Previous Article Next Article The requirement for mandatory electronic filing of end-of-year returns couldbe seen as an imposition, but introducing e-filing for payroll systems couldtransform the way you work. Liz HallinvestigatesThe rash of new government initiatives – such as mandatory electronic filingof end-of-year returns – combined with mounting pressure to be cost-efficient,is forcing employers to take a long hard look at how they run their payroll.The deadline for e-filing to the Inland Revenue is just overtwo years away for organisations employing more than 250 staff. Those that failto comply will face penalties of up to £3,000 on top of the existinglate-filing penalties. Meanwhile, this April brings a shake-up to working parents’schemes with changes to Statutory Maternity Pay, and the introduction ofStatutory Adoption Pay and Statutory Paternity Pay. It also sees the start ofWorking Tax Credits, and changes and hikes in National Insurance contributions.Jill Owen, exchequer manager of Liverpool University – whichemploys 4,800 staff and has responsibility for 1,200 pensioners – says:”There has been an unprecedented run of legislation all coming at once toplan in and process, which is not easy. Sometime soon there will come thestrain that breaks the camel’s back.” Kate Upcraft, policy and research manager of payroll body theInstitute of Payroll and Pensions Management (IPPM) says it is big decisiontime for businesses in terms of payroll. Do they join the ranks of Kent County Council andtelecommunications firm Cable & Wireless, which have chosen to outsourcepayroll? Do they seize the chance to buy in a new system or upgrade an existingone? Or do they opt for a shared services set-up with other non-core functions,like retailer Marks & Spencer?Upcraft, former payroll legislation manager at Marks &Spencer, believes the e-filing target is not achievable for many employers.”Many employers’ systems do not have the technological capability topresent information via the net, and a lot of our members are looking atoutsourcing or buying in new systems to support e-filing,” she says.Owen is among those employers concerned that their existingsupplier may not technologically be sufficiently on the ball to match the newlegislative requirements. Liverpool University’s supplier is a higher educationinstitution, which also supplies bespoke payroll software to seven other highereducation institutions. ”I know I am not the only payroll manager lacking inconfidence. But it would be incredibly costly to change systems, so that isvery much in the melting pot,” Owen says.IPPM’s Upcraft says: “Even with existing software, thereis a direct bottom line cost to moving to e-enablement. If you couple this withthe purchase of a new payroll system, it is extremely significant.” A growing number of organisations are deciding it is mucheasier to just hand payroll over to a third party. Debbie Monk, payroll managerat Microsoft, says: “The average payroll person now has to know so much todo payroll in-house, and more and more are saying ‘here are the starters andleavers, you do it’.” Local governmentorganisations and those in the financial services and retail sectors areshowing the most interest in outsourcing payroll and other HR services,according to a survey by Capita Payroll Services last year. The survey of 100 firms also finds that managed services –which currently takes up 45 per cent of the payroll outsourcing market – is setto grow by 15 per cent. Bureau services, which takes up another 45 per cent, islikely to stabilise, and ASP services – the remaining 10 per cent – is set togrow by 20 per cent. To meet e-filing requirements, employers must submit theirend-of-year returns (P35 and P14 forms) by internet service for PAYE, orElectronic Data Interchange (EDI) service, or by using an intermediary, such asa payroll bureau or agent. One of the early adoptersof e-filing, high street retailer WHSmith, opted to keep payroll in-house byupgrading its Cyborg system. But it still needs new software to comply with thechanges and will be stepping up its staff training. “Our system is solid and robust enough to cope, but wewill look at our internal processes, such as what data we have to collect andhow we get it onto the system,” says Yvette Lamidey, group compensationsmanager.She says that setting up e-filing was by no means painless andat times very frustrating, especially as the retailer had to deal with threeexternal points of contact: the payroll supplier, the Value Added Network (VAN)software supplier and the Inland Revenue.Since taking the electronic plunge in April 2000, WHSmith hasembraced electronic P45 and P6 forms as well as P14s – end-of-year returns. Ithas reaped tangible benefits. The total amount of work saved by using the P6message – opening and distributing the post, checking the payroll numbers andentering and checking data – is the equivalent of one full-time employee. “While I have not cut a ‘post’ per se, it certainly helpedwith reducing the need for an additional post a few years ago, and in saving onposts through natural wastage over the past 12 months,” says Lamidey.W H Smith currently uses a Value Added Network (VAN) to sendinformation to the Inland Revenue. It is now looking at ways to reduce themailbox costs which, due to theorganisation’s high turnover, are very expensive. It would then use EDI throughits own box instead of a VAN. “It’s a business decision whether to use EDI, EDI throughan ISDN line or internet, or VAN. It depends on the individualorganisation,” says Lamidey.She says it is important to treat the exercise as a properproject, making sure sufficient resources are allocated with enough time setaside. “If you start early enough you will get payback on P45s and P6s.Yes, you will have to do work on testing P14s, but that is just a part of thepuzzle.”WHSmith is now looking at bringing in student loans and taxcredits to reduce paper handling even further. Significant benefitsScotland-based Standard Life has also seen significant benefitssince introducing electronic filing 18 months ago. It is saving noticeably onmanual resources – previously, it took about two weeks a year to input all thetax updates. It now takes around six days.The financial services company pays around 12,500 staff,including pensioners. It uses Employers’ Electronic Communication (EEC), alsoknown as EDI, to process P45s and P6s, and to electronically receive P9s – ortax code changes – from the Inland Revenue.Standard Life was able to use its existing system, Unipay, fromRebusHR. It is also well-placed to deal with imminent changes to statutorymaternity pay, paternity and adoption pay, as it already pays the latter. It isnow looking closely at how to further improve its payroll operation bystrengthening the emphasis on electronic processing, and handing overresponsibility to staff. “We want to improve procedures, looking at process mappingand what the customer is telling us, so that we can offer excellent customerservice and cut costs,” says Julie Wilson, payroll manager at StandardLife.Plans for the future include imlpementing self-service options– such as the facility for staff to update their bank details online, which isexpected to go live in the Spring – and expanding the e-filing system toinclude student loans. David Barr, head of HR operations – which encompasses payroll –says: “As we move forward, we will be making self-service the key thing sothat people have greater access to information. This will sort out lots of thecalls and letters we get, whereas now, we have to go back and manually adjustthings. We want to make the process as slick as possible.” It was this desire to give more control to staff, combined withthe need to achieve e-government goals, which led Ipswich Borough Council tointroduce a state-of-the-art system. The council, which employs 1,300 staff, has signed a £300,000deal with RebusHR to provide a fully integrated HR and payroll solution. Theseven-year project ties in with the council’s decentralised approach to peoplemanagement. “Our main objective was to take the service to employeesso they could access non-confidential information, such as payrollrecords,” says Julie Price, head of HR for Ipswich BC. “It was alsoour objective to do e-government and gradually eradicate paper.”Marks & Spencer was recently forced to rethink how it runsits payroll and other non-core functions when it moved its London headquartersfrom Baker Street to a smaller site in Paddington, which housed 1,800 staffinstead of 3,000. It had to choose between outsourcing, or keeping payrollin-house, but operating from a different location.When the retailer examined benchmarking statistics, itestablished that in terms of cost per payslip, it was one of the top fivecompanies. It also had a very good ratio of 25.5 full-time employees to 63,000static staff (110,000 staff going through payroll). Keeping payroll in-housemade the most sense. Along with other non-core parts of the business, it issetting up a 64-strong shared services division in Manchester’s Salford Quay,which goes live in September.Like so many organisations with vast workforces, M&S usesRebusHR’s tried-and-tested Unipay and Uniper systems. Sandra Carr, head of HRshared services, says: “It’s old technology, but along with Oracle, it isone of the few that can cope with such large numbers of employees.”The company also uses PIMS . But it will be using PeopleSoft’score ERP solution for its state-of-the-art HR system of the future. “The PIMS personnel management system is a really oldsystem that has a lifespan of about another 18 months. At the moment, thepayroll system is the only one true source of data, with PIMS, PeopleSoft andthe pensions system all feeding into it. However, this is not where we want tobe,” says Carr, “so we need to get PeopleSoft fullyoperational.” M&S uses PeopleSoft’s HR, Learning and Recruitment modulesat head office and its eight recruitment centres. It then has another 43 sitespicking up HR administration through the PIMS system, which it retains for itstime and attendance element, which drives and feeds payroll. “As soon as we find a time and attendance productcompatible with PeopleSoft, or if we go for their new version, it would meanthe 43 PIMS sites will no longer have to exist,” says Carr.”I think of our payroll as a Brussels Sprout, with a coreand all these bits such as legislation changes all hanging off. It all lookshellishly complicated and we need to dumb down,” she adds.Although it is early days, a growing number of companies areexploring the possibility of single international payroll applications. M&Sis currently looking at PeopleSoft’s global solution, but is waiting for moreevidence that it works well. Another player in this field is LogicaCMG, who hasbeen working closely with SAP to offer an international pay service coveringaround 38 countries. The attractions of a single international payroll solutioninclude greater economies of scale and the avoidance of managing lots ofsuppliers in different countries. In the increasingly complex minefield that ispayroll, the search is on for ultimate simplicity. Changing affecting payrollFrom April 2003 – National Insurance (NI) contributions will increase by an additional 1 percent on earnings above £89 a week. For senior staff, there is no longer a true annualmaximum amount of payable NI. Employees with additional directorships now haveto pay 1 per cent on all earnings, whatever the source – Child Tax Credit – paid directly to the carer replaces Children’s TaxCredit – Working Tax Credit – paid through the wage packet – replaces WorkingFamilies’ Tax Credit, Disabled Person’s Tax Credit and New Deal 50 plusEmployment Credit – Changes to Statutory Maternity Pay, and the introduction of StatutoryAdoption Pay and Statutory Paternity Pay From May 2005 – Mandatory electronic filing of end-of-year returns for employers with morethan 250 staff www.inlandrevenue.gov.ukwww.gateway.gov.uk Comments are closed. No small change transforming payroll systemsOn 11 Mar 2003 in Personnel Today Related posts:No related photos.