FEATURE ARTICLE | 27
This issue, Lora spoke to: Paul Simpson MCIPP, Senior Director of Payroll and People Operations, Europe, Middle East and Africa, Ralph Lauren (Please note that Paul’s responses relate to global payroll practices) Fiona Smith MCIPPdip, Payroll Training Manager, IPP Education Paul Unwin MCIPP, Payments Integration Manager, Caxton. Q: What are the top three compliance actions you’d advise every pay team to take on a monthly basis? Paul Simpson: To reduce payroll risk and maintain compliance, payroll teams should focus on a small number of high-impact actions each month. The following three activities address the areas where errors most commonly result in financial penalties, audit findings or employee issues: 1. The priority is validating employee and pay data changes. Payroll teams should review all master data updates made during the month, including new hires, terminations and compensation changes, ensuring appropriate approvals and documentation are in place. Particular attention should be paid to high-risk areas such as executive pay, contractors and international workers. Bank detail changes, minimum wage compliance, allowances, premiums and overtime eligibility should be spot-checked, and any unusual variances, such as excessive overtime or manual overrides, investigated. Data changes remain the leading cause of payroll errors and compliance breaches and can result in significant financial and reputational impact. 2. The second focus area is tax deposit and reporting verification. Payroll teams must ensure all payroll tax deposits and filings are completed accurately and by the required deadlines. This includes validating tax calculations and withholdings, confirming tax rates are current and correctly applied and promptly investigating any discrepancies. Even when payroll calculations are correct, late or incorrect filings can trigger penalties, interest charges and regulatory scrutiny. 3. Finally, audit and reconciliation activities are essential. Payroll registers should be reconciled to payroll accounts and general ledger entries, supported by a monthly compliance checklist signed off by payroll and finance leadership. These controls create a clear audit trail, strengthen
internal controls and support SOX and internal audit requirements, reducing the risk of control failures, payment errors and wage or tax violations. Fiona Smith: Although not all compliance activity happens monthly, there are three areas I’d expect pay teams to actively review every pay cycle because they present the greatest ongoing risk. 1. National minimum wage (NMW) checks: Pay teams should routinely review minimum wage compliance by worker type, ensuring hours are accurately captured and that any changes to pay or deductions haven’t inadvertently reduced pay below the correct rate. 2. Automatic enrolment duties: Each pay cycle should include assessing workers not already enrolled, enrolling eligible jobholders, processing opt-in and opt-out requests, issuing statutory communications and calculating / collecting pension contributions accurately. 3. Processing payrolled benefits: While not yet universal, payrolling benefits will rapidly become part of the monthly payroll process for all organisations. This requires reviewing benefit changes each period and if necessary, recalculating any notional pay to ensure correct tax treatment. Paul Unwin: From a payroll perspective, the three main pieces I’d look at are the following: 1. Staying updated on legal and regulatory changes. 2. Conducting monthly payroll audits. 3. Maintaining accurate records and secure data. Now, most people reading this will be CIPP members who are lucky enough to have the updates from the policy and research team and the Advisory Service. However, regular checks on HM Revenue and Customs’ (HMRC’s) website is always advised. Taking time to audit your payroll data ensures you can identify any discrepancies as early as possible. It will ensure you’re able to reduce errors, spot any potential fraud and comply with statutory pieces such as NMW rules. Ensuring your data is secure and accurate will protect against any data
breaches and mean you’re able to provide any audit / reporting pieces quickly and efficiently to your business or your clients, if operating in a bureau. Q: What tools and methods do you use to identify, quantify and track risks? PU: To identify, quantify and track risks, I recommend using a structured risk management approach using proven tools and methods. For identification, practices such as risk registers and stakeholder workshops can bring any potential threats across operational, financial and compliance areas to your attention. Techniques like SWOT analysis, scenario planning and trend analysis will help to uncover hidden vulnerabilities and spot any anomalies or emerging risks to your immediate and wider business. For quantification, applying risk scoring models, such as a likelihood-versus- impact matrix, will help to prioritise issues effectively where financial exposure is significant. Simple sensitivity analysis can be used to understand how changes in key variables affect outcomes. Key risk indicators or ‘KRIs’ should also be monitored to provide early warning signals of increasing risk levels. For tracking, it’s important to have a good risk management software and / or dashboard in place to maintain visibility and accountability. These tools allow for real-time updates, automated alerts and audit trails for compliance. Frequent cross-functional risk reviews ensure risks are evaluated and monitored across teams. Owners should be assigned to each risk identified, so everyone is clear on what their responsibilities are. Regular reviews (they could be monthly or quarterly) ensure risks are reassessed and mitigation plans remain effective. Having an effective risk committee allows for regular reporting to leadership, providing adequate visibility at the right level. Managing risk is always going to have its complications. However, being proactive will significantly reduce any potential exposure.
“Ensuring your data is secure and accurate will protect against any data breaches and mean you’re able to provide any audit / reporting pieces quickly and efficiently to your business or your clients, if operating in a bureau”
Made with FlippingBook - Online magazine maker