CIPP future of payroll research report 2020

FUTURE OF PAYROLL RESEARCH REPORT 2020 The CIPP’s Future of Payroll report has been made possible through the collaboration of a high number of payroll professionals within the United Kingdom, and the support of JGA, Workday and Zellis

Produced by Lora Murphy, policy and research officer, CIPP

THANK YOU TO OUR SPONSORS

CIPP FOREWORD Our third Future of Payroll report falls within a challenging year for the payroll community. Payroll professionals have quite literally been keeping the UK paid through the coronavirus pandemic, as have payroll colleagues across the globe. And, whilst this has been challenging and has felt like a thankless task over the months since national lockdown on 23 March, it is no doubt changing the future of the profession. The survey which informed this report was distributed approximately eight weeks into lockdown, and therefore the results give some insight into how payroll is being affected by world events.

Ken Pullar FCIPP Chief executive officer, CIPP

Whilst traditionally seen as a threat, respondents to this year’s survey confirmed the opportunities that they saw through the development of Artificial Intelligence (AI) and automation. Payroll professionals recognise that there is value in automating more transactional aspects of the role to enable them to focus on the human role of payroll, such as dealing with queries coming into the department. When asked about their payroll software strategy, respondents confirmed that they would seek specialist payroll software which integrated well with other specialist software, such as time and attendance or expenses. Therefore recognising this as a favourable approach to ensure skills of developers are not diluted and that software can be adapted quickly to deal with frequent changes to legislation, as was seen with some technology in relation to the Coronavirus Job Retention Scheme (CJRS). What is also apparent for 2020 is that employees are demanding more transparency in respect to pay, which has led to the introduction of various pay gap reporting. However, organisations don’t always follow this belief, with 59% stating that pay strategies should be confidential. It will be interesting to see if this changes over the coming years. Pay on demand remains very topical, increasingly so during the current global pandemic. But results show that this is not something that payroll professionals are looking to introduce in their organisations. Essentially, payroll professionals have concerns regarding the long-term financial wellbeing of employees where pay on demand can encourage them to fall into a cycle of debt. We recently ran a roundtable on this topic and will continue to discuss this theme throughout the coming year. Unsurprisingly flexible working and work-life balance are more important now than in previous years. Perhaps more so for payroll colleagues who have been working 12 hour days, seven days a week over recent months. Respondents stated that there have been more requests for home working than ever before, something which will no doubt increase as we come out of the national lockdown and pandemic.

It would be remiss to consider the future of payroll without considering the skills required of payroll professionals, and positively payroll professionals recognise the need to develop their leadership, technological and remote working skills.

Finally, there is still work to be done to recognise the value of payroll. Positively 60% stated that payroll is represented at board level; however, just 9% said that this was through the role of a payroll director. The remaining 51% split between finance and HR.

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HOWWILL TECHNOLOGY ENHANCE THE PAYROLL PROFESSION?

Workday foreword At Workday, we’re delighted to continue to partner with the Chartered Institute of Payroll Professionals (CIPP) for this year’s Future of Payroll report . Getting the results from this research is a highlight every year, and it’s interesting to get an insight into the trends that are fast emerging. The pressures on the payroll function continue to increase as the world changes, and as the way people work continues to adapt. Technology advances are bringing new solutions and pressures, and ensuring compliance with legislation continues to be a challenge. What strikes me in this year’s report is that payroll is starting to play a different role within organisations, and I think this is closely linked to payroll professionals embracing the change.

Daniela Porr Senior product, marketing manager, Workday

The challenges that 2020 is bringing to the workforce – and payroll professionals – have a special quality. We see them responding to COVID-19 and the related compliance and legislation changes, while managing the shift to remote work, a remote economy and remote payroll. We also see them taking measures to protect and support their workforce, and their businesses, as they prepare to recover and emerge from the crisis stronger. Responding to changes quickly requires a high level of agility, flexibility and resilience – and it’s impressive to see the payroll function responding in this way. Crises like this often intensify and speed up trends that were apparent before. And so it’s especially encouraging to see respondents are positive about technology, and embrace these advances as a way to enhance their role. Modern systems, including Workday, allow the use of automation, machine learning and artificial intelligence. And these technologies are seen as a way to make payroll more effective – freeing up time to focus on the more strategic elements. As a result, the value of the payroll function is increasing. It’s becoming increasingly recognised within organisations as payroll professionals can focus on strategic tasks, and become more involved with other departments. At Workday, we’re already seeing HR, time, absence, payroll, compensation and finance work closely together in some organisations. We’re also seeing more payroll departments have a seat at the table. They’re able to become a part of the conversation as they deliver unique insights based on real-time payroll data analysis, and by looking at history and sharing trends, they can often anticipate potential problems. For instance, when payroll experts begin to work with compensation and finance departments, and start participating in planning meetings, they become a strategic partner in business decisions. And these decisions could be mergers and acquisitions, adjusted business models as companies respond to changing customer demands, or designing crisis response and recovery plans.

This report emphasises the value of the payroll profession. We hope you find it as useful and encouraging as we do, and as always, we’re looking forward to hearing your thoughts and feedback.

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FUTURE OF PAYROLL SURVEY REPORT 2020

The advancement of technology within the payroll space, and the automation of the more administrative aspects of the jobs that payroll professionals undertake have been topics of discussion for some time now. Whilst historically, those working within payroll departments may have been fearful that this new way of working could be detrimental to their position and could end up eventually replacing them in their roles, the results of the Future of Payroll survey indicate that this perception is shifting massively, and that payroll teams are now embracing Artificial Intelligence (AI) and automation in the workplace. There were a selection of questions that dealt with the issue of whether or not technology will enhance the payroll profession in the future, and also some that assessed how far current technologies that have already been implemented have amended the way in which payroll departments operate.

When asked where payroll software was now hosted, responses ranged from 38% for cloud-based software, followed by 37% stating that it was hosted on site, and a further 25% confirming that payroll software was hosted on a client server. It could be anticipated that, due to the outbreak of coronavirus, which saw the number of employees working remotely increase significantly, even more businesses could benefit from utilising cloud-based software to better enable the payroll function to be accessed remotely, should the need arise in the future. When asked if AI and cloud technology had altered how queries are received into the payroll department, this seemed to be an area where payroll professionals have seen little change, and are still required to use more traditional methods of communication, such as emails and phone calls. This demonstrates that, whilst technology is rapidly emerging in the world of payroll, employees have yet to be convinced about responses from AI and prefer speaking to a person when they have questions, particularly when those queries relate to something as important as their pay.

38% host payroll software in the cloud

37% host payroll software on site

25% host payroll software on client’s server

It also demonstrates the need for payroll professionals to be proficient in customer service, and to constantly be trained and skilled in this area. 91% of respondents confirmed that they were using more traditional communication methods to respond to queries, with 7% confirming that they now receive queries via an online chat facility, that are responded to in a manual fashion. Whilst this latter finding shows the incorporation of an element of technological advancement, the liaison with the employee is still one that is human in nature. Only 2% of responders stated that, in their department, queries were received through an online chat facility with automated standard responses being sent via a chatbot.

of responders receive and deal with queries via a chatbot.

2%

The responses to the question which dealt with the subject of automated business processing, or AI developing further to manage the transactional side of payroll reveals that the majority of people do believe that this will be the case. 86% stated that they saw this coming to fruition, with only 14% maintaining that automated business processing or AI will not develop to further manage the transactional side of payroll. By transactional, we refer to the more methodical processes that are repeated numerous times each payroll cycle, for example, the processing of starters and leavers, or changes to details. Technological advances will remove the requirement for payroll professionals to continue carrying out these monotonous tasks so that they can focus on more challenging duties, which involve using enhanced payroll knowledge, such as streamlining processes or dealing with employee queries, which, as we saw with the responses to the previous question, seem to still be dealt with by those working within the payroll department as opposed to being an automated process. It will also free up payroll professionals to dedicate greater time to more strategic activities. As payroll expands and tax and employment policy evolves, there is a greater need for increased interaction with other departments, such as Finance and Human Resources. Some of the recent changes to legislation have seen payroll professionals having to reach out to communicate increasingly complex legislation, which traditionally would not necessarily have fallen within payroll’s remit. Take the example of the off-payroll working (IR35) reforms, originally due to be implemented in the private sector from 6 April 2020, but now postponed to take effect from 6 April 2021 – historically payroll departments have had limited or no dealings with self- employed contractors, instead they would have been paid through the Finance department. The off-payroll working (IR35) reforms began in 2017 in the public sector, and have required enhanced and improved communication within organisations between procurement, IT, finance, HR and payroll. The new rules relating to off-payroll working in the private sector have meant that payroll professionals have had to grapple with a whole new type of employee, and

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employment status. More recent examples that demonstrate where greater communication and cross working has been needed include Gender Pay Gap reporting. All of these new requirements have had to be delivered with no additional staff resource in the majority of businesses, so if staff hours can be made available due to the automation of other processes, then this is definitely a positive thing.

68% responded to say it would provide opportunities to show strategic value

The sentiment that payroll professionals are beginning to see how AI and automated processes will actually enhance the workings of the payroll department and of payroll teams is reflected in the answers to the question, “how do you think that new, simple-to-use, cloud-based technologies that promote payroll at the ‘push of a button’ will impact employers’ value of payroll professionals?” Emphasising the fact that there has been a shift in the perception of payroll professionals, from being concerned about automated processes and AI, to welcoming it and seeing how it can add more value to their roles, 68% responded to say that they will provide payroll professionals with an opportunity to show their strategic value, and that payroll is more than the transactional ‘push of a button’. 28% remained to be convinced and still believe that these technologies will serve to devalue payroll professionals, whilst a much lower 4% believed there would be no impact whatsoever. The results highlight the fact that, whilst people are more open to new technologies in the main, there are still those that have their reservations surrounding the introduction of new systems to simplify the administrative duties

of payroll professionals. There is no ‘one size fits all’ within payroll, and due to the fact that government policy has evolved to exclude smaller employers, the size of the company that a payroll professional works in could have massive implications on their experience of, and attitude towards, the future of payroll and technology.

59% recognise that advances in technology would solve problems and allow individuals to focus onmore strategic aspects to their role.

This idea is explored further in the question that asks, “Do you envisage that advances in technology will….” Those accessing the survey had the ability to select multiple responses, as it may have been the case that several answers applied to them and their situation. This looked specifically at the effect that technology will have on the effectiveness of the payroll team, and the structure of the payroll department. 78% of responses held the view that technological advances will make individuals and their payroll team more effective. 62% felt that technological advances would reduce the costs associated with processing payroll, followed by 59% who confirmed that this would solve problems and allow individuals to focus on more strategic aspects to their role. 44% felt that advances of this nature would reduce the number of jobs available in the profession and 43% thought it plausible that there would be no impact on the level of jobs available but that

it would change the role of payroll professionals and the role that payroll teams play within organisations. Similar themes are emerging in the results to all of these questions and this demonstrates that the profession is beginning to accept technological advances and can see how they will enhance the position of payroll professionals and of the profession. But there is work to be done yet to reassure individuals who are nervous and who feel that technology could result in the loss of jobs and changes to the structures of payroll departments. The final question in this subject area asked, ‘What strategy are you adopting within your organisation in relation to software for the future?’ The top response confirmed that businesses were looking for specialist payroll software, which integrates well with other specialist software, such as time and attendance and expenses, gaining 63% of responses. 37% said that they were looking for generic software to manage all aspects of pay and reward. This reiterates the idea that payroll is becoming more and more interlinked with other departments, which needs to be more far-reaching than just the Finance and Human Resource departments. Far fewer companies are seeking to implement software that focuses solely on just pay and reward elements, and more are searching for software that can interact with a variety of other platforms to receive and transmit data. If systems interact with one another, this also removes the responsibility of the individuals who ordinarily provide information to payroll, for example, managers who may send timesheets across manually for their staff. Certain payroll software will respond to time and attendance software and the processes behind this becomes automated, removing the potential for human error, or, indeed, for individuals to forget to complete tasks, which can leave employees being paid incorrectly, resulting in frustration and annoyance aimed, ordinarily, at the payroll department. The advancements in technology and software have far reaching ramifications for companies as a whole and are not just confined to having an effect on payroll departments. In summary, it would be fair to assert that technological advances within the payroll sphere are generally accepted as being positive. The majority of people see how, by removing the more transactional, and time consuming tasks within the payroll department, this can add more value to the role of payroll professionals as they can devote their time and effort to tasks that

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actually utilise their payroll knowledge and skills. It is apparent that there are still some very human elements to a role working within a payroll department, as many payroll practitioners are still required to liaise with employees at a manual level, often through traditional styles of communication, such as emails and telephone calls. Some employees may even approach their payroll department face to face. This is an area of payroll that seems as if it will never change, and payroll professionals will still be required to provide help and support to staff at a personal level. It is plausible to state that anyone who is having an issue with their pay or their payslip does not want to be greeted by a robot, but by a fellow human who also experiences human emotion, and can empathise with their situation. There does seem to be, however, a lingering sense from some individuals that technology has no place within the payroll department. There are those that still appear to feel threatened by the introduction of technology to the payroll profession and feel that it leaves their jobs at risk. More training and education to improve skills and knowledge in this area may benefit companies and their payroll teams, as often fear is generated by a lack of understanding, and once this lack of understanding has been removed, people may be more receptive to the introduction of enhanced technology within the payroll department. Granted, the number of people who confirm that they feel this way has decreased, but there is still an element of distrust present within a small proportion of the responses. The outbreak of coronavirus, and how businesses and employees have had to rely on, and use, technology whilst working from home, may have greatly impacted how payroll professionals and businesses feel about technology’s place within the payroll department, and it will be interesting to see if opinions change over the coming year.

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SALARY STRATEGIES OF THE FUTURE

Payroll departments exist with the main function of ensuring that employees of the business they work for, or indeed, staff members of the clients that they work for, where in a bureau environment, receive the pay that they are contractually or statutorily entitled to, both on time and accurately. There has always been much discussion around the future of, and changes to, the method by which employers could pay their staff. If you consider that, in the not so distant past, employees would have received their pay in cash form, ordinarily counted out in front of them by a member of the payroll department, then it is not difficult to perceive that the way in which staff are paid in the future could change dramatically. The majority of employees are paid via Bankers’ Automated Clearing System (BACS), which means that there is no requirement to physically handle money and that staff are now paid via an electronic method. The standard process is that the payroll department will ensure that all payroll processes have been completed in full, plus any exception reporting and checking, so that BACS submissions can be sent two working days prior to the contractual pay date of employees. In recognition of this fact, the CIPP’s Future of Payroll survey included a variety of questions that relate to pay strategies and potential new methods and ways of paying employees in the future. In the past, the general consensus on the topic of pay was that it should be completely confidential and that there was no need for employees to have any awareness whatsoever of how other people working within their company were paid. However, this is a concept that is evolving, as organisations begin to favour more transparent pay strategies. In large part influenced by new reporting requirements such as the gender pay gap report, and the fact that there may be the need in the future to report on ethnicity pay gaps and disability pay gaps within businesses. Chief Executive Officer (CEO) pay gap reporting became mandatory for financial years on or after 1 January 2019 for certain companies. ORGANISATIONS BEGIN TO FAVOUR MORE TRANSPARENT PAY STRATEGIES In response to the question, ‘do you have transparent pay strategies within your organisation?’, 59% confirmed that they still hold the traditional belief that total compensation pay strategies should be confidential. Whilst this was the top response, there is an emerging pattern that demonstrates that change is coming, with 36% of respondents stating that they operate salary bandings within their organisation, which employees have visibility of, and 5% even advising that their company operates a ‘set your own salary’ strategy. The concept of employees setting their own salary is extremely new and innovative and it is surprising that businesses are choosing to adopt this approach to employee pay. This signifies a very dramatic change to attitudes surrounding reward and renumeration packages. Self-set pay is used, and will continue to be used in the future, to attract and retain the top talent, particularly in competitive sectors and roles. Payroll professionals have always had access to information pertaining to the pay of employees within their organisation, or of the employees of their clients. Frequently, they will also be able to see personal details, such as address, date of birth and bank details. One of the key attributes that anyone working within a payroll department must possess is that they are trustworthy and therefore will maintain the confidentiality of the pay and personal details of staff. They must also be trusted to act responsibly, and not in a fraudulent manner, when processing payrolls. Although the perception of pay transparency has changed, it has always, and will always be the case that those working within payroll departments must be able to respect confidentiality and act in ways that protect employee data. It seems that this is one element of payroll that remains unchanged, even as many other aspects shift and change to keep pace with the modern world. There were a couple of questions presented on the idea of ‘pay on demand’, which is a forward-looking salary strategy that employers in the UK do not appear to have been very receptive to, both widely, and also within the results of the survey. There are exceptions, as it is understood that this method of paying staff is operated frequently, and successfully, within the hospitality sector, but more widely, it is not a concept that has gained momentum. Pay-on-demand is a system through which employees can access their pay prior to their contractual pay date, and is often offered through a third-party provider. Employees have the ability to access their wages at any point within the pay cycle. Anecdotal evidence highlights the fact that many payroll professionals don’t hold favourable feelings towards the idea of ‘pay-on- demand’ as they view it as effectively emulating payday loans, and worry that these sorts of pay methods will only serve to exacerbate cycles of debt as employees inevitably need to pay the advance back at some point. This is echoed in the responses to the relevant questions within the survey – ‘Do you offer ‘pay-on-demand’’? This question drew 97% of responses which stated that no, they did not offer it, as opposed to only

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3% who revealed that they do offer ‘pay-on-demand’. Delving deeper, when asked the question, ‘do you see ‘pay-on- demand’ being an attractive benefit to your workforce?’, the responses were less clear cut, but only 12% stated that they did definitively see it as being an attractive benefit, whilst 36% said they did not feel it was, and 52% have yet to be convinced either way and responded ‘maybe’. The huge number of responses for ‘maybe’ could simply be attributed to the fact that it is not a subject that has yet received widespread attention or media focus and many individuals may simply not be aware of it, and what it involves. Is it just a glorified loan scheme? For companies that introduce it, will there be the requirement for more frequent Real Time

Information (RTI) submissions? Will there be a limit to how many times employees can access it each pay period?

Planning to implement Pay On Demand in the future

The same was true of payroll cards, which seemed to flourish in America but simply were not welcomed in the same fashion in the United Kingdom. The payroll card offers employers the opportunity to load employee wages onto a prepaid card, which staff members can then use to perform a variety of payments, reducing the costs associated with printing cheques for businesses, and allowing them to offer cards to employees who may not have access to a standard bank account. ‘Do you plan on introducing ‘pay-on-demand’ in the future’? completed the trilogy of questions on the topic. The responses were in complete alignment with those from the previous questions. An overwhelming 65% confirmed that they had no intention of introducing ‘pay- on-demand’ in the future, with 31% providing a ‘maybe’ response and 4% confirming that they were planning on

No plans to introduce Pay On Demand in the future

4%

65%

31%

Possibly introduce Pay On Demand in the future

implementing ‘pay-on-demand’ in the future. In terms of pay strategies of the future, it appears that pay-on-demand is not one that is yet dominating the payroll sphere, and that something as forward-thinking and revolutionary as ‘set your own salary’ may outpace this concept. Whilst there appears to be high levels of negativity surrounding ‘pay-on-demand’, as previously stated, the strategy does appear to have its place, in, for example, sectors such as hospitality. Employers may still wish to offer employees this structure of pay but they must be mindful that a responsible employer will, alongside it, provide financial health and financial awareness training, to ensure that their staff don’t fall into a perpetual cycle of debt. The CIPP hosted an online roundtable on the topic of ‘pay-on- demand’ which was attended by subject experts, and those working within the payroll sphere. Similar themes emerged during discussion, where people confirmed that, where they were operating a ‘pay-on-demand’ scheme, they advised that they had performed a lot of research and study into financial wellbeing and how funds drawn down prior to contractual pay day were being used, and if the use of the scheme actually left individuals in financial dire straits. The outbreak of coronavirus has bought with it an unexpected and unplanned new pay strategy, in that of the Coronavirus Job Retention Scheme (CJRS). The way in which the scheme has been operated is unprecedented, with employers paying staff they have placed on furlough, whilst protecting their jobs from redundancy. Employers can then claim the appropriate amounts back through an online service, provided by HMRC, with the funds appearing in their designated bank accounts within six working days. Never before has a scheme of this magnitude and scale been witnessed within UK society. This, along with the Self- Employment Income Support Scheme (SEISS), could raise questions about how the UK is paid in the coming months and years, and how payments to and from HMRC could potentially be administered in the future. ...QUESTIONS ABOUT HOWTHE UK IS PAID IN THE COMINGMONTHS AND YEARS, AND HOWPAYMENTS TOAND FROMHMRC COULD POTENTIALLY BE ADMINISTERED IN THE FUTURE.

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THE FUTURE OFWORKING

Zellis foreword The future of work is a hugely important topic for the payroll community. As the workforce evolves and diversifies, so too must the payroll function, particularly as new and often complex regulations are introduced to meet the needs of today’s employees. Now, as we hopefully enter a post- pandemic period, payroll staff are perhaps under more pressure than ever to keep pace with these changes and continue to develop best practices. At the same time, the payroll community must address its own future of work. In other words, how payroll professionals should upskill and adopt technology in order to continue meeting and exceeding expectations in the ‘new normal’. Beyond this, the future of work also means pushing for the recognition of payroll as a strategic, rather than purely operational, business function. This year’s Future of Payroll report reflects on trends and developments which will lead to increased complexity for payroll teams.

Jaspal Randhawa- Wayte ChMCIPP Director of product management - payroll solutions, Zellis

The COVID-19 crisis will further accelerate a trend that was already very much in motion, the shift towards flexible working, with 67% of this year’s survey respondents saying they have seen an increase in requests to work compressed hours, work more fluidly within core hours and, of course, work from home. This shift in behaviour only serves to underline the importance of capturing accurate employee working hours to minimise the risk of errors, underpayments, and overpayments – something which can be achieved with a stronger integration between T&A and payroll systems. Time tracking is essential to avoid National Minimum Wage/National Living Wage underpayments, particularly as there seems to be a trend towards remote employees working longer hours than if they were in the office. The complexity of payroll calculations will also be increased by the scope and choice surrounding benefits, particularly with the growing popularity of options such as childcare vouchers (offered by 80% of organisations), salary sacrifice ( 65% ), and the ability to take paid or unpaid sabbatical ( 41% ). As benefits become an even more integral part of the employee experience, we should expect more organisations to join up the pay and benefits processes through the introduction of ‘total rewards’ statements and stronger integrations between employee self-service and benefits platforms. The Good Work Plan, which will implement the recommendations made by Matthew Taylor in his report on modern working practices, is widely recognised as a positive development in the world of employment. However, we must acknowledge that as the Good Work Plan is implemented, payroll teams will naturally need to adapt – and therefore they should work to prepare for such changes as far in advance as possible. The potential introduction of a single enforcement authority for employment rights could help reduce some of the complexity, with 64% saying they think it would have a positive impact. So, what changes will we see to how payroll teams themselves operate, particularly in the ‘new normal’ of remote working? The short-notice shift to working from home will have exposed the limitations of on-premise software solutions for the 37% of organisations that use them, and it likely caused many of them to worry about their ability to process payroll accurately and on time. The proportion of organisations using cloud-based software has increased significantly from 25% last year to 37% this year – and we should expect to see a further leap in cloud adoption in order to support a more efficient, flexible, and agile way of working post-pandemic. For similar reasons, we anticipate that technology used in areas such as data security and remote communications will also become increasingly important. Above all, the payroll profession’s focus during this indeterminable period of uncertainty should be to stay as informed and ahead of change as possible. This means working closer than ever with industry associations, regulatory bodies, and technology suppliers to receive the right guidance and assurances on pressing topics such as National Minimum Wage, IR35, salary sacrifice, holiday pay, pay gap reporting and, of course, COVID-19. We should remember that in every crisis, there is opportunity. And while the pandemic may bring the future of work to bear sooner than we might have expected, we should look to embrace the opportunity for positive – and perhaps long overdue – transformation. In doing so, we can truly showcase the essential and highly strategic role payroll plays in our organisations.

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It has been a long time since employers and employees alike observed the strict 9-5 Monday – Friday working pattern that Dolly Parton famously sang about, and, particularly over the past couple of decades, flexible working has emerged to the point that it has almost become ‘the norm’. Many employers now offer employees the opportunity to balance their work life with their home and family life by allowing them to work different shifts, such as compressed hours or part-time hours, with some businesses offering the opportunity to work remotely, and from home, in more recent years. Whilst this is a welcome development and the increased flexibility that employers offer is certainly to be celebrated, it does have its implications for payroll departments who have to grapple with calculations for elements such as pay and holiday entitlement relating to working arrangements that are anything but straight forward. In recognition of the fact that working arrangements have become so flexible in offices within contemporary society, the survey incorporated a number of questions on exactly that topic, and also on the future of working practices more generally. When asked if businesses have been receiving increased flexible working requests, unsurprisingly over a third 67% confirmed that yes, they had, whilst 33% stated that they hadn’t seen more flexible working requests from members of staff. Employees have the legal right to submit a flexible working request, where they have been working for their employer for a minimum period of 26 weeks, are legally classed as an employee and have not submitted a previous flexible working request in the preceding 12 months. Employers do have the right to refuse flexible working requests but only in limited circumstances, which are relating to: planned structural changes, the burden of additional costs, quality or standards suffering, the inability to recruit additional staff, performance suffering, the inability to reorganise work amongst existing staff, struggling to meet customer demand and a lack of work during the periods the employee requests to work. To reflect the fact that there are a variety of flexible working patterns that an employee can adopt, the Future of Payroll survey also asked which flexible working arrangements businesses offer to staff. It is important to point out that the answer options were not interdependent of one another, but the greatest response rate was for the ability to work from home, with 82% confirming that this was a style of working that their businesses allowed. This is particularly prevalent at present, due to the outbreak of coronavirus, which has forced many individuals, who would never have worked remotely, to do just that. Typically employers have maintained that the payroll department should work from within the office, due to their key and crucial role in the business, however, payroll teams up and down the country have demonstrated well, how they can work just as effectively, and maybe even more so, when working from home. Recent events will undoubtedly impact how requests for flexible working by payroll professionals are treated in the future. It is entirely possible that there will be a shift to permanent home working for many working within the profession. 74% of respondents confirmed that their employers offered flexible hours within set core hours, so having the freedom to work certain hours as long as they adhere to the operational requirements of the business by remaining in a selected timeframe. Have seen an increase in flexible working requests Not seen an increase in flexible working requests 67% 33%

Finally, 51% stated that their business offered the option of working compressed hours, so maintaining their contractually agreed number of hours but compacting them into fewer days, which ultimately results in working longer hours across less days.

The responses we received to this question clearly highlight that working arrangements are evolving rapidly. In addition to this, there has been an emergence of different ways of working, with the advancement of the gig economy, and people working on zero-hours contracts. It seems that, as time progresses, and individuals are encouraged to balance their home and work life, the standardised 9-5 role will become a thing of the past.

82%OF RESPONDENTS STATED THATWORKING FROMHOMEWAS A STYLE OF FLEXIBLE WORKING THAT THEIR BUSINESS ALLOWED

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As we look to the future of working, it also becomes apparent that, in order to attract and retain staff, businesses are needing to offer a more robust benefits package, in addition to base salary. This is particularly apparent within competitive sectors and for the most complex roles. Whilst offering flexible working patterns will have an effect to a degree, there are a range of other perks that companies can provide to draw in staff of the highest calibre. The survey wanted to enquire what benefits companies currently offer, and there was a huge variety of responses. In ranking order, the results are displayed below:

80% 74% 66% 56% 54% 46% 41% 39%

Childcare vouchers

Tea and coffee in the workplace

Cycle to work scheme

Salary sacrifice

Free car parking

Paid private healthcare

Ability to take sabbatical (paid or unpaid)

Flexible benefits platform, providing individuals with discounts on high

street brands, including gym memberships, shopping etc.

39% 37% 37% 36% 30% 28% 22% 12%

Voluntary paid benefits, e.g. health cash plans, sick pay schemes to enhance statutory payments

Car allowance

Ability to buy and sell annual leave

Flu jabs

Canteen

Company car

Uniforms

Other

It is clear that many businesses still offer more traditional benefits, such as tea and coffee in the workplace and free car parking, however more innovative rewards such as flexible benefits platforms and salary sacrifice schemes are also in operation. It is refreshing to see such a varied mix of elements to pay, and it seems as if the number of different aspects of pay and reward will continue to develop in the future. Each different benefit will attract its own set of rules, particularly in terms of tax and National Insurance (NI), so as the number of them increases, so will the complexity of the payrolls to which they are applied. Payroll professionals will need to be particularly alert to the complexities when processing and administering the benefits through payroll to ensure compliance with tax legislation and ensure that employees are paid correctly, and the employer remains compliant with reporting duties. As more benefits become available, it remains vital for HMRC to maintain up to date guidance that the payroll community can have faith in, and that it is readily available, clear and concise. In recognition of this, the Future of Payroll report asked, ‘how would you prefer to have payroll legislative guidance communicated to you in the future?’ Currently there are a range of communication mediums through which HMRC publishes updates and changes but there is still a general consensus that guidance needs to be simplified and streamlined. Again, this was highlighted as a result of the pandemic as there have been so many iterations of guidance on the Coronavirus Job Retention Scheme (CJRS) that those working within payroll have found it nearly impossible to keep pace. The majority of responses held that online content and guidance is a helpful way of communicating information ( 87% ), followed by a preference for webinars ( 82% ) and then factsheets ( 79% ). HMRC does

...MORE INNOVATIVE REWARDS SUCH AS FLEXIBLE BENEFITS PLATFORMS AND SALARY SACRIFICE SCHEMES ARE ALSO INOPERATION

already utilise a combination of these methods, but it is felt that information could be more targeted and easier to locate. The interim Director of Labour Market Enforcement (DLME), Matthew Taylor continues to explore ways in which new protections for millions of vulnerable workers can be implemented. The Government’s Good Work Plan which builds on earlier recommendations in the Review of Modern Working, will also have significant implications for the future of working.

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FUTURE OF PAYROLL SURVEY REPORT 2020

Taylor’s Review had identified four key areas of concern, relating to employment status, increasing transparency, agency workers and enforcement. Within the survey, we asked ‘from the choices provided in the Matthew Taylor report, what would you, as a payroll professional, like to see in the future in terms of making employment fairer?’ Out of the three options provided, higher National Minimum Wage / National Living Wage rates, more rights for ‘workers’ and contractors not deemed as employees, and more security for zero-hours workers, the most popular response related to higher levels of protection for those working on zero-hour contracts. Zero-hour contracts have long been a cause of concern for many, due to the extremely low levels of stability for those working under this contract. This was followed by 58% who agreed that there should be a higher rate of National Minimum Wage (NMW) / National Living Wage (NLW). This is for those, again, who have non-guaranteed hours, and ties in with additional protections for flexible workers, zero-hours and anyone within the gig economy. 41% maintained that more rights for ‘workers’ and contractors not deemed as employees are crucial for the future. Taylor’s report most definitely raises a range of questions about employment status and the rights awarded to workers not classified as typical employees.

ZERO-HOUR CONTRACTS HAVE LONG BEEN A CAUSE OF CONCERN FORMANY

DLME also discussed the possibility of a Single Enforcement Body (SEB) to give greater powers to separate authorities to enforce items such as National Minimum Wage and holiday payments. It would combine the Employment Agency Standards Inspectorate (EAS), Gangmasters and Labour Abuse Authority (GLAA) and HMRC National Minimum Wage (HMRC-NMW). When asked the question of how individuals would see this impacting the roles of those working within payroll in the future, the response was positive, on the whole, with 64% confirming that it would have a positive impact, 28% stating it would have no impact, and 8% believing it would have a negative impact. The notion of combining separate authorities to enhance their power and skills seems plausible, and hopefully it will help enforcement action in the future, and ensure that companies and payroll departments act in compliance with legislation, and pay employees and workers accurately. There is much to be said on the topic of the future of working, and it is clear to see that changes to traditional, nuclear ways of working patterns and styles will continue ahead into the future. As there becomes more focus on balancing a home and a working life, new trends will continue to emerge, and payroll departments will need to keep up to date - another strong reason to free up time by using automation for the more routine and repetitive tasks. The government is committed to improve modern working practices and increase flexible working take up to maintain a healthy work life balance, and the resounding message is to watch this space. Juggling a job with a home life still disproportionately affects women, so government work is being carried out in this field to ensure that the gender pay gap can be reduced, and so that women and men are treated equally within the workplace.

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SKILLS OF PAYROLL PROFESSIONALS AND THE JOB ROLES OF THE FUTURE

JGA foreword

Covid-19 has rapidly increased the adoption of remote working technologies. Suddenly the whole world seems to be familiar with the daily use of Zoom, MS Teams or Skype. Consequently, the barriers to hiring staff in remote locations have been reduced as businesses continue to globalise workforces. This added complexity to the payroll process will require payroll professionals to develop new skills in managing global compliance, remote teams, and rapidly changing technologies more efficiently.

Nick Day ACIPP Managing director

The growth in cloud-based solutions, automation, AI, and robotics will highlight additional skill- related challenges as the payroll industry fights to stay ahead of its rapidly evolving landscape. Mundane processes concerned with inputting data and managing manual processes are being replaced by skills required to deliver automated solutions that drive corporate strategy. From 438 payroll professionals surveyed by the CIPP, 68% said they thought cloud-based technologies would provide payroll professionals with an opportunity to show their strategic value. I believe this is already happening. In the world of payroll recruitment, at an administrative level, we already see payroll positions becoming more analytical and less process driven. 86% of payroll respondents from 441 surveyed by the CIPP believe automated business processing will reduce transactional responsibilities. With this in mind, expect skills to become more prioritised on data analysis, reporting and stakeholder communication. At the other end of the career spectrum, organisations are demanding more from payroll as boardrooms seek improvements in speed, profitability, flexibility, security, and transparency. The data generated by advancing payroll technologies are providing payroll leaders with information to make these strategic improvements possible. Therefore, organisations will require payroll managers to possess data interpretation skills that can identify cost-savings and efficiency improvements to drive organisational objectives. Every day, payroll jobs evolve with more task hours succumbing to automation by robots. As this trend increases, the skills needed to manage machines and collaborate with technology grows. With data now considered one of the most valuable resources in the world, businesses are becoming increasingly dependent on data to drive strategic decision-making. It is an exciting evolution in the world of payroll. Why? Because payroll leaders can be the backbone that supports businesses with the data required to make the crucial decisions that drive successful outcomes. Currently, only 9.5% of 390 payroll professionals surveyed by the CIPP confirmed they have payroll represented at board level with a payroll director. It is disappointing that this percentage is not higher. Still, as data continues to drive organisational strategy, I believe this number will grow as the value payroll directors contribute at board level increases in recognition. Meanwhile, as payroll responsibilities augment, soft skills and technical skills increase in demand. Skills such as change management, project management, data management, leadership capability and stakeholder engagement will be more critical than ever as we move into a new age of automation and AI. In fact, 83.6% of 390 payroll professionals surveyed by the CIPP agreed that they are likely to take on more of an advisory role once technology improves. So, what does this mean for the future? Payroll directors will be required to contextualise data and advise boards with an incisive understanding of how to use it to support organisational goals. Understanding how the technology works and how to get the best value from it will be essential. Meanwhile, as the pace of change intensifies and innovations emerge, skills gaps will appear, making niche skills associated with specific systems, remote management, and global compliance heighten in value. Experienced individuals lacking skills in board-level reporting, leadership development, performance management, global payroll or data interpretation may need to undertake external training to stay competitive.

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FUTURE OF PAYROLL SURVEY REPORT 2020

Businesses are changing strategies. In recruitment terms, I have seen this first-hand. Employees are now demanding more from employers than ever before, and organisations are focusing their attentions on retention instead of attraction. The way employees receive their pay plays a central role in this emerging challenge as employees seek more transparency regarding wages. To satiate demand, I predict we will see a rise in the adoption of self-service platforms, mobile apps, chatbots, pay-on- demand services and interactive payslips. Surprisingly, only 12% of 413 payroll professionals surveyed believe pay-on-demand services were an attractive benefit for the workforce. However, I think organisations will continue to adopt the US trend of implementing employee-centric services. Why? Because organisations will utilise all marginal gains possible to improve the employee experience because better engagement typically results in better performance. In response, the demand for hybrid skills is also growing. Inter-related collaboration between payroll, reward, wellness, and performance is increasing, causing payroll to become more holistic. Therefore, transferable skills in the fields of compensation, benefits, human resources, and customer services are becoming more valuable. Individuals with the necessary skills to bridge the complexity gaps that exist between positions will become highly sought after by organisations aiming to drive efficiency improvements with integrated workforces. Encouragingly, I believe that as global complexity increases and technology advances, payroll skills will continue to increase in both value and demand. It will be payroll professionals who take responsibility for interpreting and contextualising the data robots provide for strategic purposes. It will also be payroll professionals who provide the safety-blanket for when things go wrong. The COVID-19 pandemic demonstrated that when systems failed, it was human payroll professionals who stepped in to keep the world paid. Therefore, it is imperative payroll professionals continue to build the soft and technical skills required to manage both people and robots. Autopilots may fly planes, but I, for one, would be reticent to board a flight without a competent pilot present to take over the controls if the autopilot failed.

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