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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