Enacting payroll solutions
In recent years, changes in income tax and PRSI have placed an annual burden on the vendors of payroll software. These vendors have a very short window to update their products. With the budget now delivered in December, any taxation or other changes that have to be reflected in the following tax year need to be carried out before Christmas.
“Our customers pay us to ensure they are compliant with their statutory obligations. We have just a couple of weeks after the budget to re-program our software to achieve that,” said Mark McDonagh, chairman of the three-year old Payroll Software Developers Association (PSDA) and managing director of specialist software company Ardbrook.
When legislative changes just involve rates and parameters and allowances, he said, that is not exceptionally difficult. In part, that is because all of the software firms are accustomed to that rush of work between the budget and Christmas. “The tight timescale is even tighter than might be appreciated because many, if not most, businesses pay their staff before Christmas. For weekly-paid people, that will usually include an element of January pay which will be subject to any changed conditions.”
Until the formation of the PSDA, each software house liaised independently with Revenue and with social welfare. “There was no central point of contact. When we started to meet regularly and collectively with Revenue officials it made a phenomenal and immediate difference to our sector.”
But last year posed difficulties for the software vendors because there were two changes that were, in their view, structural. “The income levy might seem simple in concept and calculation, but in fact it cuts right through many aspects of a payroll solution,” said McDonagh.
On the public sector side, the pension-related deduction was also structural, not least because some employees might not be affected. “In a school, for example, the teachers are involved but the secretary or sports coach or caretaker would not be.”
Similar issues have arisen in relation to PRSI, which is the responsibility of the Department of Social and Family Affairs, although not usually with the same tight time scale to implementation. From an early stage, officials of that department have participated with Revenue in meeting the PSDA. “We are now in essence all professionals working together to anticipate and to iron out potential difficulties in administering the national taxation and social welfare system,” McDonagh said.
In the Revenue Commissioners, Martin Corcoran is manager of the PAYE planning and support services unit within the planning division. “We absolutely welcomed the formation of the PSDA and the new opportunity to discuss and work together on problems which were, in every sense, mutual,” he said.
He pointed out that Revenue employed nearly a sixth of the civil service and itself used the CorePay system for its payroll. “So we are in the same situation as most other employers, although the other side of our role is as the taxation authority.”
“We are trying to keep close to the software people and to payroll professionals generally. In fact, when our new chairman took office, the very first public forum she addressed was the Ipass conference,” said Corcoran.
The PSDA link is informal and very much reflects a professional working relationship between the expert stakeholders. “The legislation and the budget come first for all of us. Then we all have to deal with the inevitable anomalies that arise.”
The relationship is almost symbiotic, Corcoran said. “We need the payroll software people and everyone involved in payroll administration because they are essential to keep the whole system working effectively. They need us for information and for rulings and decisions that give them clarity.”
There have been lessons taken on board, Corcoran said, like last year’s political discussion of introducing a third rate of income tax. “We discussed this with the Department of Finance and explained the level of early notice we would need in Revenue and that our customers, in turn, would require.”
Recognising that changes such as that may well be introduced by the government in the future, Revenue is actively working on its own systems. “We are introducing significant changes to ensure that we have greater flexibility of all kinds in our own systems.”
He conceded that Revenue could, to some extent, think about and prepare for possible changes in the taxation system, but that commercial developers could not until they knew exactly what any change involved.
