This week sees the start of National Payroll Week both in the UK and the USA. The campaign is in its 16th year in America and is designed to raise awareness amongst companies and workers about the benefits that result from payroll activity.
The philosophy of facilitating a greater understanding of the work and challenges faced by payroll workers outside of the industry is certainly one I advocate. However, with pensions auto-enrolment just around the corner, perhaps this activity should not be limited to seven days.
The new legislation overlaps the areas of payroll and pensions to an unprecedented degree. As a result, those working in payroll will have to collaborate with other departments to a far greater extent than had been the case previously.
As a single example, it is a legal requirement that organisations inform their workers in writing of the changes to the pension scheme. I think this week is an excellent opportunity for payroll workers to take the lead and start talking to their company about how to make this happen.
While smaller employers can anticipate the new laws becoming mandatory between 2014 and 2015, companies can set up an auto-enrolment scheme at any point. It is therefore important for businesses to establish whether their payroll processes can cope with the new arrangements.
The first step is for companies to check on The Pensions Regulator website for their staging date. Employers must register with The Pension Regulator within four months of their assigned date. A checklist is available which contains all of the necessary information that needs to be included.
Companies also need to establish which of their employees are eligible jobholders, non-eligible jobholders or entitled workers. The penalties for non compliance can reach up to ten thousand pounds per day for larger companies, so it’s vital that companies get this right and do it on time.
• An ‘eligible jobholder’ must be enrolled into a pension scheme and the employer will have to pay pension contributions. This includes any UK workers aged between 22 and state pension age that earn more than £8,105 per year.
• A ‘non-eligible jobholder’ has the right to opt-in to a pensions scheme. This includes UK workers aged between 16 and 21 or state pension age and 74 that earn more than the minimum earnings threshold. It also includes any UK workers between 16-74 that earn between £5,564 and £8,105 per year.
• An ‘entitled worker’ has the right to ask to be enrolled into a pension scheme but the employer does not have to pay pension contributions if they do not wish to do so. This includes any UK worker between 16-74 that earns less than £5,564 per year.
In preparation for auto-enrolment, payroll software will have to be upgraded to perform several new tasks, including:
• monitoring the age and earnings of workers to establish the numbers of each type of worker, including those that need to be automatically enrolled
• establishing the date that ‘eligible jobholders’ become eligible
• calculating pension contributions to be paid to the pension scheme
• processing pension contribution refunds for those that opt out
There are already several options on the market that can cope with the new processes such as our integrated Payroll and EmployerSafe system, and we advise that companies give themselves enough time to test which format works best for them.
While some may feel that some actions fall outside their remit, it is nevertheless important that everyone is able to fully appreciate the upheaval that will result from the new processes being put in place. It’s a long process and the sooner companies start, the better their position will be when the rules come into force.