before almost everything had been corrected. And during this period other disasters demanded attention. The local tax office had been reminding the company to submit its annual P35 and P14 paper returns for the tax year recently closed. In submitting these returns the company made a substantial additional balancing payment of income tax etc related to a shortfall in remittances for the weekly payrolls. A recurring error I found in the payrolls for the current tax year was duplication of employee records, which occurred where employees were moved between the two weekly payrolls or to the monthly payroll which all shared the same PAYE scheme reference. Their effect is to count year-to-date values of tax etc twice when calculating the amounts of tax etc due for a tax period. Having discovered that the payroll records for transferred workers in the current tax year had not been deleted (or made ‘dormant’), I found many such instances in the records for the closed tax year. These were the cause of the discrepancy between the amounts actually remitted and ‘due’ according to the P35
obtaining corrected P35 and P14 returns from the bureau took several months; fortunately, the local tax inspector had not yet processed the original returns so accepted their resubmission in late September. The overpaid tax etc was recovered by simply reducing the next remittance to Inland Revenue (HMRC’s forerunner). Another disaster involved failings in handling requests from both the local tax office and social security offices for earnings and employment details. There were no controls in place, and I recall a communication challenging why we had given different earnings details for the same worker for the same period. My colleague had replied by saying that we could not explain why the figures differed. Unsurprisingly the company was subjected to a PAYE audit. My experience of duplicated employments in the payroll from hell enabled me 33 years later in the early days of PAYE real time information to identify the cause of why HMRC was claiming that their records showed some employers owed substantial amounts in income tax etc. In early 2013, if my memory serves me, payroll professionals were angrily rejecting increasing HMRC’s assertions and demands for immediate full settlement. Unable to establish the cause, discussions raged on LinkedIn (and on other social media). In a moment of insight, I perceived a potential cause/source was duplicated employment records created automatically in HMRC’s PAYE system. Shortly after I posted this explanation on LinkedIn, HMRC acknowledged that duplicated employments were indeed the source. My payroll-from-hell experience surely played a part in my identification of this system failure. n
and guide us in later situations. Bringing stability, accuracy and
reliability to the payroll function became my urgent mission. My first step was to identify essential payroll data that I could
listing for the preceding tax year. Correcting the payroll data and
...cause of the discrepancy between the amounts actually remitted and ‘due’...
| Professional in Payroll, Pensions and Reward | October 2020 | Issue 64 26
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