Paying the right price
At the best of times, the administration of payroll and human resources in any business is one of the most complex yet routine tasks in modern business. Implementing the rules of our national taxation and employee welfare systems can be a challenge, even for experienced administrators.
The annual budget changes have, in recent times, been added to by supplementary budgets and the income levy.
Outside of the larger organisations and specialist payroll bureaux, the days of the wise wages clerk, all knowing keeper of the mysteries of PAYE, PRSI and the other ‘P-codes’, are long gone.
There is a wide range of smart payroll software on the Irish market, completely au fait with national legislation and the taxation and welfare deduction rules. It is updated to comply with anything new that is introduced by budget or legislation.
At the last count, there were more than 30 payroll software packages on the market.
Most of these are indigenous, with entry level for very small businesses at less than €150.The frequency and speed of regulatory change in recent years means that Irish firms should have the market advantage, at least in terms of rapid response to changing legislation.
For smaller businesses, some human resources (HR) or personnel functionality will usually be included in a payroll package. It is likely to be limited to essential records such as employee personal details, time and attendance, holidays and so on. On the other hand, it will almost certainly cope with what might be required to satisfy a Nera inspector, for example.
Higher-level HR suites, as well as bureau services, cover almost every personnel function, from automatic health and safety compliance checks to manpower forecasting. They also include the payroll function and interface with the accounts system.
Traditionally, payroll was a function within the accounts department. Today it is recognised that salaries and bonuses, job responsibilities and entitlements, hours worked, holidays, tax and other personal affairs of employees properly belong to the HR function.
The payroll side is primarily to administer payments and Revenue returns correctly. But smart payroll software incorporates all the rules and calculations so that, within reason, accurate input of employee details will generate the correct output of payments and Revenue returns.
All payroll people should have some training, according to Eamon Corcoran, managing director of the Irish Payroll Association (Ipass). Ipass is both a provider of training in this area and a lobby organisation for the needs of professionals, such as software developers, service providers and payroll staff.
“Systems can be very smart but they depend on people,” said Corcoran.” Today’s payroll software is easy to use and highly automated. But that does not mean that there cannot be errors and in this area that could be quite costly.”
It is not the systems themselves that are the issue, said Corcoran.
“What is essential to complement them is a user who understands taxation and employment law requirements, at least in broad principle,” he said.
“Revenue rules can be complex and, in any event, the person in charge of running payroll will have to deal with internal queries and rectifying mistakes.
That is becoming even more critical in the current economic climate, so it would be hard to over-estimate the positive advantages of having a knowledgeable payroll person who can follow the rules and answer the questions.
“The crucial point is that errors are always the employers’ liability. If an employee who has left has been overpaid, for example, the cost will almost certainly come off the employer’s bottom line. Overpayment of employers’ PRSI contributions in relation to exceptional situations, such as redundancy, is something that is not at all uncommon.”
Corcoran said that many payroll systems did not cope well with redundancy and termination payments.
“There are different formulae for calculating how much of an employee’s termination payment, other than statutory redundancy, is taxable and there are special rules for employees with long service.
This is just one example of exceptional but no longer infrequent circumstances, where the operator may need information that the system does not hold or even calculations that the system does not do.”
This is borne out to some extent by Keysolve, the Irish distributor of Earnie payroll software in entry level and two senior versions.
“We have seen an interesting shift in support desk calls,” said Andrew Doyle, Keysolve’s managing director.
“For some years the ratio was consistently about 70 per cent queries relating to the software and the balance about general payroll and Revenue issues. This year, the balance has swung 50:50, if not over to the general regulatory side.”
Stressing that Keysolve was not trying to be a payroll bureau, Doyle pointed to the recent extension, by demand, of a service his company had frequently offered to clients.
“As well as the general support desk, we have often supplied temporary staff services to businesses using Earnie,” he said.” That would have been to cover sick leave, sometimes maternity leave for longer periods, mostly run from our office but on the customer’s system.
Sometimes our people would go to the client site for a few days at a time.”
Another aspect of the same general picture is mentioned by Hugh O’Sullivan, managing director of Sage Micropay vendor MCS Computers, one of the country’s oldest IT businesses.
“We are seeing a general rise in the workload of the payroll function, whether the business is big enough to have a few people or, more commonly, in SMEs, where it is usually a part time set of tasks,” said O’Sullivan.
He cited the CSO returns requirements as just one example of additional administrative burdens introduced in recent years.
Changes in legislation have also complicated the picture at a time when employees are scrutinising their payslips more closely.
“There are just more queries from staff than ever before and operators are not always able to answer them,” said O’Sullivan.
“For the most part, the system applies the rules and people can get to grips with the software fairly quickly. But people using it need to have some grasp of PAYE and PRSI and our national employment regulation framework. Like other software vendors, we provide training and support for the use of the products but the background knowledge is not our territory.”
One historical problem that Sage Micropay has overcome is the fact that many businesses need to run their year-end payroll before Christmas. By the third week in January, they may need to run the next payroll without having closed off the previous year.
“Such an apparently simple issue yet it used to cause major headaches for administrators,” said O’Sullivan.
The fear of the National Employments Rights Authority (Nera) is a headache, according to Mike O’Grady of Aquila Technology, a Galway-based developer of HR Pay.
“There has been a lot of inspection activity and SMEs are worried about falling foul of the regulations,” said O’Grady.” They are also concerned about accurate recording of time worked as part of tighter controls of their costs. So there is renewed interest in all forms of automated time recording.”
Aquila offers an electronic system based on RFID proximity card technology, with a master unit about the size of an early mobile phone. It offers a seamless link with the HR and payroll software.
Layoffs and redundancy, short time working and other variations on these themes are often a challenge to SMEs in applying the tax and other regulations properly.
“Another wrinkle that arises, especially in the construction sector, is ‘re lease for apprentices’ because you have to account for employees who remain on your payroll but are not, for certain periods, being paid by you,” said O’Grady.
It al l adds up to increasingly complicated administration for HR and payroll, particularly in smaller businesses, said O’Grady.
“The income tax levy is really confusing people – not too surprising when you consider that the latest Revenue bulletin on how to deal with it came out in November.”
One of the Irish packages that has combined HR and payroll functionality for many years is Herbst HRM Payroll, which has more than 400 user companies, principally SMEs with up to 100 employees.
“We tend to use the term ‘employee relationship management’ because the idea is to have a single unified view of everything to do with each person on the payroll,” said Orson Herbst.
His firm is encountering a lot of concern about Nera, he says, with managements looking to ensure that they comply with the record-keeping specifications that are imposed by legislation.
“In practice, that is al l taken care of by the HRM Payroll system once the working times are recorded,” said Herbst.” Similarly, the information required by the CSO can all be compiled readily from the system when required.”
Herbst sees its system more in terms of the proactive management of personnel, from performance review scheduling to training and safety records.
“Planning and review are all in the system, while it is easy to maintain consistent records of everything from the initial letter of appointment and employment terms to what was said and agreed at any meeting.”
It is important both to manage and record any actions to do with disciplining employees, Herbst said.
Mamut is a European business software vendor exclusively serving smaller companies and offering a choice of server-based or online (software as a service) applications, or a hybrid model, which has the added bonus of constant replication of a customer’s databases by the Mamut data centre.
Recognising how specific to each country payroll is, Mamut has partnered with Payback.ie, the Kerry based company which has been in the sector for 25 years.
“It is fully integrated with Mamut financial systems,” said Luke Buckley, country manager for Mamut.” We also have a smart HR module and it is easy to set up information transfer to it from the payroll, typically for monthly updates.
That tends to suit most customers because whether they work primarily online or not, payroll ends to be an office based function.”
That point is reinforced by Padraig Gill, managing director of Intelligo Software.
“What we are seeing clearly is fewer people to of a multinational group with 4,500 staff in 32 countries. Its hosted Resource Link offers all of the functionality online as a service without the investment or systems overhead.
“Our clients in Ireland as elsewhere continue to look for maximum efficiency and accuracy in HR administration,” said Roddie Aherne, business director for Ireland.” This includes ful l compliance with their statutory employer obligations and very often also with best practice standards.
“That’s the top line. Closer to the bottom line today is seeking to cut costs and in that context see what the HR side can help with,” he said.” Certainly, the first thing is to make HR and payroll administration as cost-effective as possible. Self-service for employees in dealing with their employer’s systems is one very good example and now almost standard.”
An area that is receiving particular attention by employers is time and attendance, said Aherne.
“In some traditional sectors, clocking in has always been the norm. But many service sector businesses did not emphasise the monitoring of time onsite or on duty. Times are changed, there is a very different attitude and monitoring is becoming universal.”
Northgate Arinso has seen a major pick-up in demand for monitoring systems in the last 18 months, including solutions for teleworking and other offsite time. People can log on for their day or work session by PC while a portable’ time clock’ unit with GSM connection can serve teams of cleaners, for example, or project sites.
This is also applicable in managing more flexible ways of working, Aherne added, such as flexitime, teleworking and job sharing and, in the current economy, short time working.
A more sophisticated tool that is coming into its own in larger businesses is organisational modelling and charting, Aherne said.” Just like other forms of computer model ling it offers a way to test ‘what if ?’ scenarios before making corporate decisions.
“In HR it could involve, for example, the effect of staff reductions on rostering options or cover for core functions. Other effects of reorganisation could be examined, like assigning responsibilities or tasks to small teams rather than individuals.”
A key attribute of this model ling is that it can extend the impact assessment to any HR area, from payroll and costs, naturally enough, to minimum staffing or skills requirements or compliance with employment regulation such as likely breaches of maximum working time.
“The value is in enabling senior managers to make well-informed decisions when reorganising, as so many businesses must, to do more with less in the current economy,’’ Aherne said.
