COMPLIANCE
Changes to the collection of hours worked through payroll: a journey
Lora Murphy MCIPPdip, editor and Samantha O’Sullivan ChMCIPPdip, policy lead from the CIPP, discuss the chain of events which allowed the CIPP’s policy and research team to represent the voice of payroll professionals on a number of levels regarding an important change for the industry
T he CIPP’s policy and research team is here to act on behalf of you, the payroll professionals, and the broader payroll industry. We wanted to share some insights with you regarding the journey we have been on in representing you and your views / opinions when HM Revenue and Customs (HMRC) announced its intentions to change the data it collects in terms of employee hours worked. Let’s cast our minds back Our story begins back in July 2022, when the government published the consultation, ‘ Improving the data HMRC collects from its customers ’. This aimed to consider how additional data could be collected to improve the tax system while ensuring any additional burden was as minimal as possible. Several changes to real time information (RTI) were proposed, but not all of them taken forward. The potential changes were as follows: l collecting more occupational data to understand the skills the government should focus on to best help employers and employees. This would be achieved by requesting more information regarding employee occupations through an extra field added to RTI l additional data relating to office locations or normal work bases for employees. This was with the aim of highlighting areas of real economic activity to HMRC and to show the split of activity between a business’s locations l changes to the way employee hours are recorded, to change the process of selecting from a range of bands (A to D) of hours worked through RTI to recording the actual number of hours worked per pay period. Not all these proposals were actually taken forward, as it was established that
the administrative burden of collecting the occupational and location data would far outweigh the benefits of doing so. HMRC did, however, confirm that it would proceed with the changes regarding the recording of employee hours worked. Representing payroll across all environments Fast forward now a year and a bit. HMRC reached out to the policy team to follow up on this topic, wanting to explore the impacts of these changes for those administering payrolls. As we recognise there are many differences in this space dependent on whether someone works on an in-house payroll or processes payroll in an outsourced environment, we suggested that two sessions be held. And so, in October 2023, two think tanks took place, one for each such group. The lead official on the original consultation from HMRC joined both meetings and allowed members to talk freely around any concerns or comments they had regarding the changes. The think tank for payroll providers highlighted that they, specifically, were very concerned their clients wouldn’t be forthcoming with the extra information on hours. They also expressed their worry that if the clients weren’t privy to that information or didn’t have it to hand, they would potentially just provide any figure, which would likely result in the opposite of what HMRC is trying to achieve. Additionally, if the hours were found to be incorrect, what would the implications be? Would any repercussions fall on the employer or on the payroll provider? Across both meetings, attendees stressed the importance of holding a ‘pilot’ period to allow the changes to be rolled out in. This would allow organisations to adjust to the
changes before they become mandatory. A timeframe of a year was suggested, and as HMRC has confirmed its intentions to introduce this from tax year 2025/26, this would need to be facilitated rather swiftly! Concerns were raised across both environments around employees who don’t work in a traditional pattern or format, e.g., seasonal workers or term-time workers. HMRC confirmed that a list of exemptions would be provided (scenarios in which the hours worked can’t plausibly be recorded), but both the CIPP and the attendees reiterated the importance of ensuring this guidance is crystal clear. Payroll professionals aren’t fans of grey areas. A final observation from the think tanks was that payroll professionals tended to believe that the first set of hours provided would be the most correct HMRC would ever get. Over time, when employees change hours, for example, there seemed to be a consensus that businesses / clients wouldn’t keep on top of them or provide the correct information each pay period. This, again, would defeat the whole purpose of HMRC improving the data it collects on employee hours worked. It struck some attendees that there was no clear intention or articulation for exactly what the data would be used for. It would certainly be an improvement on what’s already collected, but to what end? Some stated it would help payroll professionals in understanding how to change processes and accommodate the change if they knew how that data would be used. HMRC found these think tank sessions really useful and took lots of considerations away in terms of constructing straightforward, transparent guidance to help organisations to get this right and to act compliantly. The CIPP
| Professional in Payroll, Pensions and Reward | February 2024 | Issue 97 16
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