Payroll statistics survey report 2008-2022

Payroll Statistics Survey Report 2008-2022 Compiled and edited by the CIPP policy and research team

Sponsored by

This annual research looks at • the number of people being paid • the frequency at which they are paid • the method by which they are paid • how payslips are distributed

Contents

Datagraphic foreword 

4

Executive summary

5

Key findings

5

Summary of results

6

Year-on-year payslip trends

6

Number of individuals paid

6

Number of payrolls processed

7

Payroll frequencies operated

8

Popular pay days and dates

9

Payroll statistics

12

Change of pay frequency

12

Payroll payments

13

Payslip information

14

Holiday pay

18

New for 2022

20

Health and social care levy message

20

Ongoing impact of coronavirus job retention scheme (CJRS) 

20

Core demographics

21

In-house versus payroll service providers

21

Industry sector

21

Business location

21

3

Datagraphic foreword

Glyn King Group managing director, Datagraphic

acknowledging the insurmountable data protection issues affecting all organisations.

As an advocate for the CIPP, Datagraphic is pleased to support the annual Payslip Statistics Survey Report and has done so since it was first published in 2008. The flagship survey has provided invaluable insight into trends impacting payroll processes and payslips and continues to be a helpful resource for organisations of all sizes. In the wake of the pandemic and a relative return to ‘normal’, payroll teams have continued to work relentlessly despite the ongoing challenges. Confronted with changes in confidentiality legislation, privacy, compliance, employment law or regulations, payroll professionals have persevered in a period of hybrid working to ensure employees get paid accurately and on time.

The results show that employers are taking steps to provide secure payroll information. 67% of employees use personal login credentials to access their payslips, and 35% of emailed documents are password protected. However, it remains a considerable risk that 2% confirmed payslips sent via email had no protection of the employees’ personal information. Only 17% use multi-factor authentication to protect data security online. As a payroll specialist, I urge payroll teams without security measures to seek a robust software solution that automatically provides peace of mind against potentially damaging data breaches. Interestingly, how payroll teams communicate the new health and social care levy contributions through payslips arose in the report. While the majority (61%) confirmed they would include the message on all payslips, 18% said they would only display it if the payslip software did so automatically. As payslip information is an opportunity to engage with employees on matters beyond understanding their pay, organisations using outdated payroll technology are missing a convenient and proven method to communicate with employees. Employees want to see their pay information, so why not use it to share other important messages? Datagraphic’s Epay is an excellent way of communicating more than pay information. It can be a communication and resource hub where employees can access documents that are personal to them and company-wide documents such as policies and handbooks. I am looking forward to seeing an uptake in payroll technology that offers a more agile process, flexibility in payments, greater information, and advanced secure payslip distribution.

Since the last survey, I’ve seen first-hand the impact of these numerous obstacles.

The increasing pressure of economic factors over the last 12 months, including a rise in the cost-of-living and the end of the furlough scheme, have manifested in significant changes for payroll teams. Payroll for larger headcounts has reduced, and there have been unprecedented changes in requests to amend pay frequency. The report shows that 23% of respondents confirmed they had implemented a change in pay frequency, compared to just 3% in 2020. Although evident that a wide range of factors has generated these pay frequency changes, redundancies, the collapse of organisations, and higher costs are the harsh reality of the global crisis. Never has it been more critical for accurate data and first-class technology to help payroll teams balance employee welfare with an efficient payroll process. The report shows a continued trend of digital payslips, with 77% of teams using a self-service platform, correlating to how customers have used Datagraphic’s Epay platform over recent years. I am therefore pleased to see questions about the security of payslip information in this year’s survey,

Thank you to the CIPP and all those who contributed to this report. I trust you will find the results to be thought-provoking.

4

Executive summary

The Payslip Statistics Survey Report is one of the CIPP’s flagship surveys which explores trends impacting payroll processes, payslips and compliance. The research has been conducted on an annual basis since 2008 and continues to confirm and discover practices in payroll. The policy and research team is responsible for collating this research and is thankful to everyone who took the time to respond to the survey to generate the results in this report. These contributions are vital to ensure the results are representative of the payroll industry as a whole. Each year, topical questions are included in the survey. This year, the health and social care levy payslip message, and the ongoing impact of furlough were included. The associated results are noteworthy. Furthermore, this year, the question bank has been developed to include new research to expand the depth of this report. The questions have been refined and modernised to ensure the results are relevant and meaningful for the payroll professional of today. KEY FINDINGS ● The number of payroll teams processing more than 10,000 employees has reduced, but the number processing 50 or less has increased ● Monthly pay remains the most common pay frequency with 97% operating a monthly payroll ● Payroll teams have changed employee pay frequency six times more this year when compared to last year’s results ● Bacs continues to dominate payroll payments with 86% using it as a pay method ● The most popular method to make ad-hoc and interim payment to employees was via a manual payment process ● 58% of respondents were fully compliant with the full payment submission (FPS) requirements for pay day reporting

● 90% confirm that all pay and deduction elements are broken down on the payslip ● The tools used by payroll teams to help employees understand their pay include: ❍ payslip messages (30%)

❍ self-service portal message (22%) ❍ frequently asked questions (18%). ● The top three payroll queries relate to: ❍ 1.) querying the tax code applied ❍ 2.) being unable to access the online payslip ❍ 3.) an underpayment due to late data sent to payroll

● Self-service platforms are the most common method of payslip distribution (77%) ● The majority of payroll teams have adopted measures to ensure payslip security

● 50% store all payslip records digitally, with 53% retaining those records for six years plus the current tax year ● The results highlighted evidence of non-compliance with holiday pay calculations, underlining the administrative challenge faced by payroll teams in this area ● The majority (61%) of respondents will be using Her Majesty’s Revenue and Customs’ (HMRC’s) recommended payslip message to communicate the health and social care levy ● As a direct consequence of the coronavirus job retention scheme (CJRS), 40% confirm that manual calculations have been required to determine maternity or redundancy payments.

5

Summary of results

YEAR-ON-YEAR PAYSLIP TRENDS

Number of individuals paid A key question tracked throughout this survey’s history is how many employees and pensioners are paid by the payroll department. The chart below shows the results have remained relatively stable over the last seven years. Most payroll teams pay between 51 and 1,000 individuals (45.6%), and many between pay 1,001 and 10,000 individuals (37.76%).

The number of teams who control payrolls of 10,000 people or more (11.2%) has dropped slightly since last year, while there has been a small increase in those looking after 50 employees or less (5.4%).

The economy has been impacted by several factors over the last 12 months, including a rise in the cost-of-living, and the end of the coronavirus job retention scheme (CJRS). The increase in payroll teams looking after small headcounts could be a result of a growing number of payroll entrepreneurs, who have set up their own small businesses. Alternatively, this could be a result of small businesses recruiting an in-house payroll professional to manage payroll processes internally.

Number of employees paid

6

Number of payrolls processed This research also looks at the total number of payrolls processed by payroll departments. The trends broadly follow the previous years, with the majority of teams responsible for one, or two to five payrolls. It’s likely these teams are based in- house. Although this could indicate the majority of payroll teams are based in-house, the CIPP wouldn’t suggest the results should be interpreted in this way. 16.05% of respondents processed more than 101 payrolls, with 2.47% processing more than 1,000 payrolls. Outsourced payroll services continue to play an important and significant role in the payroll industry, and broader UK economy. Interestingly, the number of teams processing 1,000 or more payrolls has seen a significant decrease in 2021, with the figure dropping by almost 50% in comparison to 2020 results. However, teams processing 51 to 100 payrolls, and 101 to 500 payrolls have seen a sizeable increase – 46% and 39% respectively. These results indicate that while large, outsourced payroll services have seen a substantial decrease in numbers, small payroll providers have grown year-on-year.

Number of payrolls processed

7

Payroll frequencies operated Pay frequency remains a topical conversation in payroll, however, the history of this report has shown that monthly pay remains the dominant pay frequency, with almost 97% of respondents confirming they pay monthly. The second choice, weekly pay, has seen a year-on-year increase in the previous four reports, demonstrating that weekly payroll still has its place in the UK. In this year’s survey, we reduced the number of answer options available as we’d seen consistently low results (less than 1%) for frequencies such as daily and rotational pay. Furthermore, we removed the frequency ‘ad-hoc’ and created a new section, which explores how payroll teams make interim payments to individuals. This section is included later in this report.

Pay frequencies

8

Popular pay days and dates Friday remains the most popular pay date for weekly, fortnightly and 4-weekly payrolls. The increase in the number of weekly payrolls in the results of this survey have carried through to the volume of Friday payments, with a 13.64% increase in weekly payrolls paid on a Friday in 2021.

Weekly payroll pay days

Monday

Tuesday Wednesday Thursday

Friday

Saturday

Sunday

Fortnightly payroll pay days

9

4-weekly payroll pay dates

Monday

Tuesday Wednesday Thursday

Friday

Saturday

Sunday

10

The most popular monthly pay date continues to be the last working day of the month. It’s common for monthly payrolls to pay employees from the first day to the last day of the month. A later pay date can provide greater opportunity to capture and prevent overpayments caused by problems such as late leaver data. This research indicates this is considered when determining which date to pay employees. It is, however, worth noting that the results for individuals paid on the last working day of the month have dropped from 41% in 2020, to 35% in 2021. The 2021 survey reduced the number of monthly pay date options available to respondents. This change made the data easier to interpret and report on. This year’s results showed that less than 6% of respondents paid on an alternative date to those provided.

Monthly payroll pay dates

11

PAYROLL STATISTICS

Change of pay frequency The Payslip Statistics Survey Report has consistently looked at the number of payroll teams who have implemented a change to pay frequency. In the 2020 results, only 3% of respondents confirmed they had made a change. The 2021 results show an increase of more than six times that amount. In 2021, 23% confirmed they had implemented a change in pay frequency. Furthermore, the number of requests from employees to change their pay frequency has increased by more than twice the amount seen in last year’s results. Only 7% of employees requested a change in 2020, but in 2021, 20% requested an alternative pay frequency.

Implemented a change to pay frequency

Request to change pay frequency

In anticipation of these results, the CIPP asked respondents why the change was made. The unprecedented challenges faced across payroll, and the UK economy as a whole have clearly created an agenda for change for many teams. 40% of teams were looking to improve payroll team efficiencies through a change in pay frequency, with 34% taking cashflow into consideration as part of the decision. Several respondents cited other reasons for frequency changes, including business policy decisions dictating the changes, such as temporary staff moving to monthly payroll when made permanent. Others confirmed pay frequency was changed to make furlough calculations simpler. Evidently, a wide-range of factors have created the increase in pay frequency changes. The CIPP also asked respondents to confirm why employees had requested pay frequency changes. The responses included asking for help with their cashflow, and a need for more frequent payments. Others confirmed that financial issues were a direct result of the request. This evidence demonstrates the direct impact that the payroll cycle has on financial well-being, and the important role payroll can play in supporting employees.

Reason for change to pay frequency

0% 5% 10% 15% 20% 25% 30% 35% 40% 45%

Improve cashflow

Support employee well-being

Improve payroll team efficiencies

Improve payroll accuracy

Accommodate a new payroll system

TUPE transfer / company acquisition

Other

12

Payroll payments Bacs remains the most common payment method in payroll, with 86% of respondents confirming this is their preferred method. Faster payments continue to impact the market, however are yet to make any significant impact on the dominance of Bacs, with only 14% delivering payment in this way. 17% confirmed their payroll team didn’t make payments to employees, instead clients were responsible for the final monies into employee bank accounts. While only a few (3%) confirmed they used an alternative payment method, the international presence of SWIFT and SEPA payments made up the majority of these numbers, demonstrating the global reach of payroll teams.

Client makes payment to employees 17%

Bacs 86%

Cheque 2%

CHAPS 2%

Other 3%

Faster payments 14%

A new question in this year’s survey acknowledged the need for ad-hoc payments between pay days. This is perceived to be common practice in payroll teams, however 42% confirmed they did not facilitate ad-hoc payments at all. This result could be influenced by the number of payroll service providers / bureau teams (17%) who confirmed the clients make payments to employees directly, therefore would be unlikely to facilitate any ad-hoc payments. Those who do make payments between pay days, predominately use a manual process (44%), with the second most common process being a supplementary run (9%). Surprisingly, it seems that while pay on demand, or earned access wage, has hit the payroll headlines for a number of years, only 2% confirmed they used this method to make ad-hoc payments. Introducing these platforms does require upfront costs from the employer such as implementation and license fees. It’s possible the roll-out of these platforms has been limited by the pandemic. The CIPP will continue to watch the numbers in this area moving forward.

Provision of ad-hoc payment to employees between pay days

Yes - via a manual process outside of payroll

Yes - via a supplementary run

Yes - via a pay on demand / earned wage access platform

Yes - other

No

The payment date on the full payment submission (FPS) should always be the contractual pay date. If the pay day is brought forward because it falls on a weekend, bank holiday, or pay is made early at Christmas, the FPS should continue to show the normal, contractual pay date. The main reason for this is the impact the date has on employees who claim universal credit. The results of this survey showed that only three in five submissions are complaint in this area. One in five confirm the date the employee receives the money in their account is the date used, which could result in issues for some

13

employees in receipt of universal credit. The CIPP is concerned about the volume of non-compliance in this area and is planning to produce regular communications on this topic to promote improved accuracy.

FPS submission for early pay days

Payslip information The information included on the payslip will vary from business to business and this research always includes a question on the most common information included on the payslip. The table below shows what items are contained on the payslip that don’t specifically relate to payments and deductions. Interestingly, only 4% confirmed they included all bank details on the payslip, demonstrating the importance of data security in payroll.

Information added to payslip

Response

Tax code

99.10% 95.93% 94.57% 89.59% 88.24% 70.14% 62.44% 60.18% 54.30% 52.04% 15.84% 5.88% 4.07% 3.62% 2.74% 2.26%

Name

Payroll number Payment date

National Insurance (NI) number (in full)

NI category

Home address Payment method

Pay as you earn (PAYE) reference Pay point (department / location)

Work address

Bank details - partial information e.g. last 4 numbers

Bank details - all information

Date of birth

Other

NI number (in part)

Bank details - if requested

0.90%

14

Pay elements and deductions on the payslip are usually broken down for all deductions and payments, with 90% confirming this is how they operate. Only 2% of respondents just show total pay and deductions, and 3% vary payslip details depending on their clients’ specifications.

Pay and deduction element payslip breakdown

The survey also asked specifically about variably paid employees, since there is a legal requirement to show hours worked on the payslip for this population. 79% confirmed they do show this on the payslip, with only 7% stating they don’t. 14% didn’t process variable paid employees. Payslip information often needs explanation to help employees fully understand their pay. The chart below demonstrates that responding to individual queries as they’re received remains the most popular method to support individuals to better understand their payslips. However, 30% have also embraced payslip messages to provide additional information to employees, with 22% using self-service portal communication tools to share messages too. Almost one in five had a bank of frequently asked questions to support employees.

4% used a payslip attachment. This low result is evidence of the demise of the paper payslip, which is demonstrated again later in this report. Those individuals who said they did something different describe tools such as:

● weekly newsletters ● internal intranet sites ● an example payslip to support employees in interpreting their payslip information.

Tools used to help employees understand their pay

0%

10%

20%

30%

40%

50%

60%

Physical attachments to payslips

4%

30%

Payslip messages

22%

Self-service portal communication messages

20%

Self-service portal dashboard tools

18%

Frequently asked questions

2%

Chatbots

53%

No tools used, payroll team responds to individual queries received

7%

Other

15

Communication is key in any business, and the payslip is a document which is distributed to all employees on a regular basis. For this reason, businesses can choose to communicate other messages via the payslip. 28% confirmed the payslip is used in this way.

Do you use the payslip to communicate other employee messages?

72%

28%

Payroll professionals will be familiar with payroll queries forming part of business-as-usual processes. The CIPP was eager to understand the most frequent payroll query that payroll teams encounter. 35% confirmed the tax code that had been applied was the most frequent query. This question can be a challenging conversation for a payroll professional since they can only operate the code that Her Majesty’s Revenue and Customs (HMRC) confirms. Interestingly, the second most frequent query relates to problems accessing online payslips. This result is further supported in the payslip distribution section of this report. In third place, 24% confirm that underpayments because of late data create the most queries for their payroll team.

Most frequent payroll query

16

Payslip distribution

In the 2021 survey, the question regarding payslip distribution was simplified to acknowledge the dominance of the online payslip, therefore there are no year-on-year comparison results for this topic. The results below demonstrate that the printed payslip still features in some payroll teams, with some printing and distributing to the client or department, and others sending directly to the employee’s home address. However, the vast majority (77%) use an employee self-service platform to enable individuals to access their payslips. Email is the second most popular method, with 36% emailing to employees direct, and 10% asking clients to distribute payslip emails.

Payslip distribution methods

0%

10%

20% 30% 40%

50%

60% 70% 80% 90%

Printed - sent to employee department / direct to client

18%

Printed - sent to employee home address

22%

Online - emailed to employee direct

36%

Online - emailed to client to distribute

10%

Online - via employee self-service platform

77%

Other

4%

For the first time, this report also asked questions about the security of payslip information as part of the distribution process. Again, these results reflected the popularity of digital payslips. The majority (67%) of employees had personal login credentials which were used to access their payslips. Where payslips were emailed, these were usually password protected (35%), however 2% confirmed payslips sent via email weren’t password protected. Although this number is small, it’s a concern as this provides no protection to the employees’ personal information.

Multi-factor authentication is often described as the most secure method to protect data security online, however only 17% used this method as a means to access payslips securely.

Online - employee self-service portal accessed only by personal login credentials

66.82%

Online - payslips sent via email to employee email address and are password protected

35.05%

Printed - payslips sent via post not identifiable as a payslip e.g. sent in a plain envelope

20.09%

Online - employee self-service portal accessed only by multi factor authentication

17.29%

Printed - correct distribution is the responsibility of the relevant department / client

11.68%

Printed - correct distribution is the responsibility of the payroll department

6.07%

Online - payslips sent via email to employee email address and are NOT password protected

2.34%

Payslip distribution has been impacted due to the pandemic, with 23% confirming they changed their method of distribution as a direct consequence. It’s clear from the evidence in this report that online payslips are now a key resource for payroll professionals. When respondents were asked what feedback they’d received on payslip distribution methods, the majority commented the key issue related to difficulties in accessing portals. Employees had forgotten login details or were struggling with encryption methods. Many responses pointed to IT literacy as a major challenge for some employees, with requests for paper payslips being received. While the majority (70%) had received no feedback on payslip distribution, it seems there are still those who haven’t embraced the digital payslip in full just yet.

17

Payroll record keeping

New for this year, the CIPP wanted to understand how the payroll industry retains payroll records. Digital record keeping is highly popular, since it removes the need for storage facilities required for paper records. Digital records also provide additional options to secure the data more easily than physical records, albeit this isn’t always the case if records aren’t maintained on systems appropriately. The results showed 50% of respondents stored all records digitally. Digital record keeping also helps processes run smoothly when working remotely and away from the office, which could be the reason for this majority result. 40% stored records in a mix of digital and paper, with 9% choosing to store all records in both digital and paper format. Only 2% chose to keep all records in a paper only format. The length of retention is also an important consideration in payroll, ensuring that evidence is available should an audit require backdated information. That requirement must also be balanced against the need to store the data, to ensure compliance with the general data protection regulations. 53% said they stored records for six years plus the current tax year, making that the most popular response. 34% confirmed they stored payroll records for longer. Only a small percentage of respondents stored records for less than this.

Most frequent payroll query

Holiday pay Holiday pay remains an administrative challenge for many payroll professionals. In April 2021, the reference period that should be used for variably paid employees moved from 12 weeks to a 52-week reference period (up to a maximum of 104 week for unpaid weeks). The results of this survey show that less than half of respondents calculate holiday pay in this way, with one in five using a static 52-week reference period, regardless of unpaid weeks, and some continuing with the 12-week reference period calculation. These results demonstrate widespread non-compliance, however, this result doesn’t come as a surprise, as many commentators have described the administrative burden that holiday pay places on payroll teams cannot be met in all circumstances.

The CIPP will continue to engage with members about holiday pay to promote a better understanding of the requirements, and encourage businesses to adopt the correct calculation method.

18

Holiday pay reference periods

The visibility of holiday pay on the payslip can result in an increase or reduction in employee queries in this area. 38% confirmed the holiday pay amounts weren’t separated on the payslip, however 26% showed it as daily rate, with 34% displaying holiday pay as an hourly rate. Others (14%) responded they added a top up to basic pay for holiday payments and 20% indicated they used another method. The split of practices here reinforces the complexity surrounding holiday pay, and highlights that a single method or process is not viable across multiple terms and conditions that exist across many businesses. The CIPP was also keen to understand, what, if any, pay elements were excluded from the holiday pay calculation. Employees and workers must receive normal remuneration while on holiday, therefore many pay elements such as regular overtime, shift premiums and allowances would usually be included in the calculation. The results are shown in full in the chart below. Surprisingly, 70% excluded car allowance from holiday pay, and almost one in three excluded overtime and shift premium. Almost 40% excluded commission. The volume of payroll professionals excluding these values from holiday pay calculations demonstrated there could be a high risk of non-compliance in this area.

Pay elements EXCLUDED from holiday calculation

Overtime

Shift premium

Bonus

Commission

Car allowance

Other

19

New for 2022

HEALTH AND SOCIAL CARE LEVY MESSAGE In September 2021, the government announced the introduction of a new health and social care levy. In the 2022/23 tax year, the levy was introduced as an increase to National Insurance (NI) before becoming a deduction in its own right from 2023/24 tax year. Her Majesty’s Revenue and Customs (HMRC) has recommended a payslip message for the 2022/23 tax year to explain why the rate of NI has increased. The message reads; “1.25% uplift in NICs funds NHS, health and social care.” Commentators have criticised the message, with some describing it as too political. The CIPP has encouraged members to use the payslip message, or a similar alternative to support communication regarding the change with employees. 61% confirmed they would include the message on all payslips, and only 16% said they wouldn’t include the message at all. Unexpectedly, 3% weren’t aware of the message at all. 18% said they would include the message, but only if the payslip software did so automatically.

As evidenced earlier in this report, the payslip message is often used as a tool to communicate with employees. This research demonstrates that many businesses see the value in updating employees in this way.

Are you including the health and social care message on payslips in the 2022-23 tax years?

ONGOING IMPACT OF CJRS The coronavirus job retention scheme (CJRS) closed in September 2021, however there is an ongoing legacy for certain payroll calculations moving forwards. If an employee was furloughed on less than 100% pay during their qualifying period for maternity, the employee must have their earnings adjusted to reflect their full pay. Furthermore, any redundancy payments processed within 12 weeks of an employee returning from furlough should have reflected full pay, and not any reduced furloughed payments received when calculating average weekly earnings. The consequence of this is that 40% of respondents have had to calculate redundancy or maternity pay manually, with only 8% using a system which did this automatically. 42% weren’t impacted at all by CJRS and the remaining 10% either weren’t sure, or this scenario had not yet happened.

20

Core demographics

In-house versus payroll service providers The 2021 survey has seen an increased number of responses from individuals who work in a team that deliver payroll as a service on an outsourced or bureau basis. 33% of respondent were acting on behalf of a client. This is a fantastic increase and an important step to ensure that the CIPP data represents the whole of the payroll industry. In 2020, this result was 25%, so this is a substantial increase. Industry sector The three main sectors represented in the results of this survey were retail, manufacturing and public services. This reflects similar numbers to the 2020 results. However, it’s evident from the results that the survey was taken by a wide spectrum of payroll professionals, including those in construction, education, finance, healthcare and hospitality.

Public services / local authority / local government 11%

Retail 12%

Manufacturing 12%

Business location The majority (64%) of responses were from professionals with businesses based in England.

Throughout United Kingdom 17%

Scotland 4%

17% were based throughout the United Kingdom and 12% had a presence both in the UK and overseas.

4% were based in Scotland, 2% in Wales and 1% in Northern Ireland.

Northern Ireland 1%

England 64%

UK and overseas 12%

Wales 2%

21

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