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BlogPAYE Data Reveals Growing Payroll Complexity, New Challenges for HR Teams

PAYE Data Reveals Growing Payroll Complexity, New Challenges for HR Teams

HMRC and the Office for National Statistics (ONS) have released UK payroll data based on online PAYE filings. While the release of these statistics is still experimental, the data offers plenty of interesting payroll insights for UK companies.

According to the release, early estimates for June 2023 indicate that the number of payrolled employees rose by 1.5% compared to June 2022. This is a rise of 439,000 employees. Since February 2020 when the COVID pandemic hit the UK, the number of payrolled employees has risen by 1,027,000, a rise of 3.5%.

As workforces grow larger, employers are best served by examining the state of their payroll processes. Here are a few other interesting payroll implications based on the data.

An Older Workforce

HMRC and ONS’s release notes that between June 2022 and June 2023, there was a decrease of 32,000 payrolled employees aged under 25 years. During the same period, payrolled employees aged 35 to 49 years increased by 156,000.

Given the amount of attention surrounding Gen Z joining the workforce, this data seems curious. The workforce in the UK got older over the past year, and companies must rethink their payroll processes to match this trend. Older workers are more likely to prioritise flexible working arrangements (another law that was passed recently), and these situations have payroll implications.

Currently, the government has specified different categories of flexible working that employees can request from their employers. For instance, an employee working on staggered hours will create different payroll tax implications compared to a part-time worker.

Companies might even find switching worker statuses and granting flexible work requests saves them money. Either way, growing companies that rely on spreadsheets or outsourced payroll services will lack the flexibility needed to run such analyses and offer ideal solutions to their workers.

Next-generation cloud-based payroll management platform Pento makes this process simple, giving companies full control of their data. The result is a customisable workforce planning process that satisfies the needs of both workers and time-strapped HR teams.

Increased Pay

Inflation has hogged headlines in the UK over the past year, and HMRC’s release puts a spotlight on its impact. Early estimates for June 2023 indicate that median monthly pay increased by 9.7% compared with June 2022 and increased by 24.1% when compared with February 2020.

While increased pay strains a company’s expense budget, it only tells half the story. When combined with the ageing workforce trend, companies in the UK are clearly being forced to rethink their compensation schemes. Older workers prioritise cash compensation but demand other benefits like health and housing allowances.

To compete in the market and attract qualified talent, UK employers need to tailor compensation to fit an employee’s needs. For instance, offering a higher salary might not satisfy an employee and they might choose a competitor offering a slightly lower salary combined with equity options and a daily commute allowance.

Customisation of this kind brings complexity, one that is likely to result in missed PAYE filing deadlines and penalties. Payroll is a company’s biggest expense, and increasing it due to inefficiency is unlikely to assist growth. While companies with small workforces can change their processes ad-hoc and still meet deadlines, growing companies will struggle to do so.

In this situation, automating company filing with Pento and creating customised payroll workflows are the best options. The efficiency added by these solutions can impact the bottom line directly, boosting profits in a challenging economic environment.

Regional Growth

HMRC’s release includes another bit of highly interesting data. The regulator divides the UK into different territorial units, called Nomenclature of Territorial Units for Statistics, or NUTS. Analysing payroll data separately in each of these regions reveals that while salaries have increased, they haven’t done so uniformly.

Annual growth in payrolled employees in June 2023 was the highest in Luton, with a rise of 4.0%, and was lowest in Camden and the City of London, with a fall of 1.0%. These findings flip the traditional narrative that London attracts the highest amount of talent and salary rises. Manchester showed impressive growth, at 2.6%.

The presence of technology in the financial sector and the rise of remote work have affected the way firms in the city operate. Employees would rather skip the commute, and companies must adjust to these conditions, or risk losing talent.

These demands put extra stress on a company’s payroll, since worker status filings will change, creating more complexity in PAYE filings. A payroll system like Pento that integrates with HR systems can automate this headache away, giving HR teams more time to improve employee experiences.

Electronification of this kind is a competitive advantage, helping companies stay ahead of the competition in the long run.

Electronification and Automation Here to Stay

Technology has changed the way UK workers relate to their workplaces and companies must adopt electronic solutions to smooth payroll and HR workflows. Relying on spreadsheets or inflexible outsourced payroll solutions is a poor choice for growing companies, given the number of workforce changes they deal with.

In the long run, choosing electronic solutions is a competitive advantage, future-proofing a company against changing employment trends.

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