Exploring the impact of flexible working on UK payroll Exploring the impact of flexible working on UK payroll

Exploring the impact of flexible working on UK payroll
31 Dec 2014

While organisations are assessing the potential impact of the UK's new flexible working practices, from job shares to annualised hours, how many have contemplated the impact on payroll of this significant shift in employee activity - from the risk of over or underpayment to incorrect inclusion in auto-enrolment schemes?

Neil Lagden, head of Bond Payroll Services, outlines the importance of capturing detailed and accurate employee working hours in minimising the payroll overhead and avoiding the risk of expensive mistakes.

A new era of working practices

Flexible Working Regulations were extended on 30 June in the UK to give everyone with a minimum of six months service the right to request flexible working. While this is a positive step towards creating a more flexible workforce, what additional pressure will it place on the payroll function to manage an employee base now looking for job shares, compressed hours, flexitime, annualised hours, or any other nonstandard working patterns?

Of course, payroll teams are used to dealing with employees coming back from maternity leave or long term sickness absence and requesting flexible working. They have processes in place to manage these changes. However, this latest change to flexible working practices adds more than a degree of complexity.

When everyone worked the standard 37.5 hour week, a simple glance down the payroll run could reveal an error. Now with businesses adopting multiple flexible working patterns it becomes far harder to spot those mistakes.

Indeed, even if the number of hours worked is standard, the use of compressed hours, for example, makes time off and holidays far more complicated to calculate.

A key requirement for any payroll team, whether in house or outsourced, therefore, is to ensure that employee working hours are accurately recorded and recorded by the hour, rather than by the day. As long as the information is accurately recorded, for example, using a time and attendance system preferably tightly integrated with the payroll system, the payroll team can be confident that the right employee is being paid the right amount at the right time.

Employee understanding

Furthermore, with trusted, accurate working hours a business can customise the information included on the payslip to reflect each individual’s working activity. This makes it much easier for employees to understand each payment and minimises the time spent by payroll fielding employee questions.

This is an area perhaps overlooked by management when introducing flexible working. Individuals, while welcoming the chance to work different shifts or embark upon job shares, are often understandably confused at the week or month end by the figure paid and the deductions made.

Providing a complete overview of the hours/ days worked, including location where applicable, makes it far easier for employees to understand the impact of the new flexible working model on overall take home pay.

This is particularly important for any organisation currently - or soon to be - making auto-enrolment (AE) submissions. Flexible working is likely to increase the number of individuals hovering around the £10,000 annual AE threshold.

If the information provided to payroll is inaccurate there is a serious risk of an individual being incorrectly assessed and submissions automatically deducted from the weekly or monthly pay packet.

For any low earner this could cause huge financial discomfort and require time-consuming unpicking by payroll to rectify the problem. Accurate tracking of employee payments is therefore critical to automatically identify every eligible employee, irrespective of working patterns, calculate the payment and send the file to the pension provider.

Complex and unique

There is no question that flexible working can be used as a strategic tool to improve the performance of individual employees through greater diversity and increased levels of engagement and commitment. However, with every business opting for different flexible working practices and employees continually evolving their flexible working requirements, the commonality between payroll departments is reducing.

Each payroll operation will be different and will demand different business rules, a process that can be time consuming to set up. However, once in place, the payroll process should run seamlessly, assuming the quality of information remains high.

However, failure to introduce the right mechanisms for capturing employee activity by the hour will put huge pressure on payroll to manage and verify employee payment. It is by automating potentially labour-intensive processes, such as AE enrolment, that administration time and costs associated with dealing with flexible work patterns can be significantly reduced.

Neil Lagden is head of Bond Payroll Services, Bond International Software.

While organisations are assessing the potential impact of the UK's new flexible working practices, from job shares to annualised hours, how many have contemplated the impact on payroll of this significant shift in employee activity - from the risk of over or underpayment to incorrect inclusion in auto-enrolment schemes?

Neil Lagden, head of Bond Payroll Services, outlines the importance of capturing detailed and accurate employee working hours in minimising the payroll overhead and avoiding the risk of expensive mistakes.

A new era of working practices

Flexible Working Regulations were extended on 30 June in the UK to give everyone with a minimum of six months service the right to request flexible working. While this is a positive step towards creating a more flexible workforce, what additional pressure will it place on the payroll function to manage an employee base now looking for job shares, compressed hours, flexitime, annualised hours, or any other nonstandard working patterns?

Of course, payroll teams are used to dealing with employees coming back from maternity leave or long term sickness absence and requesting flexible working. They have processes in place to manage these changes. However, this latest change to flexible working practices adds more than a degree of complexity.

When everyone worked the standard 37.5 hour week, a simple glance down the payroll run could reveal an error. Now with businesses adopting multiple flexible working patterns it becomes far harder to spot those mistakes.

Indeed, even if the number of hours worked is standard, the use of compressed hours, for example, makes time off and holidays far more complicated to calculate.

A key requirement for any payroll team, whether in house or outsourced, therefore, is to ensure that employee working hours are accurately recorded and recorded by the hour, rather than by the day. As long as the information is accurately recorded, for example, using a time and attendance system preferably tightly integrated with the payroll system, the payroll team can be confident that the right employee is being paid the right amount at the right time.

Employee understanding

Furthermore, with trusted, accurate working hours a business can customise the information included on the payslip to reflect each individual’s working activity. This makes it much easier for employees to understand each payment and minimises the time spent by payroll fielding employee questions.

This is an area perhaps overlooked by management when introducing flexible working. Individuals, while welcoming the chance to work different shifts or embark upon job shares, are often understandably confused at the week or month end by the figure paid and the deductions made.

Providing a complete overview of the hours/ days worked, including location where applicable, makes it far easier for employees to understand the impact of the new flexible working model on overall take home pay.

This is particularly important for any organisation currently - or soon to be - making auto-enrolment (AE) submissions. Flexible working is likely to increase the number of individuals hovering around the £10,000 annual AE threshold.

If the information provided to payroll is inaccurate there is a serious risk of an individual being incorrectly assessed and submissions automatically deducted from the weekly or monthly pay packet.

For any low earner this could cause huge financial discomfort and require time-consuming unpicking by payroll to rectify the problem. Accurate tracking of employee payments is therefore critical to automatically identify every eligible employee, irrespective of working patterns, calculate the payment and send the file to the pension provider.

Complex and unique

There is no question that flexible working can be used as a strategic tool to improve the performance of individual employees through greater diversity and increased levels of engagement and commitment. However, with every business opting for different flexible working practices and employees continually evolving their flexible working requirements, the commonality between payroll departments is reducing.

Each payroll operation will be different and will demand different business rules, a process that can be time consuming to set up. However, once in place, the payroll process should run seamlessly, assuming the quality of information remains high.

However, failure to introduce the right mechanisms for capturing employee activity by the hour will put huge pressure on payroll to manage and verify employee payment. It is by automating potentially labour-intensive processes, such as AE enrolment, that administration time and costs associated with dealing with flexible work patterns can be significantly reduced.

Neil Lagden is head of Bond Payroll Services, Bond International Software.