Companies have always had to deal with changing business conditions and regulations, but payroll management has increased in complexity in recent years.
When the COVID-19 pandemic’s lockdowns were instated, technology revolutionised the nature of the workplace, with remote and hybrid working models becoming the norm. Now that it’s standard, employers in the UK have to offer hybrid working arrangements from the first day an employee begins at the company, which can sometimes complicate their official classifications.
These changes have pushed payroll systems into the spotlight, as companies need new ways of calculating payroll and ensuring compliance. Remote work has also complicated the tax picture, stressing the important role payroll management is now playing in modern companies.
Here are three reasons UK employers need to use powerful payroll systems to ensure business resilience.
Successfully fulfilling modern regulatory reporting standards boils down to good data organisation. A company may have relevant data in its systems, but without the ability to access or analyse it for insights, data collection is pointless. This inability will also lead to hefty fines.
For instance, HMRC’s PAYE program is now ingrained in every payroll check employers issue. HMRC automatically deducts taxes and national insurance contributions from a paycheck based on an employer’s reports. These reports must be filed before a deadline every month, or companies risk incurring fines.
Once companies reach a certain size, manually processing all these reporting requirements becomes impossible. The deadlines are too tight, and the complexities are huge. Effectively, HMRC has forced employers to adopt electronic solutions that automate large portions of the reporting process.
These tools offer another advantage: they automatically establish audit trails, giving regulators an instant view into business tax reporting, should the need arise. As technology continues to improve, companies must back their electronic payroll systems with practices like good data management and storage.
Regulators are unlikely to roll back these complex reporting needs, making payroll systems a critical cog in a successful company’s machinery.
As recently as two decades ago, most university graduates would automatically begin searching for a job after finishing their studies. Unlike today, technology was in its infancy, and people did not have too many options beyond traditional paths. Fast-forward to today and social media has turned teenagers into stars with budding careers.
Earning money on the internet has never been more accessible, and the traditional nine-to-five career path seems more quaint as each day passes. Employers must work hard to attract talent, and top talent has several options, including the ability to quit and launch their company.
Payroll systems might house data that is unexciting, but they offer employers valuable insights into reducing workforce attrition and maximising engagement. Compensation is the key to retaining and attracting talent and payroll systems give companies valuable insights.
For instance, some skilled employees might need highly-customised compensation packages that encompass complex bonus formulas. Payroll analytics can give companies insights into the cost of these packages and whether they are viable. They also allow company HR teams to brainstorm innovative options that deliver value to employees but reduce company costs.
A young employee might value training and development over healthcare benefits, for example, and companies can model their compensation terms on their payroll systems. The result is a well-compensated workforce likely to remain loyal in the long run, giving the company an edge in the market.
Companies can realise cost savings in these situations, too. Hiring costs are a significant expense when accounting for ramp-up times and employee training costs.
As a business scales, expansion becomes a headache. Specifically, modelling expansion costs and the ROI of scaling a business is challenging. The UK’s proximity to the EU and the rest of Europe means that overseas expansion is inevitable when growth is a priority.
At the very least, a UK company must model the costs of serving EU customers and the cost ramifications of that decision, given Brexit’s implications on taxes and duties. Payroll systems play an important role in giving financial planning platforms cost inputs.
As a company’s most significant expense, payroll costs can make or break an expansion plan. A payroll system centralises salary and compensation data, along with helping companies model new regulatory expenses.
These inputs into a broader financial model will help companies accurately understand expansion costs and avoid costly mistakes.
Payroll data might not strike an observer as an obvious place to begin when creating business resilience. However, these datasets are an invaluable resource for companies in the UK, helping them future-proof their businesses.
While business resilience might be a function of several factors, there’s no denying payroll data’s role in serving as input and steering a company’s course towards long-term success.