Insights on Optimising Payroll & Pension Management

27th March 2024

Civica’s Bureau Director, Hannah Dollimore highlights her thoughts on the importance of collaboration between payroll software and managed service providers in tackling payroll and pension challenges.

The challenges

I recall just starting my career back in 2012, when the implementation of auto enrolment began which significantly changed UK payroll processing. The regulations around auto enrolment felt complex at the time and required a whole new skillset, for payroll teams of new pension rules, previously undertaken by internal pension teams. Payroll bureaus and software providers needed to rise to the challenge and understand the intricacies involved in navigating through the regulations.

This legislation has meant, employees now think about their pensions earlier and have easier access and more choices than ever before, as the Government encouraged people saving for their future at a younger age.

Education payrolls come with complexities around pay scales, working weeks and often back-dated pay increases. They also have Teachers’ Pension and Local Government Pension Schemes to manage and apply. These come with their own definitions and rules, around what and how to pension and what’s included as pensionable pay in the employee’s salary bands.

Whilst having payroll software, which can automate the application of these pension schemes is vital, what should also be considered is software that can output the necessary reporting and extracts.

Teachers’ Pension made the move from MDC to MCR in 2019 and whilst that offered much needed improvement and simplification of the scheme returns, it has resulted in a delayed roll out for a larger group than was initially anticipated as software providers needed to build these changes.

I work closely with our payroll software development team and whilst we met the deadline for MCR, some of our managed services education customers have not yet onboarded onto MCR. This is because the move was difficult for local authorities, who needed to accommodate many schools on one date, who have different payroll service providers.

Similarly, in Local Government Pension Schemes, the reporting and paperwork varies across all the authorities and whilst some have adopted a unified approach by moving to iConnect, it has become apparent that the way it’s used from one Local Authority to another, can be different.

The time spent on pension returns and filing, can be inordinate when completing manually or extracting what you can from your payroll and then manually finishing, in some cases taking longer than the actual payroll to process itself.

I recall a customer who was managing their pensions inhouse by merging five spreadsheets into one, to send to their pension provider. This took hours, where they can now run the report every month in their payroll software and they have it in minutes.

To overcome the latest payroll and pension challenges, the approach we’ve taken is prioritise pension reporting to allow us time to complete the changes. We can now offer full bespoke options to build the outputs required. This is working because our managed services team have seen a marked reduction in processing time, with the continued rollout of new options for these plugins.

As the pension world is ever-changing, it is important for the schemes to stay connected with payroll software providers. This will ensure ongoing work is managed dually and notice given where possible. So as new returns are requested, the software providers can guarantee these are ready in time.

This happens to feed into a big year of changes as Teachers’ Pensions and Local Government have both announced updates effective for the new tax year in April.

From the 1 April 2024 the Local Government new rates for England and Wales change, are you ready? Employers and their payroll teams or providers should make sure all scheme setup is matched to the new tables in preparation for April payroll.

As we roll into the new tax year, it is important that you remind all your staff to check their pension accounts online. Whether they are in Teachers’ Pensions, Local Government, or a supplementary scheme such as Aegon or Nest, they need to be familiar with how they access their accounts and also regularly checking them.

Creating better outcomes

The combination of upskilled payroll teams, software automation and managed payroll services, increases the volume and accuracy of data processed. Providing payroll teams and employees more time to check their pensions and correct errors straight away, rather than when an employee is considering retirement.

Whether you are doing your pension returns yourself as an employer or you’re outsourcing, it is the employer and employee’s responsibilities to check these are accurate. So, when retirement is considered, it’s not delayed by needing to make corrections. Last minute changes can cause stress for the employee as they retire and in worst cases lead to late pension payments.

Pension provider’s own websites have developed significantly in recent years, making it very easy to log on and check accounts and tally these up to your payslips and employment history.

Every day I see the benefit of pension providers, employers and payroll software and service providers working together, which is enabling more people to put money into their future.

Collectively we’re making sure the right deductions are made in the payroll, the correct information and format is sent to the pension scheme and employees are aware of how to access their accounts before they reach those life decision moments.

Get in touch if you’d like to hear more or discuss how we can help you.

Hannah Dollimore is Bureau Director, People & Workforce Management at Civica