COMPLIANCE
DIRECTION OF TRAVEL: IS THERE A BETTER WAY FOR PAYROLL OPERATIONS?
David Yewdall, partner, BDO UK LLP, outlines the different considerations for employers when it comes to payroll compliance
P ayroll teams are not often congratulated for delivering another successful payroll run or when payments are made to a workforce on time and without error, yet hearing the ‘noise’ of errors is commonplace. Even if immaterial in value, these can cause significant reputational, legal and reporting non-compliance issues that have an impact when there is an (often unexpected) shortcoming. Increasing errors However, the opportunities for errors to arise are growing rapidly as UK and international payroll operations have become increasingly complex over the post-Covid years. This trend is expected to continue due to a myriad of factors; a non-exhaustive list includes the below. Changes to tax legislation increasing reporting and / or collection of taxes and / or National Insurance via the payroll For example, year-end P11D reporting is moving to monthly reporting and withholding obligations with the mandatory payrolling of benefits in kind from April 2026. Our article entitled ‘Employers’ year end reporting’ in the June 2024 issue of Professional highlighted just some of the current unknowns of how this mandatory payrolling will work in practice, particularly
Demand for payroll data for wider company reporting requirements in addition to tax and employment regulations, there are broader regulatory requirements for environmental, social and governance and gender pay reporting as examples. In these cases, it can be necessary to collate and share certain data typically perceived to be held and owned by payroll. Hours worked is just one example of this, but the extraction and supply of this data in the required format may not be readily available. Cross border considerations Complexity is multiplied when having to manage cross border considerations, such as payments to assignees by both home and host countries. This is being further complicated by the emergence of new worker categories, including international remote workers or teleworkers. Taking a step back to move forward As organisations look to grapple with these and other challenges there is a clear benefit in taking a step back from the detail and considering a holistic approach to payroll management. This is where expert consulting support is useful to provide a strategy to help deliver payroll in a more time, cost and resource efficient
given the relatively short timescale for implementation. This may be challenging for those companies that are not familiar with payrolling benefits, which is voluntary at present. Employment regulatory scrutiny Notwithstanding tax legislation, complex employment legislation to support payroll governance continues to be introduced. This requires data, which often sits in the payroll systems, to be collated, analysed and reviewed to ensure compliance with legislation. This includes current obligations, such as holiday pay and national minimum wage legislation, as well as those on the horizon, with more information having to be collated via real time information (such as the hours worked requirements coming into force from April 2026). Reduced support or decommissioned payroll software from providers With the advancement of cloud-based payroll software, companies are finding limitations with no updated or improved functionality / support of existing payroll software being released. This is often a headache where companies haven’t been informed of the decommissioning of software until it is too late and must invest in new software or create costly workarounds to update existing applications.
| Professional in Payroll, Pensions and Reward | December 2024 - January 2025 | Issue 106 27
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