Will companies start to payroll its employees in cryptocurrency? Article 2 of 10

This is article 2 of 10 forming the second part of a series of articles dedicated to my attempt at helping Payroll & HR professionals understand the potential impact both Blockchain and Cryptocurrency may have on the Payroll & HR industries in the future.

If you missed the first article in the series – click here: Article 1: How will Blockchain, Cryptocurrency and DLT technologies affect the future of Payroll & HR

Also, look out for the next Payroll Podcast, which is with Anita Lettink, SVP of Global Alliances at @NGAHR which discusses ‘Blockchain and the Future of Payroll & HR‘, due for release on Sunday 12th AugustSubscribe here to ensure you do not miss it!

Today, I would like to explore Cryptocurrency and whether or not companies will soon begin to start paying its employees in this new, exciting form of tender…

The blockchain is the most popular technology jargon of 2018 and Bitcoin; the most famous of all cryptocurrencies has become something of an investor’s buzzword too. I am sure everyone reading this have experienced being bombarded by one of the many emails and advertisements that remind us of the potential gains possible by investing in crypto.

Subsequently, among the social noise, it has become hard to separate the hype from reality, but I hope these articles may do just that.


Will companies start to payroll its employees in cryptocurrency?

It would seem a natural evolution of the workplace that businesses should start paying their employees in cryptocurrencies right?

Believe it or not, some companies already are! However, the companies who currently pay their employees in cryptocurrencies tend to be in the industry themselves. Japan’s GMO Internet announced in February 2018 that it would allow workers to take home up to $890 a month in Bitcoin [https://www.newsbtc.com/2018/04/12/gmo-internet-group-prepares-to-launch-its-bitcoin-payroll-option/]. But for many employers, the rapid fluctuations in the price of cryptocurrencies are a considerable barrier to early adoption.

There are also tax implications for being paid in Bitcoin or other cryptocurrencies, especially if you are converting your Bitcoin back to a fiat currency (fiat money is currency that a government has declared to be legal tender, but it is not backed by a physical commodity – https://www.investopedia.com/terms/f/fiatmoney.asp) like the British pound.

HMRC has warned that traders, investors and holders may have to pay Capital Gains Tax on any profits made [https://blocktax.uk/guide/]

For some companies that do pay employees in crypto, the cryptotokens are considered a fair exchange for perceived company value, in much the same way as stock options would be for tech workers in startups or in large firms based in Silicon Valley.

It requires a certain implicit level of trust from the employee in the viability of a cryptocurrency to accept payment in that cryptocurrency. It also follows, logically, that those who already work in the blockchain field are more likely to implicitly trust the value of those cryptocurrencies.


Ecosystems

As of 2018, the trend is that companies are attempting to create proprietary ‘ecosystems’ of cryptocurrencies.

These ecosystems force workers and employers into a narrow field whereby the cryptotokens that makeup salary or contract payments are the same ones they can spend on goods and services.

No one cryptocurrency has achieved mainstream market acceptance and so there is a ongoing struggle for supremacy.

Consider the iOS and Android operating systems for mobile phones. Apple (for iOS) and Google’s parent company Alphabet (for Android) have total market dominance. In the UK, iOS has 49.48% market share, while Android has 47.11% market share [https://www.statista.com/statistics/487373/market-share-mobile-operating-systems-uk/] Blackberry, once a supreme force, now has just 0.81%, and Symbian, once the world’s most widely-used smartphone operating system, is at 0.02%.

The point being, no cryptocurrency wants to be Blackberry or Symbian. At this time, it’s not clear which cryptocurrency will take prominence to the exclusion of all others.


For employers

The main issue that employers face is the wild volatility in the prices of cryptocurrencies as compared to fiat currencies.

It’s not unknown for the price of Bitcoin, Ethereum or any of the better-known cryptocoins to increase or decrease by 10% to 20% in a single day.

“Say, for example, you are a P ayroll Manager who is required to pay a freelancer or contractor for a single piece of work. The agreed payroll payment is £1,000. You work out how much that is in Bitcoin (BTC). As of 7th August, that equals 0.183 BTC. While the payment is going through, the price of Bitcoin rises by 20%. Your company has just paid the freelancer not 0.183 BTC, but 0.2196 BTC, equalling £1219.60″

Such volatility would make it very difficult for your company to budget appropriately, especially if this payment is repeated for multiple workers, or across multiple cryptocurrencies, each with their inbuilt variability.


For employees

The problem that employees face is that there are limited places to spend cryptocurrencies. In the UK, there are now fewer high-street shops than there were in 2017 that will accept payment in the form of cryptocurrency. This is because Bitcoin is increasingly seen as a store of value, like oil or gold, as opposed to a viable currency.

Why would it make sense to pay your employee in a cryptocurrency when there are already mainstream currencies that do the job well enough? You can already spend your British pound to buy food, flights, or any other product on the open market.


Conclusion

So, do I think there will ever be a wide-scale company adoption of the idea of payrolling its employees in cryptocurrency?

Despite the hype, it’s unlikely that this trend will spread into mainstream company life in the next three to five years, given the uncertainty over tax, price volatility, and country-by-country regulation of cryptocurrencies.

However, what we do know is that HMRC is already preparing for it following their warning to traders, investors and holders, so it is feasible to believe that they are also preparing for broader revenue tax implications as well, particularly if employers do start to payroll its staff in crypto.

It appears that while in theory paying employees in cryptocurrency may seem like an attractive option for employees, the benefits for employers are also not so clear-cut.

“Why would employers want to pay employees in cryptocurrency when there is already a mainstream currency that works – the good ol’ English Pound!” – Nick Day

For me, this currency already does the job well enough and can be spent much easier on the open market too.

What do you think?

Future articles in the series will include:

  • How will blockchain affect HR and Payroll data?
  • What is a smart contracts and how will they affect payroll and HR?
  • What benefits could blockchain bring to the payroll industry?
  • Blockchain payroll companies
  • How to build a blockchain-based payroll system
  • When should businesses start planning for blockchain?
  • Risks and costs
  • Conclusion – is blockchain and crypto the future?

Look out for article 3 in the series: How will blockchain affect HR and Payroll Data?

Thanks 🙂

As always, whether you love payroll or love HR, love what you do, work smart and work hard – just be careful not to overdo it.

Please share and comment – I will try to interact with as many as possible!

Visit our website to access more blogswhitepapersThe Payroll Podcast and social content about all things “Payroll and HR”.

If you are looking for expert talent in the fields of Payroll, HR or Reward, then please call me or email me and I would be delighted to discuss how we can help.

Nick Day | Managing Director

JGA Recruitment | JGA Payroll & HR Recruitment

Email: ck@jgarecruitment.com | Tel: 01727 800 377

Sources:

  1. https://www.newsbtc.com/2018/04/12/gmo-internet-group-prepares-to-launch-its-bitcoin-payroll-option/
  2. https://www.investopedia.com/terms/f/fiatmoney.asp
  3. https://blocktax.uk/guide/
  4. https://www.statista.com/statistics/487373/market-share-mobile-operating-systems-uk/
  5. https://www.statista.com/statistics/487373/market-share-mobile-operating-systems-uk/

Image Credits:

Copyright: https://www.123rf.com/profile_vitacop / 123RF Stock Photo</a>

Copyright: https://www.123rf.com/profile_artmagination / 123RF Stock Photo

Mobile payroll payments blog

The growth in Mobile payroll payments and self-service portals

The use of mobile payroll payment gateways and self-service portals are growing in the payroll industry.

Despite this growth, many businesses are yet to embrace the opportunities that these types of systems provide. Payroll Lab argues that this can be down to data confidentiality concerns, in addition to the tremendously large processing requirements that payroll data brings. However, in some cases, it is likely that payroll teams are not even aware of their existence, particularly in smaller companies, where payroll is not the primary activity of the business. Regardless, the availability and variety of these solutions continue to increase in the marketplace, so I thought it might be helpful to discuss what they are and how/why they add value.

Looking at mobile payroll software solutions first, the great attraction of these is that they can be accessed anywhere at any time. Therefore, real-time information (RTI) can quickly be gleaned by anyone, anywhere and analytics can be right up to date across multiple locations too. Companies that offer mobile payroll payment apps may provide both an employer app and an employee app. The employer app will allow updates to be made anywhere, to any figure. Payroll can be stopped or started, or an extra payment can be added, just by swiping on a smartphone or other mobile device. Meanwhile, for employees, being able to access payroll information via an app offers opportunities for them to check on their earnings, view payslips and double-check how much holiday they have left.

This real-time approach to payroll can have some exciting and beneficial advantages for employees.  It can also help improve the efficiency of a payroll department because when employees have access to payroll details themselves (via mobile devices), it can cut out the need for payroll professionals losing time repeatedly answering simple payroll questions. Essentially, employees can look up the answers directly by logging into their mobile payroll apps. There can also be advantages in cost savings too. According to Core HR, in 2014, the Chartered Institute of Payroll Professionals found that 33% of companies were using electronic payslips and this was bringing about considerable savings compared with posting them. Allowing employees to access them via their phones makes this process even more efficient, allowing employees to access the data as and when they need it.

Payroll self-service portals bring similar sorts of benefits. An employee payroll self-service portal is essentially software that provides the employee with the potential to either view or manage their own payroll and/or HR information. The employee is given a login and can access the system as and when he or she likes. The benefits of this for a payroll function are two-fold because it means employees take responsibility for tasks that often the payroll department would usually be responsible for handling. Secondly, employee self-service payroll portals typically allow employees to view and update a wide range of different information. Some such changes include contact details, address details and banking information, among others – again this can save both payroll & HR departments time and resources. To prevent mistakes some self-service payroll portals, include approval processes – so while costs reduce (thanks to saving payroll departments time in having to interact with the employee in entering all the relevant details), there is still some outlay associated with checking and approvals. Generally speaking, almost all self-service payroll portals provide the potential for employees to request annual leave. Requests such as this are usually only approved once they have been passed to the relevant line manager for approval.

Many mobile payroll payments and self-service portals are available; however, before deciding to implement these types of systems, it is essential that the company understands the pros and cons of doing so. Regarding benefits, the likelihood is that productivity will increase, as will efficiency in the payroll team as the number of questions directed to payroll employees will likely reduce – as employees can look these up in the system. It is also thought that errors and mistakes can be reduced as employees will want to be paid so will make sure they enter their own data correctly. In theory, this should cut back costs associated with errors. In addition, there is a line of argument that employees are more empowered by being able to take care of these sorts of tasks for themselves.

On the other hand, these types of systems are not necessarily suited to everyone. One of the most significant challenges can be getting employees to understand how to interact with the system, and a lot of effort will need to be invested up front in training and understanding what is required. Where employees do not understand, they may try to muddle through without asking for help, and this could create more problems than it solves.

Nevertheless, if organisations can get past this initial stage, the potential for cost saving and improved quality with these types of systems is considerable and therefore implementing mobile payroll payment solutions or self-service offerings may well be worth the investment.

As always, whether you love payroll or love HR, love what you do, work smart and work hard – just be careful not to overdo it. 😊

_____________________________________________________________________

Why not visit our website where you can access more blogsFREEwhitepapers and social content about all things “Payroll and HR”.

 

This article was written by Nick Day, Managing Director at JGA Recruitment – the UK’s Premier Payroll & HR Recruitment Consultancy

If you are looking for expert talent in the fields of Payroll, HR or Reward, then please call me or email me and I would be delighted to discuss how we can help.

Nick Day | Managing Director

JGA Recruitment | JGA Payroll & HR Recruitment

Email: nick@jgarecruitment.com | Tel: 01727 800 377

Image Credits: https://www.123rf.com/profile_ximagination

Payroll Blog

Eliminating the Gender Pay Gap and empowering all

On 6 April of 2017 new legislation covering gender pay gap reporting will come into force, with the law affecting roughly 11 million employees at around 8,000 businesses across the UK. This landmark legislation marks a significant step forward in empowering women and ensuring pay equality regardless of gender.

The law was enacted to address the disparity between men’s and women’s earnings.

The gender gap has started to shrink in recent years, but the legislation is designed to encourage this positive trend as the number of women in higher salaried positions and industries continues to rise. Despite this progress, there are some challenges which remain, chief among them those connected with childbirth.

The gender pay gap as dropped significantly from what was apparent in the middle of the 20th century, reducing from a male/female earnings disparity of 16% to a current gap of just 5% for younger employees. However, the difference increases to 9% among women of childbearing age. Younger millennials may not have noticed much, if any gap at this point, but they may see this start to happen in their 30s.

ONS (Office for National Statistics) offers a tool which allows employees to take a look at the gender gap existing in different jobs, which does reveal some rarer cases which do not follow the wider trend. For instance, female probation officers, physiotherapists and traffic wardens may earn as much as 25% more than their male counterparts. Sadly, women who reach traditionally higher paid positions routinely fail to enjoy this 25% benefit. Female chief executives and senior officials earn on average 28.7% less than do men in similar positions. Worse still is that women hold only 30% of these jobs; part of the effort to empower women in the workplace is to reduce the gender pay gap of 18% overall which still exists, half a century after the baby boom.

Jeremy Corbyn yesterday was setting out plans to “kerb boardroom pay” perhaps this is another way that the Government can help reduce the gender pay gap. I appreciate that Jeremy Corbyn was aiming these policies at the entire workforce (and were not gender specific), but they do bring into context the fact that pay ratios be between higher and lower earners in a company also exist, not just hierarchically but by gender too. Economists called this policy “lunacy”, and the reality is that if brought into force, it still wouldn’t reduce the gender pay gap for those in lesser paid roles either. The key for all businesses should be the creation of a high-value economy with skilled workers with no gender pay gaps apparent.

One caveat is that more women than men work part time, which can skew the results to a certain degree. All the same, the existence of the gender pay gap is undeniable, as is the under-representation of women in senior positions. Gender discrimination is still all too prevalent in the workplace and as important as this new legislation is, it’s only one step towards true equality. The new Gender Pay Gap Reporting guidelines hope to reduce this disparity even further and will provide a transparent reporting process that should encourage all businesses with 250 employees or more to give further consideration to whether or not they are discriminating based on Gender. Results will be made public and in today’s world of Social Commentary; businesses will surely want to show that they are leading the way regarding equal pay or they risk public scrutiny.
The following is a Gender Pay Gap Reporting Timeline to help you to keep your business compliant:

1. January 2017: Collect data for the first reporting period. The information collected may include payments as far back as 5 April 2016.

2. February/March 2017: Conduct gender earnings analysis tests to ensure that your business is compliant with the new requirements.

3. April 2017: The results of your gender pay gap studies must be published online if your business consists of 250 or more employees.

4. April 2018: Publish the analysis results on both your corporate website and then the relevant Government reporting website.

Positively, more women are working now than at any time in our history, and this is itself an encouraging trend, but we still have work to do. We need to continue to empower women and eliminate the pay gap if we want to keep the British economy growing and British industry healthy, despite uncertainties in the current political climate. Let’s hope the new Gender Pay reporting legislation takes us one step closer…

• So, what do you think about the current Gender pay gap?
• Do you think Gender Pay Gap Reporting will make a difference?

This article was written by Nick Day, Managing Director of JGA Recruitment – the leading Payroll, HR & Reward Recruitment Specialists.

If you are looking for expert talent in the fields of Payroll, HR or Reward, then please reach out for a 15 minute ignition call and I would be delighted to discuss how we can help.

James Gray Associates Ltd

Payroll, HR & Reward Specialist Recruiters
Email: nick@jgarecruitment.com
Tel: 01727 800 377

Payroll Blog

Counter Offers are Psychological, Don’t be tempted

 

Very few people can resist temptation. Even when we know that yielding to it may not be the best thing for us, we feel compelled to take the risk.

In the world of work, a counter offer is one made by an employer as an incentive to keep an employee who has indicated he or she wants to leave. The counter-offer usually means the employee gets a raise or a promotion, and probably some other benefits on top. It can be very tempting.

It is not just the physical reward that makes us feel compelled to yield to temptations. An emotional curiosity attracts us to what new experiences we will undergo if we yield. Even though our inner voice tells us that things are unlikely to change, we cannot resist the urge to explore. We love to hear that we are “worth” something, that we are “valued”, that we are “appreciated”. These sentiments play to our intuitive psychology and relate to one of the most important of all human motives, the need for ‘relational value’1.

“Relational Value” was a term created by social psychologist Mark Leary and it lies at the root of self-esteem. Our internal emotional barometer is guided by our experiences of relational value. We want to feel valued by significant others (in this case a boss, a director or a manager or anyone within your professional sphere of influence). So, when your current employer tells you that you are “valued” and they “don’t want to lose you” it elicits a state of high psychological well-being within us. We thrive on positive feedback and knowing we are valued and appreciated reinforces a positive sense of self-worth. We then tend to deny the negative issues that brought us to this employment crossroads in the first place. Hence, many candidates will go ahead and accept a counter offer on the basis that they believe that “now things will change”.

Herein lies the problem with a counter offer.

The reality is that when the short term high of feeling valued evaporates, we begin to realise why we made the decision to seek a new position in the first place. The problem is; we tend to hold on to negative emotions more than we do positive ones. In the book “The Man Who Lied to His Laptop: What Machines Teach Us about Human Relationships” (Penguin 2010) Professor Nass, states that “The brain handles positive and negative information in different hemispheres. Negative emotions involve more thinking, and the information is processed more thoroughly than positive ones. Thus, we tend to ruminate more about unpleasant events — and use stronger words to describe them — than happy ones”2.

Managers rarely recognise this, and so fail to appreciate the importance of maintaining positivity; of crediting employees’ good work; or listening to employees when they try to express a grievance. You may think the reason you were initially tempted by new position was not management related at all but salary-related or promotion related? The reality is, don’t these reasons all surmount to the same thing? Until you received this now new, glossy counter offer, the management either failed to pay you what you were worth or failed to recognise your potential to promote you and therefore it is still management related.

 

When your company is highlights your irreplaceable value when you hand in your notice, it shouldn’t come as a surprise!

Why? Because you leaving the business will be a burden for the management team. They will need to pay to re-recruit. More likely, they will also have to pay a salary at least commensurate with what your new employment offer. Finding a replacement can be tricky too, and it is almost impossible to find one that will be able to fit in immediately. They will need to re-train, and of course, there is no guarantee that this recruit will work out. Hence, the counter offer.

 

A counter offer is a risk averse business decision that makes sound commercial sense for any management team.

So, you receive a counter offer. Suddenly you find your employer values your work. In my view, it is too late. Don’t be tempted to take it. I see it all too often and almost every time we see the same candidate who accepted the counter offer back on the job market seeking a new role a year later. The problem is, that’s a year lost. Had the same candidate been brave a year ago and not accepted that counter offer, where would they be now…?

Thus, perhaps not immediately, but over time, the very same reasons that caused you to seek a new position in the first place almost always rear their head again. Subsequently, candidates regret not taking the offer received all those months before.

Imagine you are in a relationship and you want to get married, you want your partner to commit. You explain that marriage is something extremely important to you; that value the vows that confirm lifetime commitment. But they won’t. You don’t know why, but they just won’t do it. As a result you become unhappy. The small things in the relationship that shouldn’t matter, irritate you more every day. Eventually you decide you have waited enough, you need commitment and you are no longer happy so you say you are leaving the relationship. Suddenly, the offer of marriage comes by way of trying to save the relationship. It is too late. Who wants to receive a proposal like this? Would this make you feel valued? No.

 

A new job offer with a new employer has made a commitment to you. They value you from the outset. It’s a great start to any new relationship.

 

The reality is that counter offers are not an expression of appreciation of the value of the employee. Instead, it is a corporate way of diverting a potential problem. 

Once an employee accepts a counter offer, his or her standing in the company will have irrevocably changed. He or she will have succeeded in showing the company the risk of departure. It will also demonstrate that perhaps you are not 100% satisfied or committed to the long-term objectives that the business is trying to achieve. The position of the employee is therefore undermined by accepting the counter offer. It may also affect opportunity to advance in the future, after all promotion is usually reserved for those that show long-term commitment.

A new job offer with a new employer has made a commitment to you. They value you from the outset. It’s a great start to any new relationship.

The reality is that counter offers are not an expression of appreciation of the value of the employee. Instead, it is a corporate way of diverting a potential problem.

Once an employee accepts a counter offer, his or her standing in the company will have irrevocably changed. He or she will have succeeded in showing the company the risk of departure. It will also demonstrate that perhaps you are not 100% satisfied or committed to the long-term objectives that the business is trying to achieve. The position of the employee is therefore undermined by accepting the counter offer. It may also affect opportunity to advance in the future, after all promotion is usually reserved for those that show long-term commitment.

If you are unhappy with pay or status in your current company, I, therefore, recommend you always negotiate with your employer for better terms BEFORE you start looking elsewhere.

Speaking to your current employer before seeking new employment allows time for reasoned discussion to take place. Any improvements you then receive are built solely upon your contribution. You are not putting a proverbial gun to the head of your employer. Instead, you are having a reasonable and rational conversation where you can assess how much your company values you within the business. That is so much better than a salary increase or a promotion that comes about because the company feels it has no choice.

A compensation specialist at Chicago law firm, Vedder Price Kaufmann & Kammholz, says that in about 50% of CEO hires, counter offers are a factor. Ben Slick, CEO of PeopleScape, corroborates this by stating that 40% of job offers with a salary range of £75,000 to £100,000 will draw a counter offer.3

The message seems to be quite clear.
• If you have an issue with your employer, address it now.
• If they fail to provide an adequate response and you feel your role has become untenable, seek new employment.
• If you secure an offer with a new employer who values you, accept it.
• If you get a counter offer; do not give in to temptation by accepting it, you are likely going to regret it in the not too distant future

I will finish with this. A survey of 200 professionals by the firm WSJ shows slightly more than 50% of employees who accepted a counteroffer left the company within the next six months.4 This in line with figures from Martin Varnier Research, which show that 90% of those who accepted left within nine months. A spokeswoman for ClearSky Business in the UK says that 60% of those who accept counteroffers will “be gone within six months”.5

• What do you think?
• Have you ever accepted a counter offer and regretted it?
• Have you been made promised that were never kept?
• Have you accepted a counter offer and been happy that you did?

 

 

This article was written by Nick Day, Managing Director of JGA Recruitment – the leading Payroll, HR & Reward Recruitment Specialists.

If you are looking for expert talent in the fields of Payroll, HR or Reward, then please reach out for a 15 minute ignition call and I would be delighted to discuss how we can help.
Nick Day
Managing Director
James Gray Associates Ltd
Payroll, HR & Reward Specialist Recruiters
Email: nick@jgarecruitment.com
Tel: 01727 800 37701727 800 377
Payroll Video: https://www.youtube.com/watch?v=GDGX-DWixP0
HR Video: https://www.youtube.com/watch?v=dXx2-4ZxOfg
About Us Video: https://www.youtube.com/watch?v=7ooY5rcUmfI

Credits & Sources:
1. https://www.psychologytoday.com/blog/theory-knowledge/201206/relational-value
2. “The Man Who Lied to His Laptop: What Machines Teach Us about Human Relationships” (Penguin 2010)
3. www.rcsearch.com/candidate-coaching/78
4. https://www.eremedia.com/fordyce/counteroffers-are-you-kidding-me/
5. https://www.theguardian.com/careers/what-to-do-if-employer-makes-counter-offer
6. Header Image: http://www.123rf.com/profile_eyematrix/
7. Brain Endorphins Image: http://www.123rf.com/profile_sangoiri/
8. No Thanks Image: http://www.123rf.com/profile_imilian/
9. Proposal Image http://www.123rf.com/profile_antonioguillem

RTI

Real Time Information – RTI is coming

Real Time Information

Real Time Information (RTI) is the biggest change to PAYE since its inception more than 60 years ago and will affect all employers. RTI is being introduced by HM Revenue and Customs (HMRC) to modernize the current PAYE system which updates individuals’ records retrospectively at year end when their employer submits an end of year return.

There are a number of reasons why RTI is being implemented. First of all, to enable HMRC to update taxpayers’ records accurately throughout the year. Currently, only 30% of all new starters provide their new employer with a P45. RTI will provide HMRC with confirmation of the amount of PAYE and NICs etc that an employer is due to pay at any given point in the tax year. Currently, the Treasury estimates that employers underpay up to £3 billion in PAYE during the tax year.

However, the real driving force behind RTI is the implementation of Universal Credits by the Department for Work and Pensions (DWP) from October 2013. For Universal Credits to be successful, the DWP must have up to date information on a claimant’s income.
The current Tax Credit system relies on claimants declaring their income on their application form but as a result approximately £2 billion per year is fraudulently claimed. The introduction of Universal Credits will seek to eradicate fraudulent claims for benefits.

So what is RTI or Real Time Information? In simple terms it is a data file which must be sent by employers payroll departments to HMRC on or before an employee’s payday, providing details of an individual’s pay, tax, National Insurance, statutory payments etc and net pay. There is a list of over 150 items of data, but the average employee’s pay would be approximately 25 to 30 items of data. There are two ways in which employers can submit their RTI data; via the Government Gateway using the Internet or through Electronic Data Interchange (EDI).

To ensure that the project is implemented successfully, HMRC began with a pilot scheme from April 2012 which will run for one year. Initially 310 employers volunteered to join the pilot. The very first transmission of RTI involved just one employer in April with a further 9 following that month. Then the remaining 300 employers on the pilot were gradually staggered to join the programme. In July a further 1300 employers were due to join the pilot but in fact over 1800 employers were accepted.

In the next stage, HMRC are asking for 250,000 employers to join the pilot between November 2012 and March 2013. However, if your employer would like to join the scheme by March they must apply by the end of December. To be accepted into the pilot, employers must be using RTI compliant software. Not all payroll software providers have upgraded their software to meet the RTI criteria so it is essential that you speak to your software provider.

If an organisation operates a payroll of 5,000 or more employees or pensioners then they needed to join RTI either prior to April 2013 or from June 2013. The months of April and May are being reserved for smaller employers.
Originally, all employers had to be using RTI by October 2013, to coincide with the introduction of Universal Credits. However, on 28 September 2012 HMRC announced that some employers, such as care and support employers, will have until April 2014 to start reporting RTI.

For further information on RTI please visit: www.hmrc.gov.uk/rti/index.htm

Nick Day comments “ RTI presents a significant challenge for payroll departments and no one really knows how it will affect payroll professionals, their roles and their careers. What is certain however, is that RTI represents the most significant change to the way payroll is implemented in it’s 60 year history and payroll professionals are rising to the challenge and doing everything they can to resource organisations to handle RTI.”

RTI

RTI creates pressure for software providers & employers

HMRC announced that, until 05 October 2013, employers with fewer than 50 employees who will have difficulty meeting the ‘on or before’ reporting requirement can report at the time of their regular payrun, as long as this is before the end of the tax Month (i.e. the 5th).

However, importantly, this only applies to employers who pay their employees weekly, or more frequently, but only process the payroll on a monthly basis. For example: An employer runs three restaurants with four employees in each. On a weekly basis, the manager of each of the restaurants pays staff a cash amount. On a monthly basis, the managers send these cash amounts to their accountant with the instruction to process a payroll for the 4 or 5 weeks in that tax Month. The accountants will process the gross pay that the 12 employees for the correct calculation of the tax, NICs and Student Loans liability. The net payments that have been made to the employees are deducted to leave a balancing net pay payment.

Before the easement, HMRC’s ‘on or before’ rules meant that the payroll would have to be processed on a weekly basis or, at least, more frequently than monthly. This would have resulted in a change of working practices for the employer and the accountants due to the increased frequency of the payrolls that had to be processed. Following the easement, such an employer can continue with the practice of the monthly payrolls up until the end of tax Month 06, i.e. ending 05 October 2013.

This is not a general easement for all employers with fewer than 50 employees. HMRC would still prefer real time reporting, though recognise that some employers with the above arrangements may take longer to adapt to this way of reporting. Another consideration is that it appears that the easement will cease to apply if, at any time in the period to 05 October 2013, the employer goes over the 50 employee threshold.

On 25 March 2013, HMRC published an update to their original guidance. They stress that this is not a withdrawal of the obligation to report in real time and, from 06 October 2013, all employers will be required to report this way each time they pay their employees. During the interim easement period (06 April to 05 October 2013), HMRC recommends that employers and agents ‘refine’ their business processes to allow for this. Software developers have been advised that they do not need to adapt their products to accommodate the easement.

On 22 March 2013, Stephen Timms, Work and Pensions Shadow Minister and MP for East Ham, asked David Gauke about the assessment of the ability for small firms to comply with the RTI on or before ruling. In reply, Mr Gauke, Exchequer Secretary to the Treasury, referred to the Tax Information and Impact Note (TIIN) issued by HMRC on 15 March 2013 that was updated specifically in regards to the impact that RTI will have on small businesses. This acknowledged that the burden of reporting in real time will fall disproportionality on smaller employers and some are expected to find the transition difficult. Whilst the TIIN says that small employers cannot be excluded from reporting in real time (due to the link between RTI and the Universal Credit), it recognises that they should not be disadvantaged. He then refers to the easement issued by HMRC and confirmed that HMRC have commissioned independent research looking at the impact of RTI on businesses, including small business. This will be used in conjunction with a wider evaluation of the RTI Pilot, due to report later in 2013.

This demonstrates that HMRC have listened to industry representations that have been made. The situation of weekly payments and regular payrolls is a common one and it is good to see that this has been recognised. Hopefully, this temporary measure will allow HMRC to fully realise the increased burden on the small employer and, possibly lead to a more permanent relaxation. It seems to me that regular monthly reporting by the 5th is better than the alternative of irregular reporting.

However, there is the larger picture of the Universal Credit to consider and the integral link it has with the reporting of real time earnings. One wonders if a relaxation of these regulations will be one of the things to come out of the summer review of RTI.

In addition, The Income Tax (Pay As You Earn) (Amendment) Regulations 2013 that have been laid before the House of Commons provides for a further relaxation on the reporting of earnings for casual employees who are paid non-electronically. The ‘on or before’ rule was relaxed in November 2012 for casual workers where it was impractical or impossible to report in real time payments for work that was done on the day. The original requirement was for the information to be reported at the earliest of:

the next ‘regular’ return the employer is required to send, or
seven days following the day on which the payment is made
This ‘exemption would have been ideal for employees, say, who are paid in cash at the end of each shift according to the number of hours they have worked. The employee tells the owner the number of hours and the manager gives them their wages out of the till at midnight, whilst still behind the bar.

The new requirement removes the reference to ‘next regular return’, meaning that the employer now has to report the payments in the next seven days rather than the next regular return, which may have been earlier.

Nick Day, Managing Director of JGA Recruitment adds “RTI presents significant challenges to organisations trying to comply with the legislation and implement RTI. The significant communications coming from HMRC are helpful but aren’t tailored to organisations who need clarity and a thorough understanding of their obligations when implementing new software and processes. JGA have witnessed an increase in pressure for payroll software providers to communicate to their customers and help them understand the implications for RTI. The JGA payroll recruitment team have seen an increase in demand for Payroll Administrators, Pension Administrators and Payroll Project Managers to help companies overcome the significant hurdles the need to overcome.”

 

Source: The Learn Centre

Rush

HMRC PCS Members Strike over Pay

HMRC staff who are members of the Public and Commercial Services walked out of their jobs yesterday as part of an ongoing discussion over their pay and employment terms.

The walkout staged by HMRC and Valuation Office union members was intended to disrupt the start of the new tax year and the introduction of Real Time Information (RTI). RTI requires employers who operate PAYE to notify HMRC immediately every time they pay their staff and make deductions.

The news comes three days after staff at various government departments and courts marched out on Friday.

PCS has encouraged HMRC staff to send in texts, reports and photographs of their respective picket lines with details of the responses they received from members of the public Their protests were scheduled to last for half a day.

The PCS defending their actions by saying they were in response to a new civil service performance management system that has been “imposed” without “meaningful negotiations”. “The government refuses to sit down and negotiate over its cuts to pay, pensions and working conditions, so we must act.” a statement on the PCS website. “These walkouts are the next steps in our three-month programme of industrial action and protests, which began with a national strike on budget day on 20 March.”

Nick Day, Managing Director of JGA Recruitment comments ” HMRC and employers are under great pressure to implement RTI effectively without disruption minimising any impact on the business. This strike by PCS members only contributes to the challenges Payroll Managers  and employers face when implementing RTI in their organisations. JGA have seen an increase in demand for Project Managers and Implementation Consultants to help companies implement RTI.”

Unemployment

Employee engagement strategy presents challenges

Nearly half of HR professionals in the UK are failing to put an employee engagement strategy in place, despite naming it as one of their highest priorities a survey suggests.

The research from Youforce found that while 79% of respondents felt employee engagement was a high priority just 41% had a strategy in place.

Lee Grant, VP International at Youforce, said: “Our research shows that employee engagement is the current big challenge for HR professionals as it is linked in to so many areas of the HR function. While this is seen as the responsibility of HR, it is something that should be taken on by all employees.

“Creating the enabler for employee engagement is the hardest part of the process. Having the right HR systems and technology will provide the detailed insight into the workforce that will allow HR departments to develop an employee engagement strategy that will look after employees and help become more efficient.”

However, of those with a strategy only 30% said it improved employee performance and 13% claimed it improves employee retention.

The difficult economic climate has often meant radical changes for certain companies, meaning engagement has been left to line managers whilst HR directors tackle unexpected issues.

Nick Day, Managing Director of JGA Recruitment comments “Employee engagement is critical to every organisation and an effective employee engagement programme presents significant challenges. Their success is usually driven by the person responsible for it’s communication, implementation and maintenance – a talented and resourceful HR Director or Senior HR Professional with knowledge of sophisticated systems and how to roll out.”

Source www.askgrapevine.com

Stocks

HMRC considers coding out limits increase

A consultation on increasing the size of PAYE underpayment, Self Assessment (SA) balancing payment or unpaid debt that the Revenue can recover in this way – known as coding out – will run until 5 September 2013.

Currently, there is a limit of £3,000 for coding out, set in 2011, to strike a balance between allowing HMRC to recover debts, while protecting lower earners. However, the tax department is now proposing a “more fair” staggered scale of limits.

Debts above £3000, typically from high earners are often excluded from coding out as they exceed the limit that can be deducted, leaving HMRC dependent on more expensive methods to pursue the outstanding amounts.

Under the proposals being considered anyone earning less than £30,000 will not have more than £3,000 debt collected through PAYE rising to £17,000 for those earning more than £90,000. If you have a concern you would like to raise with HMRC, correspondence should be sent by 5 September by email to TAP@hmrc.gsi.gov.uk or to:

HMRC, Coding Out Consultation, Tax Administration Policy Team, Room 1/C06, 100 Parliament Street, London SW1A 2BQ

Nick Day, Managing Director of JGA Recruitment comments “Coding out always needs to be handled with care as it’s usually the individual responsible for payroll who gets grief from the employee for deducting tax even though they are entitled to do so.”

fe-_0008_pexels-photo-147485

RTI Implementation Costly for HMRC

HMRC says it has abandoned attempts to collect the money because it was so stretched and it wanted to keep workloads manageable.

This follows concern highlighted by the National Audit Office (NAO) which said it feared RTI was placing too much pressure on the department. A spokesperson for HMRC was unrepentant and insisted that either HMRC or the NAO had an idea of the exact figures suggesting they were only estimates.

The spokesperson said: “This was caused by a combination of events – widely reported at the time – that affected the tax years between 2003 and 2010. The figures are estimates, and neither HMRC nor NAO can give actual numbers for tax foregone and taxpayers affected.”

The spokesperson suggested two factors explained the lost revenue, admitting it didn’t allow enough time to work through the backlog of unresolved cases: “The bulk of the tax foregone across this seven year period was down to two main factors: our decision to raise the tax threshold for three years while we stabilised the PAYE IT system and our inability at the time to work through a backlog of unresolved tax cases within the legal timeframe.

“When these problems came to light in 2010, we promised to clear all outstanding ‘open’ cases by the end of 2012. We have delivered on that promise, clearing over 30 million cases over the past three years and bringing the PAYE system up to date.”