Feature topic - Payroll’s practical role in workplace financial awareness
...the payroll team should be included in the pensions governance committee, which comprises a number of specialisms...
qualifications required to give independent financial advice and, like HR or any other department, individuals in payroll would not normally be qualified to give financial advice or to make decisions on behalf of employees or to triage financial advice. However, there is a difference between giving advice and giving information, and payroll professionals can definitely help with information. There is a responsibility from companies that offer employee benefits to give employees enough information about them in order that they can make an informed choice. This is where payroll and HR can work together – for example, ensuring employees don’t fall below the minimum wage if benefits are made through salary sacrifice, helping to set up new benefits that are paid for through salary deduction, expertise on levels of applicable National Insurance, and explaining payslips, tax codes and levels of tax deductions. Employees often need help to understand these types of issues, and payroll can be proactive in working with HR to help with clearly explaining them. Henry Tapper: Financial advice is a minority sport – available to those with the means to pay for it – which usually means a six-figure sum. Triage would mean identifying a need and establishing the staff member has the means to pay. This is a big ask. Instead of signposting financial advice, payroll could be signposting MaPS. The triage could be whether this is to Pensions Wise (when the staff member is over over 50), or whether the inquiry should be directed at the more general Pension Advisory Service or the Money Advice Service when help is needed on non- pension related matters – for instance, debt counselling. Should payroll members be more involved in retirement planning activities for staff? MB: When payroll is often the team that implements pension contributions, some may relish the opportunity to extend their role beyond a transactional function and become more engaged with the wider aspects of communication and action planning. While this may provide a deeper level of job satisfaction for some, others may feel stressed by the prospect of being out of their depth. Given the technical complexity of pensions, it would be unfair
HT: Yes, as well as recommending MaPS, payroll can refer staff to the services offered by the pension provider or (if there is one) the employee benefit consultant commissioned by the employer. How should an employer decide what aspects of financial awareness to offer/provide for employees? MB: A first port of call for an employer looking at their financial benefits is to conduct a financial wellbeing survey of their employees. This can be revealing. I remember one management team being absolutely shocked, saying, “We pay them market average salaries, so we never expected evidence of such poor financial wellbeing”. Our surveys have repeatedly found evidence of savings levels not extending much beyond a month’s income and employees struggling to cover day to day costs. In our most recent survey undertaken during the first lockdown we reported that 23% had to ask friends or family for financial help and 19% were planning to approach their employer. Remember, financial support may not just be via benefits. This could be financial education or even changes to internal procedures such as how expenses are processed or sick pay policies. VG: As with any aspect of a reward programme, employers should do some research and understand their employees to determine what type of support and financial awareness to provide. Once payroll has an understanding of its employees, it should also consider the culture of the organisation and provide financial awareness that fits with both employee need and organisation culture. For some organisations this may mean basic financial awareness training delivered to all employees, and for others it may lead to financial education and advice provided on a one-to-one basis. KY: Overall, employers should seek feedback from their staff into what aspects of financial awareness and offerings they
for employers to expect this additional involvement without providing further training. Ideally the payroll team should be included in the pensions governance committee, which comprises a number of specialisms – internal communications, benefits managers, finance and potentially an independent pension consultant. VG: Since the introduction of automatic enrolment for pensions in 2012, payroll professionals have had an increased involvement in pensions. Payroll professionals should be encouraging employees to take an interest in their retirement planning, but again cannot provide advice in this area. They can use their position, knowledge of employees and connections to research pension schemes that are aligned with their organisation’s culture. However, when it comes to advising employees where to invest their money, payroll professionals should signpost to financial advisors and not offer this advice themselves. At the CIPP, for example, we offer a pension scheme with investment options for employees to manage through an online portal. As part of the service employees can choose to pay for advice on where to invest based on their retirement plans. This is something that payroll has organised as a service, but is not responsible for providing the advice. KY: This is an area that requires knowledge of the impact of pension savings and the choices available to employees on retirement. Typically, this is done via pension specialists, the pension provider and the employee pension manager and benefits manager. Where payroll can add expertise is, for example, on ensuring employees know when they no longer have to pay National Insurance, the impact on pay that might be had if they go part-time before fully retiring and how their tax codes might change. It is important that payroll is not forgotten, and it can add value in being involved in the discussions around retirement planning on the areas that impact payroll.
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| Professional in Payroll, Pensions and Reward |
Issue 69 | April 2021
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