Need to know:
- Employers must assess whether they are liable for the new apprenticeship levy, especially where they are part of a larger group.
- Employers should assess how they stack up ahead of the upcoming implementation of mandatory gender pay reporting.
- A review of data security internally and externally will help to protect sensitive employee information.
- Given the number of changes being introduced, testing payroll software before it goes live is essential.
It is set to be a busy year for payroll, with plenty of changes scheduled for 2017. And, with details yet to be finalised on some of these, it could be a challenging year too.
Helen Hargreaves, associate director of policy and research at the Chartered Institute of Payroll Professionals (CIPP), says: “There’s so much uncertainty in 2017. Against the Brexit backdrop, firms will be dealing with new requirements such as the apprenticeship levy and gender pay gap reporting alongside the normal changes. This will bring challenges for payroll professionals.”
With ambitious plans to set up three million additional apprenticeships over the next five years, the government is introducing a new apprenticeship levy in April 2017 to fund them. This levy, 0.5% of an employer’s pay bill, will be payable by firms with a payroll in excess of £3m.
Even smaller employers need to be mindful of whether or not the levy applies to them, says Hargreaves. “Only one £15,000 allowance applies to all the [organisations] within a group so, where a smaller employer is connected to one or more other [organisations], they will need to decide how the allowance is to be allocated to determine whether or not they are liable.”
Payroll professionals will also need to deal with the changes to salary sacrifice arrangements that were announced in the Autumn Statement. Under these, the government will significantly limit the range of benefits that attract tax and employer national insurance advantages when offered through a salary sacrifice arrangements. Only pensions, childcare, bikes-for-work and ultra-low emission cars will be exempt, with a transition period for other arrangements already in place before April 2017.
Bill Thompson, principal consultant, payroll at NGA HR, says: “Unravelling existing schemes will be a potentially onerous job for payroll. And, with the changes making affected benefits more expensive for employers and employees, there could be broader questions about what benefits they offer.”
For organisations with 250 employees or more, preparations for gender pay gap reporting should be well underway. Although it is still in draft legislation, the key snapshot date is expected to be 5 April 2017. “The first reports are due in April 2018 but I would recommend that employers do a trial run before this to see what their results are likely to look like,” says Hargreaves. “Payroll [departments] are the holders of much of the information so they will be involved in the reporting.”
There is no obligation to explain or address any gap but there could be serious consequences for employers that do not, says Geoff Isherwood, legal services manager at employment law firm ELAS. “It could lead to adverse publicity and the best candidates may not be attracted to [organisations] with a large gender pay gap,” he explains.
New tax year
The regularity of the April tax changes means these should happen smoothly, especially as increases to the national minimum wage were shifted from October to April in line with the national living wage.
Payroll will see a new issue though, with Scotland proposing slightly lower income tax thresholds for higher-rate tax. This would see Scottish taxpayers paying higher-rate tax on earnings over £43,430, as opposed to £45,000 in the rest of the UK.
This will mean larger tax bills for higher earners living in Scotland. However, from a payroll perspective, it should be relatively straightforward, with HM Revenue and Customs (HMRC) responsible for identifying Scottish taxpayers and administering the tax, says Thompson.
Some of the themes that emerged in 2016 will also continue this year, such as payroll data security. Gary Webb, marketing director at international payroll firm FMP Global, says: “Last year we saw internal data theft; sophisticated hacks; and phishing scams fooling payroll people into handing over sensitive data. [Employers] must review their data security both internally and externally to ensure their payroll information is protected.”
Whether employers are grappling with the ramifications of the apprenticeship levy or assessing how gender pay gap reporting will make their organisation look, the number of changes, coupled with the lack of detail for some of them, is putting pressure on the software developers, says Hargreaves. “Software is key to everything but this year there’s so little lead-in time,” she explains. “With so many changes, it’s even more important for employers to test the software before it goes live.”
Cottage Delight switches payroll system to meet current and future business needs
From humble beginnings in 1974, when founder Nigel Cope developed a traditional recipe all-butter tablet fudge in his family kitchen, Cottage Delight now has a range of more than 700 speciality foods. This growth has seen its staffing levels increase significantly too, with the organisation now employing nearly 200 people, as well as taking on casual staff to meet seasonal demand.
With a series of complex staff rotas and pay bands to administer, the organisation decided its payroll systems were in need of an upgrade. Gary Bowcock, IT manager at Cottage Delight, says: “Our previous payroll system had been in place since 2003 and was seriously antiquated. It wasn’t very user friendly and, because only one person could use it at a time, running payroll was very time consuming.”
After evaluating the systems that were available, the organisation selected Carval’s HR Unity Payroll system. “It’s allowed us to pass some of the responsibilities down to the departmental managers,” says Bowcock.
The system went live in June 2016, cutting the time it took to administer payroll from two days a week to just over two hours.
And, while there is plenty of change scheduled for payroll this year, Bowcock is not worried. “Carval provides us with two releases a year covering off all the changes,” he says. “We also have access to [its] online support portal, which contains all the information we need about any changes in legislation or taxation. It’s a huge improvement.”