Benchmarking survey report 2021
Prepared by Gemma Mullis MCIPP, policy and research officer, CIPP
cipp.org.uk
Published October 2021
Foreword
Gemma Mullis MCIPP Policy and research officer, CIPP
Can I first take this opportunity to thank all those who participated in the 2021 CIPP Benchmarking Survey, the feedback received and involvement from the payroll community has been invaluable in creating this report.
The impact of the coronavirus pandemic has touched every element of life, and the lives of payroll professionals are no exception. Taking time out to complete this, whilst juggling business as usual tasks, as well as implementing new schemes and getting to grips with changes to legislation shows the commitment of the payroll profession in developing and improving the services they provide. New questions were added to this year’s survey so that data could be gathered on the future of the processes the profession uses. Additionally, there is a focus on salary averages within the profession and benefits provided by each organisation. The findings of the survey have proved very interesting and it is hoped that the reader will not only be able to reflect their own practices against those of others, but to give insight on others within the profession operate, inspiring them to implement changes and processes to enhance their service.
The CIPP would like to thank all that contributed once again, and as ever, any feedback readers have would be greatly received.
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Introduction
2021 marks 13 years of the CIPP benchmarking survey, and this year it is bigger and better than ever.
The CIPP has listened to feedback from members and has reflected their ideas within the survey and the final report. The CIPP would like to thank everyone who provided feedback and will continue to engage with members in future surveys. The refreshed survey introduced additional questions and was opened to the whole payroll industry. This broadened scope has enabled the CIPP to produce a report that payroll professionals can use to benchmark payroll departments and services, as well as providing insight into how the rest of the industry is performing.
The report will look at:
● Survey scope and size ● The activities and costs of a payroll team including: ❍ Salaries ❍ Structures of the team ❍ Accuracy, timeliness, and completeness ❍ Data security and confidentiality ❍ Compliance with statutory filing/payment deadlines ● What is on offer:
❍ Benefits and expenses ❍ Saving for the future
This report discusses and evaluates the survey findings so that readers can compare their current practices with other payroll professionals help to shape their payroll team.
There are several recommendations based on the current practice of payroll professionals, providing ideas and inspiration to improve service levels.
All responses are presented anonymously, so this report can be used as a tool to benchmark a reader’s own payroll team against. Results gathered in this report will be compared to those received in 2018, as well as the previous year’s as questions asked in both were more accurately aligned. Survey scope and size Making the survey available to the wider profession meant that data was gathered from across the United Kingdom, from varying sectors and industries, giving a broad spectrum of responses. ● The majority of respondents were based in the Southeast of England (32%), with few responses from Northern Ireland (1%) and Wales (3%) ● Respondents were replying on behalf of organisations of all sizes, ranging from micro employers with less than ten employees, to those paying thousands. The majority, (40%) however, stated that they processed PAYE for between 251 and 1000 employees ● Respondents were largely from the private sector (79%) with 21% confirming they were from the public sector. There were no responses from the charity sector ● 74% of respondents advised their payroll was operated in-house.19% partially outsourced their payroll function, with just 7% reporting that they fully outsourced their payroll ● 17% of those that completed the survey advised that they operated an expat payroll
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Summaryof keyfindings
Just 3% of respondents advised that they did not provide any benefits , with an increase of cycle to work schemes and car allowances when compared to previous years
of respondents advised that payroll was operated in-house 74 %
50 %
50 %
17 %
The private sector offers higher salaries across all roles within the payroll profession
of payroll teams are predominantly equally split into the Finance and HR departments
of respondents offer saving schemes
Issuing P60s was the most common obligation not made on time
The majority of payroll teams are made up of females
Salary sacrifice is the most popular way in which pension contributions are collected
Tracked errors have enabled payroll teams to collect more overpayments
90
%
77 %
35 %
Errors discovered before issue to employees/ pensioners
Errors only discovered after issue to affected employees or pensioners
Reported both pre-issue and post-issue error
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Thepayroll team
Where does it sit? Payroll departments have changed dramatically over the years. Traditionally, payroll forms part of the finance or the human resource (HR) teams, however 20% of respondents advised that their payroll department is now stand- alone. This question was recently added to the survey due to the impact of the current pandemic, and the emphasis that has been placed on the profession. It will be interesting to see next year’s results and whether this independence becomes a growing trend.
Other responses show the payroll team is split equally between the finance (40%) and the HR teams (40%).
In-house/outsourced? 74% of respondents reported their payroll was in-house, 19% partially outsourced their payroll, and just 7% reported that they fully outsourced their payroll. A more detailed analysis of the data shows that those who work within the public sector are more likely to have their payroll function in-house, as opposed to outsourced, whilst 29% percent of those within the private sector are either partially or fully outsourcing their payroll activities.
When comparing figures from previous years, in-house payrolls within the private sector have increased by 5%, fully outsourced has seen an increase of 2%, whilst partially outsourced payrolls have seen a decrease by 7%. Figures within the public sector also suggest that partially outsourced payroll has decreased (by 17%), and in-house has increased by 13%.
The increase could suggest that businesses prefer having the control over their own payroll processes, investing more in internal payroll professionals rather than outsourcing the payroll function.
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Teammembers Survey results show that on average, each payroll team consists of around seven members, however, when explored in more detail and split by sector, it is clear that those within the public sector have much larger teams.
Average HC per Payroll Professional Team
It could be presumed that teams within the public sector are larger as they process more employees, however, the survey results indicate that this is not the case. Those in the public sector have, on average, eight more employees when processing payrolls exceeding 10,000 employees, than those within the private sector. A key factor to this is that 83% of public sector payrolls are completely processed in-house, which is 12% more than the private sector.
When looking at the gender of those working within the payroll profession, it is clear within both private and public sectors that the role is predominantly occupied by female employees (76%).
Within the private sector, there are slightly more males working within the payroll team when compared to the public sector.
The average number of employees in a payroll team has increased by one. However, the number of employees who are female has increased by 17% and those who are male has decreased by 31% when compared to data
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collected in 2018. This is an area that should be further explored to try and establish why the profession is female dominated. The CIPP continues to encourage diversity within the profession and is aware there is more that can be done. The CIPP is committed to this strategy by way of promoting the profession as a whole, not only looking at the more traditional payroll roles, but exploring the multitude of career paths that could be taken. The CIPP also strongly urges employers to adopt recruitment strategies that will create more gender diversity within the profession. Salaries Within this section, salaries have been broken down by region. The rationale behind this is typically, salaries will reflect the cost of living in that region.
Apprentices
On average, apprentices are being paid around £18,000 pa, with higher salaries being paid in the Northeast of England, which could reflect the level of apprenticeships being undertaken. With apprentices in payroll becoming more popular, including the newly available Level 5 qualification, the CIPP is keen to follow how these trends develop in the future.
Entry level: administrators/practitioners/assistants/liaison officers/clerks/advisors/graduates
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The average paid across the UK for this role is £22,150 pa. Variation between regions is small, however, the results do show that those roles in Scotland pay on average £3,000 per annum more.
Middle management: team leaders/supervisors/consultants/specialists (SMEs)/vice principals
On average employees at this level are paid £34,000 pa, with those based in Northern Ireland being paid the highest for this role. The low salaries paid in the Midlands and Wales are skewing the mean average paid at this level. This could be due to the broad range of job titles described, leading to misleading figures. This is an area that will be explored further, and potentially broken down in next year’s survey.
Senior management: managers/heads of function or department/associate directors/directors
This level includes a broad range of job titles which could have affected the pay levels given in some regions, however, those who completed the survey within the Midlands region reported a £9,000 variance versus the UK average. There could be a number of factors for this variance which could include the size of the business and the number of respondents from the public sector. The CIPP will look into company size in future surveys to see if this explains the variance. It is a positive sign that respondents were advising of salary values for those that sit at an executive level within the payroll department/profession in excess of £50,000 per annum. This shows that the profession is now shifting towards an executive board level and being remunerated accordingly.
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As seen within the findings, historically, a region could affect the level of pay offered, however, with a huge shift to homeworking/flexible working in the future, could an individual’s location stop influencing this? In future reports this anomaly could potentially be removed.
Delving into salary averages further, the salary differences between those employed within the public sector and private sector see a considerable variance, especially those at apprenticeship level.
Public sector funding is controlled at government level using taxpayers’ money, whereas private businesses have control of their own budgets. In addition, those in the private sector have the potential to increase income through profit, and thus can invest more into their employees. However, salaries form just part of an individual’s remuneration package, with benefits being offered to employees that would increase their overall remuneration. Benefits offered will be explored further in this report which could explain the difference in base salaries across the two sectors.
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Processing
Payroll frequency When analysing pay frequency it is not surprising the most popular payment frequencies were weekly or monthly paid. 50% of respondents stated they operated a monthly payroll, 46% operated weekly payrolls, 3% operated a 4-weekly payroll and only 1% operated payroll on a 2-weekly basis. When compared to the figures from 2018, sole use of monthly payrolls has reduced by nearly 50% whilst processing weekly payrolls has increased by over 100%. Could this be a result of the pandemic and employees requesting to be paid more frequently? The increase could also reflect a greater uptake in survey responses than ever before. This result will be interesting when it is compared to next year’s results, as what is not expressed within the graph is that just 1% of respondents process payroll solely on a weekly basis.
Most respondents used multiple payment intervals. Therefore, going forward, this question will be amended so that this can easily be shown, providing greater clarity on preferred payment intervals.
Reports from the Office of National Statistics and media outlets suggest that the most frequently used payment method is monthly, therefore this result was unexpected. This further justifies the question to be elaborated in future reports to gain a clear and more accurate definition of the most commonly used payment frequency.
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Payroll errors When asked if errors were tracked, over 83% stated they either fully tracked them, or the majority were tracked by their payroll team. 17% stated there was no tracking process in place.
When exploring this further, it is evident those who did not track payroll errors estimated that within the previous tax year (2020-21) there were around 12,764 payslip errors identified by all respondents. Those who fully tracked advised there were 7,584, which is considerably less than those who did not track. This suggests tracking reduces the amount of payslip errors and provides a more accurate picture of the number of errors. The CIPP recommend where errors aren’t tracked, a process should be implemented for this, which could reduce the amount dramatically. In addition, those members of the team needing extra support could be identified and errors in processes can be addressed. Unfortunately, even with the comprehensive software available for processing payroll, sometimes overpayments occur. When asked about overpayments, over 60% of respondents advised that there had been an overpayment in the previous tax year.
Of the 31,530 overpayments reported across all respondents, 93% had been recovered in full. However, that figure increases to 97% when analysing the results of those who tracked their payroll errors.
The successful recouperation of overpayments by those who track their payroll errors also supports the implementation of error tracking. This could simply be done via a spreadsheet, on which errors are logged, or by more enhanced processes, where Key Performance Indicators (KPIs) are imposed alongside risk registers. Implementing a quality improvement cycle would assist in identifying the root cause and recognise where improvements need to be made to processes.
Data security/confidentiality Data security and confidentiality results showed:
● 6% of respondents noted there was at least one instance of a payslip being sent to an incorrect employee ● 4% of respondents noted there was at least one instance of personal data divulged to an unauthorised source ● 3% of respondents noted there was at least one instance of another organisation’s personnel data being received by an unauthorised source
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Whilst in an ideal world this would be zero - when comparing the above figures against the volume of data sent and received - this is low. Payroll departments hold a large volume of sensitive and confidential data; therefore breaches should be investigated fully, with processes in place to avoid future breaches from occurring. Filing deadlines Within the tax year 2020/2021 respondents stated that over 93% of the required statutory payments and reports were sent to HMRC on time, with only 7% not meeting their obligations. Of that 7%, just 11% utilised the option to defer PAYE payments due to Covid-19.
Of the 7% that did not meet obligation deadlines, the total instances equated to 31,760. The most common occurrences were failure to provide employees/pensioners a copy of their P60 by 31 May 2020 (84%).
Whilst this figure may look high, considering the effects of the pandemic it is not surprising as a large proportion of payroll departments were experiencing increased workloads due to the introduction of the Coronavirus Job Retention Scheme (CJRS), along with the additional pressure of a large proportion now working from home and the possibility of not having the equipment to issue P60s. A popular method of issuing a P60 is in a paper format, but if working from home, teams may not have had the facility to print, or even post them to employees. Further strain could have been added due to higher levels of absence relating to Covid-19, particularly in certain sectors such as hospitality and retail. Additionally, it has been widely reported that businesses have struggled to recruit people into roles, thus affecting resource and staffing levels in payroll departments.
Investment in software to deliver P60s electronically could dramatically reduce the late submission making the payroll team more compliant and fulfilling its statutory obligations.
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Benefits The CIPP has introduced new questions to understand more about the total reward package employers offer to employees. The responsibilities of the payroll department continue to grow and many payroll teams are now accountable for more than just salary payments.
Benefits offered
The graph shows that pensions offered outside of auto-enrolment, life insurance and childcare vouchers, are the most popular benefits offered to employees. It is a positive reflection on the diversity of reward packages today that only 3% of respondents advised their employer offers no benefits at all, seeing a dramatic reduction when compared to previous years when it was reported that 42% of respondents did not provide any benefits at all. This supports growing evidence that employees are being engaged through a wider reward remote than salary alone. When compared to results from previous years, the number of employers offering cycle to work schemes and car allowances has increased by over 100%. Given that a large proportion of the population was working from home during the pandemic, it is surprising to see the uplift in cycle to work schemes offered. HMRC introduced dispensations for cycle to work schemes and employees did not have to fulfil the 50% qualifying journey requirement. However, since that dispensation does not apply to any schemes entered from the 20 December 2020, the CIPP recommend that those who offer such schemes ensure that any awarded from that date onwards take steps to ensure conditions are met. If this condition was not met, the cycle would become a taxable benefit. It was highlighted early on during the pandemic that regardless of the employee’s lack of travel, unless a car was removed from their possession, the car would remain a taxable benefit. The increase in car allowance could be as a result of this. An employer removes a vehicle and instead provides the employee with a car allowance. Consideration must also be given to Optional Remuneration (OpRA) rules introduced in 2017. With the complex formula attached to calculating the taxable benefit of a car, where a car allowance is also offered, some employers may have chosen to remove the choice and instead just offer a car allowance. In 2018, 30% of respondents advised they provided company cars, whilst in data gathered within this year’s survey just 15% provide a company car, reducing the percentage by half.
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Looking into data by sector:
All public sector employers offer at least one benefit with pensions and childcare vouchers being the most popular. Public sector pension packages are often more attractive when compared to that of the private sector, which could have an impact on the base salary that those within the public sector are offered. Car allowances and income protection, which seem popular within the private sector, were not offered within the public sector. The survey results clearly show that benefits given within the public sector are more restrictive than those offered within the private sector, with five out of the 15 listed benefits not being offered within the public sector but are in the private sector.
Factors expressed within the salary section of the report will affect this position as funding is managed at government level.
An intriguing result is that just 5% of public sector employers offer health care packages as a benefit when compared to 26% in the private sector. The public sector often offer more comprehensive sickness packages when compared to the private sector, and this could be a result of differing health and wellbeing strategies between the sectors.
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Overall, 12% noted that flexitime was offered as a benefit. Surprisingly, especially due to the current working conditions, this has reduced by 10% when compared to previous figures.
With working environments, patterns and requirements ever evolving, is flexitime now not seen as a benefit but as custom and practice? Is flexitime too formal a mechanism to record flexibility within the workplace?
Next year’s survey will continue to explore how attitudes and working practices change in this area. Will flexible working replace flexitime as the new norm permanently?
In addition to the above, the survey asked if employees were given the option to purchase or sell back annual leave. Nearly 52% of respondents stated that this was offered to employees, with 48% stating it was not. Of those that responded yes, just 10% of them belonged to the public sector.
Reporting benefits and expenses Taxable benefits
The legacy P11D process proved to be the most popular reporting method, however, what stood out was that the public sector does not mix their reporting methods between payrolling and legacy P11D.
The CIPP are keen to monitor if the number of those who use the legacy process, convert to payrolling their benefits in the future, considering HMRC are now labelling P11Ds as the legacy process.
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Expenses
A number of eligible expenses do not attract any PAYE liabilities, therefore, are traditionally are paid outside of the payroll. With payroll software having the option to process net payments, the survey asked if this was still the case, or if this responsibility fell to the payroll department.
It is evident from the results this is still the case, however, 27% of expenses are paid via the payroll. This figure has the potential to rise in the future as more responsibility is given to payroll teams in making payments direct to employees. By processing expenses via the payroll, it reduces the number of additional payments needed. Many systems offer self-service platforms that can link directly to payroll software, thus removing the need for human intervention, reducing input errors and making information readily available. Companies can also have cost savings by processing expenses by payroll as it reduces the number of additional payments that are made. By processing expenses via payroll, it also has the benefit of a clear audit trail and can be included in any reports produced by the payroll team. In addition, those figures can be uploaded to finance systems, reducing the manual intervention and effort to transfer data.
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Saving for the future
Pensions With employers having to auto enrol their employees into a pension scheme, the survey asked what percentage of employees continue in the scheme. The results showed that over 82% of employees chose not to opt out of the scheme. The most popular arrangement method was via salary sacrifice, with 47% of respondents advising this was how their pensions were processed. The National Insurance (NI) advantages bring additional saving for both employers and employees and are likely the reason for this adoption rate. For those who currently do not operate a salary sacrifice scheme, the CIPP would encourage employers to explore the reasons why. NI savings could be had by both employees and employers, which may encourage those who opt out to continue with the contributions. However, the CIPP recognise that obstacles with National Minimum Wage (NMW) are a consideration when introducing this type of scheme.
Pension arrangement type
Net Pay Arrangement (NPA)
Salary Sacrifice Arrangement
Relief at Source (RAS)
Salary Sacrifice Arrangement
Net Pay Arrangement (NPA)
Relief at Source (RAS)
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When the data is broken down by sector, salary sacrifice arrangements prove to be most popular for pension schemes within the private sector, whilst in the public sector, relief at source is predominantly used. This result backs the saving seen by using salary sacrifice for National Insurance savings. Within the private sector, PAYE savings can be directed elsewhere, for example reinvesting back into employee reward packages. This question is a new addition to the survey and the CIPP will continue to review how the figures shift in the future. Over 62% of respondents also advised they pay more than the minimum auto-enrolment percentages. Paying more than is required enhances a company’s benefit package and can increase attraction and retention rates. This could be used as a tool to attract new employees where the base salary may not be as competitive when compared with that offered by others within the industry. The CIPP recommend promotion of pension contributions if they are higher than the minimum auto-enrolment requirements, to highlight this is a benefit of working for the organisation. Saving schemes Employee saving schemes are becoming more and more popular as employers play a bigger role in employee financial awareness and wellbeing. Whilst some may be wary of initiating schemes due to potential risks to national minimum/living wage, over 18% of respondents offered this facility to their employees. Those who did offer such schemes advised that less than 25% on average took up the facilities. This figure looks low, however, a one in four uptake of a saving scheme overall is a positive step in encouraging financial awareness.
30% of respondents did advise that in addition to pensions and savings schemes, they operated Additional Voluntary Contributions (AVCs) and Individual Savings Accounts (ISAs) to aid employees in saving for the future.
Expat payroll
Of those who responded to the survey, 17% operated an expat payroll, producing on average 46.7 payslips within tax year 2020/2021.
When asked how much of their time was taken up processing these payments, 30% advised it took up 20% of their time, whilst 70% said it took up less than 10%. Given the average number of payslips on the expat payroll is small, the time taken is reflective of the complexities often involved in these types of international arrangements.
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Conclusion The intention of this report was for readers to take the findings away to benchmark the services and processes they already adopt, looking at their strengths and weaknesses, with a view to implement changes and improvements where necessary.
The response rate to this year’s survey were at a record high and provided valuable data that can be used by readers to benchmark their processes and practices against.
The variation in salary was fascinating – seeing salaries reported at an executive level is a positive step as payroll professionals are being recognised and employed at this level. It was also interesting to see the level of salary offered at apprentice level. This is an area we will be interested in following with the introduction of the Level 5 apprenticeship within the profession. The stigma attached to apprenticeships is shifting from being predominantly offered to those leaving school to entry into the profession. Could this prompt an increase to the average salary offered at this level? Going forward, this section of questions will be broken down further to give greater clarity in the variation of job titles present in the payroll profession.
With home-working becoming the new ‘norm’ for many, will region continue to be a factor in the amount of basic remuneration offered? This is an area which the CIPP will be monitoring.
Evidence of error tracking proved that implementing such systems would enhance the successful collection of overpayments. If recommendations to implement such processes were taken on board, next year’s results could potentially see the volume of overpayments collected increase overall. Benefits offered within all sectors have increased since the last survey was produced. With the employment market becoming increasingly competitive, it will be interesting to see if this figure rises in the future, especially around pension contributions. It was identified that cycle to work schemes have increasingly been offered to employees. With a strong emphasis on the environmental and health benefits of cycling to work, it will be interesting to see if this continues to increase over time. The report noted a reduction in flexitime being offered as a benefit. As discussed within this section, could flexitime now be seen as an expected option for working practices? The pandemic has had a huge impact on this style of working for many, however, has this practice only been temporarily offered? Media reports and research undertaken by many have indicated that flexible working has not impacted the outputs of workers with many boasting about its benefit. The CIPP will continue to review the impact of flexible working on payroll and how it impacts employee expectation when embarking on a new role. Employee financial awareness has been an area in which employers are focusing on, therefore it will be of interest to see if the figure of those who offer employee saving schemes increases in the future. This is an area the CIPP will be exploring further, to establish the types of schemes offered and the barriers faced by implementation and how employee engagement in this area could be increased. This report has provided some key insights into the inner workings of payroll teams up and down the country. The CIPP will continue to build on the success of this report over the coming years. The CIPP hope the report has resonated with the reader, and readers will take learnings from the research and have ideas for what could be implemented within the reader’s own payroll department.
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