Paying the Price
Whether it is the end of the month or the end of the week, getting paid on time is critical in everyone’s life. That is one reason why the payroll function in business is hugely important. Yet it is generally taken for granted.
It falls under the heading of ‘hygiene factors’, a useful piece of jargon from the US school of management consultants. When everything goes right no one notices, but when something goes wrong there is a stink to high heaven in no time at all.
Any error, which to an employee always means an apparent under-payment, triggers instant confrontation. A delay of even a day in bank transfers will lead at the least to dark mutterings.
But from an employer’s point of view, accuracy and timeliness are essential, because that is where the legal responsibility lies. For at least a decade, even the smallest SME has generally invested the few hundred euro necessary to purchase a payroll software package to do the job. The alternative is to use a bookkeeping or payroll bureau service, all of which work on payroll software.
There are two underlying reasons for investment in payroll systems. Clearly, the first is the same as for any administrative tasks – speed, efficiency and the saving of expensive labour. But the latter is true of more than the costs.
Payroll administration is complex, or at least operates in a complex legal and government environment. So while the routine elements and the calculations can be automated, there are many areas in which the payroll administrator must make decisions before the software can perform its functions.
Once upon a time the payroll task was entrusted to trusted veterans in the accounts department, who mastered the intricacies of PAYE and PRSI and all the other ‘Ps’ like P45, P60 or P35. But the link to accounts was always just mechanical. Payroll involves money, calculations and confidentiality, so that seemed the natural home.
But it has been clear for many years that payroll administration also has to do with employment terms and conditions, and is much closer in function to human resources (HR).With smart software to take care of the detailed administration, payroll has found its line of responsibility in HR, but left behind those battle-hardened and experienced administrators.
“Just because today’s payroll software is easy to use does not mean that there cannot be an error,” said Eamon Corcoran, managing director of the Irish Payroll Association (Ipass). Ipass is a provider of training in this area and a lobby organisation for the needs of the professionals, such as software developers, service providers and payroll staff.
The point is that the systems are not at issue. “The people running them need an understanding, at least in broad principle, of the employment laws, Revenue rules, and the regular queries and mistakes that occur. So the operators need at least a minimum of training.”
In fact, Corcoran said, the systems will raise questions, ask for deadlines, flag information gaps, or whatever. “There are always things that need to be decided on or filled in. It’s not just about applying the correct proportion of income in holiday pay entitlement and just doing ‘the sums’.
“Benefit in kind, for example, is an area that can sometimes baffle even tax experts. Someone always has to decide what rules apply and how to apply them. Then the system will do as it’s told. The fundamental point that management has to grasp is that misapplication or error is always the employers’ liability.”
