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Making payroll pay

Mark Paraskeva, CEO Payroll Division, IRIS It may not contribute directly to the bottom line, but payroll is an indispensable function in any business. It’s complicated and you will often come up against challenges. Understanding these challenges and how to overcome them, however, will guarantee the success of your department.

In this article, Mark Paraskeva, CEO of IRIS' SME division, looks at seven of the most common challenges a modern payroll department may encounter.

1. Payroll is undervalued in today’s organisations

The payroll function is often simply viewed as a 'commodity' in many companies. Employees may view it as an administrative burden that is necessary, but provides no real added value to the business.

If you want to change these perceptions in your business, ask yourself the following questions:

  • What are the core elements and characteristics of your service?
  • What do other departments need to know about your service, its benefits and how best to use it?
  • What is the most effective communication media for distributing this message?

2. Moving from a reactive to proactive function

Payroll may be undervalued because it is often seen as reactive. Employees need to be paid, so payroll arranges wages. Management requires certain information so payroll provides a report.

With commercial payroll software, there are many customised reports which can be created. More often than not though, these reports are pulled as a force of habit but the data is not properly analysed.

There is a huge opportunity for payroll to help influence company strategy, providing they can deliver adequate information to the relevant decision makers.

3. Keeping up to date in a constantly changing world

The world is constantly changing, but in recent years these changes have been occurring at an ever-increasing pace in a variety of areas.

  • Technology – smartphones, tablets, cloud computing, digital payslips etc.
  • Legislation – Real Time Information, automatic enrolment etc.
  • Work habits – increased career mobility, telecommuting, field-based jobs etc.
  • Environmental – increase in corporate social responsibility, 'green initiatives' etc.

In order to remain competitive, you need to be willing to embrace change. Payroll can be viewed as an outdated function but this doesn’t have to be true!

Welcoming change can actually cut costs, save time and improve efficiency!

4. Dealing with Real Time Information

In April 2013, HMRC introduced Real Time Information (RTI), which requires employers to submit PAYE records on or before each time they pay employees.

There are two key things businesses need to ensure they are prepared for in order be compliant:

  1. You have RTI compliant payroll software or use an RTI compliant outsourcing service.
  2. Your provider has a range of RTI support options to help you through the transition.

5. Preparing for automatic enrolment

Automatic enrolment, part of workplace pension reform, is being introduced to counter the issue that people are living longer but saving less for retirement. Automatic enrolment is being rolled out in stages, called staging dates, from October 2012.

Industry experts suggest that businesses should start preparing for automatic enrolment 18 months before their staging date, so you should already be beginning to think about the next steps you need to take.

Payroll will play a major role in ensuring compliance so it is vital that your department is educated on the changes and the new processes you will need to follow.

6. Software limitations

When using commercial payroll software there are two issues you may encounter.

  1. Your payroll software has limited functionality and therefore cannot perform certain tasks.
  2. Your payroll software has the functionality to perform the tasks you need, but your knowledge of the software is limited so you cannot use it to its full potential.

To overcome these issues, follow these steps.

When choosing your payroll software, work out what functionality you need and try to anticipate any you may need in the future. Trying to 'future proof' your systems can be a huge benefit in the long run.

Make sure you remain up-to-date with the latest software and any changes to legislation. This will save time in future and enable you to use your software to its full potential while remaining compliant.

7. Costs

Running an effective payroll department involves costs: purchasing your software, spending time learning how to use it and employing people to run your payroll.

Having the right software in place will save you time and money, as once it’s installed and your staff are trained, submitting records to HMRC, paying employees or running reports to analyse data can be done with a few clicks of a button.

Mark Paraskeva is CEO of the SME Division of IRIS which provides business critical software and services to the UK accountancy and SME sectors. For more information, please visit:

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