The State of Payroll 2019

Feb20

Posted in Outsourcing

Most payroll is still processed in house. And yet, as the CIPP Future of Payroll Survey Reveals, the biggest challenges facing in-house processing can be resolved by outsourcing.

There’s an old Tommy Cooper gag which goes something like “Doctor, it hurts when I do this.” To which the doctor replies, “Well don’t do it then.”

Reading the latest CIPP report on the current and future state of payroll feels a little like that. It’s a report that paints a picture of in-house payroll departments firefighting a wide range of issues, a number of which they may not yet fully appreciate (we’ll get to Blockchain shortly) when they could be making life easier for themselves. Instead, the overwhelming majority of businesses (72%) still keep payroll entirely in house.

The conclusion drawn by the CIPP is that cost-conscious businesses feel better able to keep payroll in house because there’s greater technological support available for running in-house systems. And yet, when asked whether technology has made things more efficient, half of respondents revealed it had actually made them less effective.

Key issues

It’s no surprise to find GDPR top of the list of concerns for businesses over the past year. Automatic enrolment is second and, as the report identifies, it’s not clear whether the challenge for businesses is the sheer volume of people joining the scheme, or the complexity of it.

In third place sits holiday pay calculations, a result no doubt of the risk companies face of finding themselves in employment tribunals should they get changes to holiday entitlement wrong. Ironically, all of these risks can be removed, resolved or at least damage-limited at a stroke through outsourcing payroll.

Common queries

Tax queries. Pension queries. New starters. You might expect these classic payroll-related posers to be the most commonly made enquiries to busy payroll departments, but it’s the one in 4th place that is most eye-catching. Over and underpayments were problems for almost 50% of respondents, suggesting a disappointingly high level of payroll errors.

The report doesn’t explore the causes of such errors, but we know that keying errors and accuracy are often major issues for in-house payroll teams (invariably because there’s a lot more than just payroll on their plate). That is reflected by the position payroll typically occupies within organisations. In only 16% of cases is payroll a distinct and standalone function. The rest of the time, it’s a duty absorbed by finance or HR departments.

Blockchain

Only 15.75% of survey respondents had heard of blockchain and its potential impact on payroll. If you’re one of the as yet uninitiated, the short version is that it’s a secure, decentralised infrastructure that can enable faster financial transactions without a middle man (i.e. the bank). We’ll look at this in detail next month.

The point is, it could have a transformative effect on payroll and we’ll start to see real expansion in blockchain technologies this year. Naturally, you won’t be able to take advantage of them if you don’t actually know what blockchain is. And it’s in the interests of an outsourced payroll provider to be on top of developments like this.

It’s a fascinating report and we’d urge you to take a few minutes to digest it. But as with the Tommy Cooper joke with which we started this piece, many businesses seem intent on accepting the pain of in-house payroll needlessly. There is an easier way.

If you’re ready to explore how outsourcing payroll can help your business, please contact us now on 01276 587675.