What changes can we expect to see to Payroll in 2022?
Ask any seasoned payroll professional and they will tell you that they’re no strangers to change. The pay sector inevitably brings with it a raft of fresh legislative changes each and every financial year, all of which have to be juggled in addition to keeping on top of core payroll responsibilities.
Noncompliance with many of these legislative shifts can often lead to severe financial and legal penalties, meaning it becomes top responsibility for payroll professionals across all sectors to reconcile themselves to these changes in time for the advent of the new tax year.
This year has already seen significant changes to payroll being introduced, such as increases to National Insurance contributions and the national minimum wage, not to mention changes to statutory sick pay and IR35 compliance laws.
Payroll professionals have had to juggle so much in such short a time and there’s no indication of things slowing down as we progress further into 2022.
We have taken a look at some of the predicted trends for payroll in 2022 to examine some of the changes that are on the horizon both in terms of legislation and technological advancements.
The past year has seen a huge increase in employees leaving their roles, seeking to retrain or reskill in other sectors. For many industries, this has led to them becoming embroiled in an increasingly competitive jobs market and struggling to secure talent with the proper skillset.
For payroll in particular, this creates some very specific issues: Many organisations rely on a core of seasoned pay professionals to navigate the complexities of payroll legislation and ensure a timely and accurate pay cycle. Without that well embedded core of knowledge at the heart of your payroll process, many businesses can find themselves open to legal and financial pitfalls.
It’s for this reason that many organisations are now looking to implement a greater degree of automation of their payroll process. This helps to free their teams from the stresses of manual and admin based tasks, allowing them to leverage their expertise in more meaningful ways.
The benefits of using automation for payroll management include:
- Faster and more convenient.
- Greater accuracy
- Reduced likelihood of human error
- Create time in the global payroll delivery process
- Frees up professionals to focus their attention on other high value work
- Create execution excellence and operational efficiency
The Government’s decision to extend the existing IR35 rules to the private sector has been a cause of concern for many organisations who will suddenly find themselves faced with a significant increase in their financial responsibilities and compliance demands. Furthermore, these shifts have raised the possibility of heightened compliance checks in the future- not just for IR35 but any significant legislative changes.
Heightened compliance requirements creates a maze-like challenge for payroll professionals who must balance their core responsibilities of ensuring an accurate and on time pay cycle with ensuring that their organisations remain fully legally compliant. With the financial and legal penalties for non compliance so severe- not to mention the damaging impact it can have on a businesses’ reputation, it is entirely logical that organisations will want to ensure they can meet heightened compliance checks head on.
Moving forward, it appears that a trend for businesses will be to lean on the systems and technologies which they use daily in order to ensure greater degrees of compliance. For many organisations this may require an audit of existing payroll solutions in order to ensure that it can offer the degree of functionality which they require.
Looking towards the future, it will no longer be acceptable for payroll solutions to simply handle the belt and braces pay process. Instead, organisations will be leaning on these solutions to offer a greater deal of automation and documentation of legislation in order to ensure they are ready to meet the demand of heightened compliance checks.
Extra layers of payroll process complexity
There’s no escaping the fact that the past couple of years have heralded unprecedented changes to the modern working world. Like nothing we have ever seen before, the years since the advent of the pandemic have seen organisations globally and across all sectors, reconcile themselves to a completely new way of working.
This has had a knock on effect for businesses who have found that largely, geography now plays a less crucial role in the search for talent. While this wider scope of applicants is a welcome boon, particularly in an increasingly competitive jobs market, it’s no secret that keeping connected with an increasingly widespread workforce is now a dominant challenge for organisations.
Global instabilities within the job markets have also left people feeling like their finances are on a knife edge, with research indicating that over the course of the pandemic, more and more people found themselves living paycheque to paycheque. Coupled with an upswing in hybrid or remote working, this has led to a two pronged challenge for businesses: how to stay connected with their people and also how they can ensure they are rewarding their people sufficiently and helping to safeguard their financial wellbeing.
Globally, there appears to be a renewed appetite for pay on demand functionality for wages across all sectors. With the pandemic era having taught businesses a great deal about the strengths of remaining agile and adaptive to challenges, employees are now showing a greater level of demand for that same level of flexibility to be applied to other areas of their working life- particularly their wages.
The ability to “stream” your wages gradually to your employees as their needs dictate, rather than tying them to the next payday, will give them an unparalleled degree of freedom to manage their finances and to make sure that they are never caught out by those unwelcome, unforeseen costs that have a habit of cropping up.
Businesses will also be assessing their existing payroll solutions in order to assess whether they offer the functionality and complexity they require to meet the challenges of this widespread working world. With organisations tackling the challenge of onboarding and paying employees from all corners of the globe, it’s clear that the systems and technology they rely upon daily has a role to play in helping them achieve accuracy and compliance.
More businesses to be affected by IR35 in 2022
At its core, the IR35 rules are the legislation surrounding compliance for off-payroll workers. Simply put, these rules apply to workers who are providing a service to a company either via their own private company or as a contracted intermediary. These rules exist to ensure that workers who would have been classed as an employee where they are providing the service directly to the client, are contributing roughly the same amount in tax and national insurance contributions as employees.
The legislation is designed to mitigate instances of tax avoidance whereby organisations could take advantage of gig economy workers and other similar contractors by having them do the equivalent work of a salaried employee but with fewer HMRC contributions. The new rules will ensure transparency around the use of contractors or intermediary firms, but the changes do bring with it a greater burden for payroll and financial professionals who will have to ensure that their organisations remain compliant.
The latest legislative changes were introduced earlier this year and impacted large and medium businesses in the private sector. These types of organisations are defined in the Companies Act 2006 as:
- Having an annual turnover of more than £10.2 million
- Consisting of more than 50 employees
- Having a balance sheet total of more than £5.1 million.
Any organisations that meet these criteria will need to be aware of the changes in legislation and ensure full compliance and transparency regarding the employee status of any contractors or intermediaries used.
The IR35 legislation does mean that incorporated firms only need to apply the new rules in the tax year following two years as a ‘medium-sized firm’. Any organisations who pass that threshold in the interim will have a two year grace period from the additional admin these changes represent. However, this doesn’t mean that organisations can afford to be lax and should instead, take this time to assess whether their payroll solutions are up to the task of ensuring they remain compliant.
Greater demands for reporting
With organisations facing unprecedented new challenges, one of the greatest priorities will be ensuring that their payroll solutions don’t simply provide speed and accuracy of the pay cycle, but also offer comprehensive reporting to help them understand emerging patterns and trends within their business.
After years of global disruption, businesses will no doubt feel that their finances are more precarious than perhaps they would prefer and to this end, comprehensive reporting can be the key to gaining insights which can help guide ongoing strategy and to also keep costs down.
This is particularly important considering the wider net businesses are now casting in order to secure talent. When making decisions with regards to whether a work from home structure or widespread return to office model would be preferable, it’s important to get an overview of the bigger picture and to understand the impact of costs.
Data driven visibility will be absolutely vital in helping businesses formulate strategy and put it into action long term. Many organisations may also find that the existing solutions which they use, simply don’t offer the complexity of reporting they require. It will be important for organisations to take a look at their systems and to ask some tough questions about whether it can do the job and offer them the complexity they require.
Payroll calendar and important dates 2022
1st of every month
Staging date for a group of new companies.
5th of every month
Month end date for PAYE.
22nd of every month
Deadline for payment of PAYE and NICs etc to HMRC’s Accounts Office by electronic method.
19th of every month
Deadline for payment of PAYE and NICs etc to HMRC’s Accounts Office by non-electronic method.
Deadline day for employers to provide employees with a P60 form.
Filing deadline date for Expenses & Benefits Forms P11D(b), P9D and P11D to reach HMRC.
How is your business handling payroll changes?
It’s not overstating things to say that payroll sits at the heart of your business. The ability to pay your people accurately and on time month after month is a demonstration of your commitment to looking after their wellbeing and rewarding them appropriately for their hard work. In recent memory, payroll professionals have been viewed somewhat as hidden key workers- after all, without pay, getting your people into work would be nigh on impossible.
Your ability to pay your people accurately and on time is also a reflection of your organisation as a whole. Businesses who fall behind in this sense run the risk of being painted in a negative light, particularly from the perspective of recruitment. As businesses are looking to attract new talent in order to drive their future success, a reputation as being unreliable with pay will not make your organisation an attractive prospect for job candidates.
Despite this, many payroll teams are still languishing under outdated and outmoded systems: Recent research by the Chartered Institute of Payroll Professionals found that a staggering 74% of payroll professionals surveyed said that they were unhappy with inefficiencies in their current solution.
Your payroll ultimately serves as a reflection of your overall brand which is why we’ve built these core elements into our own solution-Advanced Payroll:
- Pay on Demand- Allow your employees the ability to draw down a portion of their wages early, giving them the flexibility they need to meet any unwelcome and unexpected costs. Incentivise over time or shift cover with same-day payments to employees who help cover absences. Pay on demand allows your employees to access any pay they have already earned that month, at no extra cost to your business.
- Employee Self Service- Allow your people greater visibility of their earnings with self service hubs which empower them with access to their schedule, wages and tax contributions at the touch of a button. The platform allows your people complete control of their money and can also be utilised to push through communications around financial rewards or overtime.
- Compliance- Matters of compliance, particularly in relation to tax, is a primary concern for all payroll departments. Advanced Payroll does the hard work for you, keeping on top relevant legislative changes so you don’t have to. Instant calculations can help ensure the information you are feeding through to HMRC is accurate and that any PAYE or National Insurance contributions are present and correct.
Fundamentally, we believe in payroll as a positive force across all organisations. Your people deserve to be rewarded for their hard work and a business which places pay at the heart of what they do will inevitably find they have a happier, more contented workforce- elements which all reflect positively upon your brand, particularly from the perspective of potential new hires.
To find out more about how Advanced Payroll Software can transform the way you meet the demands of new legislation and ensure accuracy and compliance throughout the next financial year and beyond, get in touch with one of our friendly team members today.