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Are you confident that your payroll processes, procedures and systems are sufficiently robust to deal with the requirements and challenges that 2012- 13 holds?
New legislative and HMRC reporting requirements which are to be introduced and impact all employers, starting this year, will have a significant impact on the payroll and pension operations of all employers. The introduction of Pension Auto-Enrolment and Real Time Information (RTI) will create a range of operational challenges while making proper governance even more vital. Failure to comply will result in financial penalties being levied by the Pensions Regulator and HMRC respectively. Furthermore, where data is not accurate there is further risk of increased operational costs aside from core costs associated with compliance.
What Is The Challenge?
Starting from October 2012, and phasing in depending on employer size, all employers will be required to assess their entire workforce with a view to automatically enrolling eligible workers into a qualifying pension scheme. Employers will also have to make a minimum pension contribution on behalf of workers creating a significant cost as well as an operational challenge for employers.
Our experience suggests that there is still a lack of awareness of the complexity of Auto- Enrolment as well as the cost and operational impact this will have particularly when there are multiple stakeholders involved eg. third party pension and payroll providers.
Are you clear what constitutes an eligible worker and a qualifying pension scheme?
Key facts that employers be considering now include:
- Understanding the cost impact of paying additional pension contributions;
- Identifying, selecting and implementing a compliant pension scheme;
- Identifying those workers who will need to be assessed under Auto- Enrolment including those who may not be employees;
- Identifying which category of worker each individual will fall into based on their age and earnings profiles;
- Reviewing the extent to which existing payroll, HR and pensions systems and processes can support compliance;
- Designing and implementing revised/supplemental business processes and controls to support compliance;
- Considering data quality and completeness and implementing remedial data cleansing and completion routines;
- Drafting, implementing and issuing relevant prescribed communications based on the worker category;
- Automatically enrolling eligible workers into the scheme and commence contributions;
- Establishing and implementing record keeping processes;
- Continuing to monitor every pay period for those workers who have not been automatically enrolled;
- Reviewing and assessing new processes and confirm operation/identify improvements; and
- Undertake annual compliance checks and certify employer’s compliance.
How can we help?
We are currently helping a number of clients to address the challenges they face in ensuring compliance with these new workplace regulations and can flex the amount of support required according to your needs.
Some clients have opted for one- off planning and education workshops to supplement inhouse capabilities and help organisations gain a real understanding on the issues and clarity on how to move forward.
Other clients have requested greater support through the project lifecycle including initial cost and impact analysis, project planning and support, technical application of the rules and scheme design, facilitating third party provider interactions to ensure system and operational changes will meet requirements, data quality health checks and consideration of future compliance checks.
In all cases we consider:
- Efficiency: Designing an approach that maximises efficiencies and minimises your costs.
- Governance: Designing a system and processes that work now and ensure your ongoing compliance with these new employment regulations.
- Risk: Ensuring that you meet your obligations in a manner that minimises the risk of non-compliance and avoids any penalties.
Real Time Information (RTI):
What is the Challenge?
RTI is fast approaching and represents the most fundamental change to the PAYE system in decades. It will impact every employer and HMRC will require significantly more information about each employee than currently provided, every time you run the payroll in order to provide HMRC with “real time” details of the payments made by every employer to every employee.
The introduction of RTI has been designed to support the Department for Work and Pensions (DWP) with the roll-out of Universal Tax Credits in October 2013. By providing accurate data and information on claimants earnings and the hours that they work, the Government aims to reduce the frequency of overpayments and fraudulent claims.
Employers will be required to provide HMRC with over 100 items of data for every employee including names, dates of birth, hours worked, payments made, details of deductions and passport numbers at the time the payroll is processed. Some, if not all, of this information is usually held in HR information systems but all employers will need to carry out a review of their records for completeness. Having robust processes supported by an effective governance and controls framework will be a key pre-requisite to ensuring successful compliance with RTI.
The time scales for the implementation of RTI are tight, and any company that has existing concerns about its’ current employment tax compliance processes must take steps now to review and remediate those issues before the introduction of RTI. Our experience suggests this will put significant pressures on systems and processes and should not be underestimated.
What should employers be considering now?
The timeline to implementation is tight and there are a number of steps that employers have to take between now and October 2013.
How can we help?
We are supporting our clients in a variety of ways to understand what RTI means for them, and the challenges they will face in complying with the requirements.
For more information contact:
Michael McCusker, head of private client tax at PwC in Scotland
Alison Fleming, head of pensions at PwC in Scotland
Chris Massey, head of human resources services at PwC in Scotland