PAYROLL INSIGHT
The hidden role payroll plays supporting families
Helen HargreavesMSc ChFCIPPdip, CIPP associate director of policy, reveals details and urges payroll professionals to look closely at pay dates
A s payroll practitioners, we all know how important our role is, both to the workers we pay and to the employer. But we also play a vital role for the UK as a whole with payroll collecting around £300 billion for the Exchequer each year. Just look at the impact that the work you do has on each and every one of us, both directly and indirectly. it, payroll genuinely does help to keep the UK economy running. And although most of the population complain about paying income tax, they would probably be complaining much louder without it because the income tax collected through payroll is used to help fund public services such as the National Health Service (NHS), education and the welfare system, as well as investment in public projects, such as roads, rail and housing. National Insurance contributions (NICs) fall into a number of classes. Classes 1, 2 and 3 NICs paid are credited to an individual’s NI account, which determines eligibility for certain benefits. Classes 1A, 1B and 4 NICs do not count towards benefit entitlements but must still be paid if due. Payroll is responsible for calculating/ deducting and paying classes 1, 1A and 1B NICs. Like income tax, NICs also help to fund the NHS but unlike income tax, paying NICs has a more direct impact on individuals because this is how they build up entitlements to claim their state pension, bereavement benefits for their spouse or civil partner if they die, and benefits if they are unemployed or off work sick – see the table. The bigger picture Without wishing to sound too smug about
Statutory payments As well as paying the NICs which fund state benefits, payroll is also responsible for making statutory payments if an individual is absent due to illness or becoming a parent. These statutory payments are not paid out of NICs but directly by the employer, although small employers can claim back some or all of the cost from the state. Employers often choose to run their own sick pay and maternity schemes which can be more generous than the statutory payments. ...policies to help support working parents, with varying degrees of success... Supporting families Over recent years the government has introduced several policies to help support working parents, with varying degrees of success. Considered by many to be solely a human resources (HR) function, the payroll department plays a vital but often unacknowledged role in enabling many of these policies, the most obvious of which being the paying of maternity, paternity and adoption pay, as well as making the correct amendments to pay for emergency and parental leave. But there are also other ways in which payroll helps support families. ● Shared parental leave and pay – Shared parental leave (SPL) can give parents more flexibility in how they share the care of their child in the first year following birth or adoption.
Parents can share up to 50 weeks of leave and up to 37 weeks of pay and choose to take the leave and pay in a more flexible way (each parent can take up to three blocks of leave, more if their employer allows, interspersed with periods of work). Eligible parents can be off work together for up to six months or alternatively stagger their leave and pay so that one of them is always at home with their child in the first year. But with this flexibility comes an essential requirement for good, timely communication between payroll and HR to ensure the parents are paid correctly depending on whether they are working or on a period of SPL. However, despite being introduced in 2015, there are still very few families taking advantage of SPL. The government has been considering how to encourage greater use of shared parental leave, and whilst a Bill to extend to the self-employed is making slow progress through Parliament, the proposal to extend SPL to grandparents has been shelved, for now at least. ● Flexible working – There are many forms of flexible working. It can describe a place of work, for example homeworking, or a type of contract, such as a temporary contract. Other common variations include part-time working, flexitime, job sharing and shift work. Whilst requests for flexible working in any of its forms would naturally be dealt with by HR, payroll plays a key role in ensuring that workers get paid accurately if their working hours or patterns change. Universal credit Perhaps payroll’s biggest impact, and one upon which most workers will be unaware,
| Professional in Payroll, Pensions and Reward | July/August 2019 | Issue 52 16
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