FEATURE TOPIC
This issue, Jerome spoke to: ● Karen Beckett BA (Hons) ChFCIPP , head of payroll and benefits, Dorset HeathCare University ● Simon Puryer , executive practice lead, LACE Partners ● Ellis Rees ChFCIPPdip , strategic account director, UK and Ireland, ADP.
Is there anything we should be doing to encourage basic finance / payroll understanding among employees, family and friends? Karen Beckett: My starting point would be to ask my family and friends if they know what I do for a profession. In many cases, they would say they do and that I pay people. But I would then take that a step further and ask them if they know what that really involves, opening a wider discussion. In doing so, I would ask a question such as, “Do you know what your tax code is and what it means?” Once you can find an opening to discuss pay and pensions, in many cases, it will lead to more questions being asked. I feel that, as payroll professionals, we have a responsibility to educate our family and friends about pay and pensions. This will ensure they understand how their pay is calculated so they can make other financial decisions with better confidence and knowledge. Pay is pivotal to people’s lives. By bringing pay into the open and having conversations with family and friends, more people will have a better understanding of pay and pensions. We should be encouraging everyone around us to have a basic understanding of their pay to enable them to have a secure future. Simon Puryer: I think this is a tricky question because it leads me to ask to what extent? Understanding their payslips and what the different elements of pay mean, absolutely, but detailed financial planning, no. However, I have heard of cases where people don’t want to be promoted because they will actually lose money by moving into the higher earning tax bracket, which seems ridiculous. Therefore, there’s basic education that can be undertaken and businesses do have a responsibility to give their employees access to resources which teach financial literacy and ensure people understand their payslips. Eliis Rees: As a payroll industry, yes, we should. One challenge we have is that when students leave school, some of the most basic financial knowledge isn’t taught.
As an industry and as employers, we’re in a perfect position to promote some of the most basic financial / payroll information. This could include: ● how to understand a payslip ● why we pay tax / National Insurance (NI) ● understanding your tax code and how important it is to monitor your earnings and tax liabilities. My family and friends who know that I work in the industry quite often come to me for help and guidance, usually to understand their tax code / deductions. The first thing I say is, “Have you set up a personal tax account – and if not, why not?”
explanation better if the actual calculation is detailed in full. Another person might want the explanation verbally. Whenever you’re communicating payroll to a non-payroll person, it’s essential that you think about your audience and adapt the explanation accordingly. SP: Again, I think this comes down to what we mean by the ‘complexities of payroll’. Do we mean complexities of the payslip, like tax, NI, pension, etc., or complexities of how your pay is calculated, for example, in arrears, holiday pay calculations, etc.? I’m a firm believer that when somebody starts at a new business, they should be educated on the way payroll works in the particular organisation, as elements are likely to differ from business to business. However, it’s important people understand that payroll isn’t simply a ‘big red button’ and that it’s reliant on good data going in to ensure good data comes out. Is it the employee’s responsibility to record their overtime or is this the responsibility of their line manager, or perhaps a time and attendance tool? Overall, I think it’s about bringing it to life, explaining the basics and ensuring the employee understands the part they have to play in payroll and its accuracy. ER: Someone once said to me, “If you understand your payslip, you understand payroll”. I’m not sure how true that is. I was fortunate that my first job on my first day was to manually calculate a payroll (for possibly 30 employees). That was a baptism of fire but the way I looked at it was that it’s like riding a bike – once you know, you know. From my first day in payroll to now, roles and departments have changed substantially. I would say the basics of a payslip haven’t really changed, but the role of the department is very different and much more complex, as well as governed by more compliance. So, to answer the question, the basic processing of payroll isn’t so complex, but the peripheral of payroll is. By this I mean that compliance and interaction with other departments have become much more technical, based on the need to reduce ‘waste’, errors and to make improvements in reporting.
"We should be encouraging
everyone around us to have a basic understanding of their pay to enable
them to have a secure future"
How easy do you think it is to explain the complexities of payroll to a ‘non-payroll’ person, and how can we make it less complex? KB: It isn’t always easy to explain the many complexities of payroll to someone not working in the profession. With so much legislation behind the foundations of payroll, many non-payroll people will switch off from any explanation unless it’s in more simplistic terms. Individuals want to know if they’re being paid correctly or not, and being able to explain their payslip in plain English is essential. It’s also important to remember that English might not be the individual’s first language. When explaining pay, it’s important to remove the jargon and don’t use acronyms. An acronym may have several different meanings and, so, it’s important to say / write the full meaning rather than list initials. It’s also worthwhile remembering that everyone is different. One person might understand a fully written explanation while another person might understand the
| Professional in Payroll, Pensions and Reward | May 2024 | Issue 100 36
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