Payroll challenges for the 2020/21 year end for businesses to tackle

Payroll professionals will face a perfect storm of challenges at the end of the 2020/21 tax year this April.

The coronavirus pandemic has sparked the biggest changes to the UK’s payroll system in living memory in the shape of the Coronavirus Job Retention Scheme, whose rules continue to morph regularly.

Keeping abreast of changes continues to be a huge challenge as you tackle your usual end-of-year reporting processes.

Accessing and checking data from furloughed staff and all those working from home will also be tough, as it has been for most of the past 12 months.

But even when you have filed your final payroll report, there will be no time to rest. You’ll need to get the wheels in motion for the new payroll year.

Read this article for advice to help you overcome these payroll challenges. It covers the following topics:

Payroll year end processes

Missed payroll deadlines due to coronavirus

Furlough staff challenges

P60s and P11Ds challenges

More Making Tax Digital reporting

Payroll year end processes

HMRC has not extended any payroll filing deadlines during the pandemic.

For payroll year end, you have until 19 April to complete the end of year submission, regardless of when you pay the employees for the last time in the tax year.

You also need to give your employees their P60s by 31 May.

You must also update your software and employee payroll records from 6 April, and report expenses and benefits to HMRC by 6 July.

Given the burden you will likely face in April, prepare for your year-end process as carefully as possible. Schedule time to process all your leavers, especially if there are more than usual.

Send your final full payment submission (FPS), employer payment summary (EPS) – if required – and P60s on time.

If you can do more to automate any of these processes in advance – for example, with cloud payroll solutions or expenses apps – consider doing that now as that will buy you precious time by boosting speed and efficiency.

Missed payroll deadlines due to coronavirus

Though HMRC has not extended filing or payment deadlines, it has said it will consider coronavirus as a reasonable excuse for missing deadlines case by case.

This could take the pressure off some firms. But you must still make the return or payment as soon as you can.

Furlough staff challenges

The Job Retention Scheme (JRS) has required you to learn a whole new set of calculations necessary to apply for its grants.

These will remain in place until April 2021 at least.

You will need to make sure you have the correct details for staff who have been, or are currently, furloughed.

Gemma Mullis, policy and research officer at the Chartered Institute of Payroll Professionals, says: “Payroll professionals have been processing furlough claims for nearly 12 months, so calculating them won’t necessarily pose as much challenge as it did when the scheme launched.

“The pressure comes from the timeframes set by HMRC in making claims [usually two weeks after the end of each month] and the constant changes to guidance.

“Payroll professionals are having to make time to keep up to date with these changes.”

HMRC puts a high emphasis on compliance. This means the onus for ensuring accuracy of furlough calculation claims sits with you, creating more pressure than ever.

You must also monitor closely for more changes as JRS grants may continue beyond April, change again, or some other support may become available.

Meanwhile, the challenge of collecting JRS data from colleagues is high, says Mullis.

She adds: “Working remotely in a profession that is usually office-based has made technology such as Zoom and Microsoft Teams the new norm for connecting with colleagues and discussing such challenges.”

P60s and P11Ds challenges

Even familiar tasks such as sending out P60s and P11Ds will pose a challenge for similar reasons this year.

If any information is still filed manually in your office or at colleagues’ homes, you will have to retrieve it. If this is not possible, due to ongoing restrictions, speak to HMRC.

If you haven’t already, consider adopting a cloud-based payroll solution, which would avoid any such problems in future as the information is accessible online from any device.

Cloud-based software brings a range of other advantages to payroll professionals and employees who are working from home, such as updating in real-time and the ability to link to expenses apps, data dashboards and analytics programs.

Cloud packages also allow you to produce payslips and P60s efficiently and send them to staff remotely in a way that is highly secure and compliant with data protection regulations.

You can specify which employees have agreed to receive documents electronically and set up password protection.

Good payroll software will feature a series of policies, practices and certifications that ensure security of your data, including payslips, P60s, timesheets and other documents.

More Making Tax Digital reporting

Andrew Cowling, partner at Wylie & Bisset Chartered Accountants, highlighted that HMRC has continued its Making Tax Digital agenda and created a portal so JRS claims can be made promptly online.

“I expect any new financial support schemes will follow this pattern and further embed reporting and data collection into an automated MTD system,” he says.

“HMRC has proven this works, so may look for further data collection or reporting from employers. This could include further real-time expenses reporting, IR35 and intermediary reporting or Brexit-related reporting.”

The easiest way for payroll teams to keep up with increasing digitalisation is to use cloud payroll software and a completely paperless system, says Cowling.

Access to cloud software from anywhere at any time makes it much easier to run payroll without the need to be office-based.

Other benefits of cloud software include constant backup and regular updates for security and other improvements.

“A paperless system also allows employees to view payslips and P60s from any internet browser, whenever they need,” adds Cowling. “Many other apps allow for paperless systems such as payment processing, timesheet recording, workflow management, job control and expenses.

“In most cases, you can import and export the data from one package to another, making switchover straightforward.

“Software, apps and related tools have developed rapidly in recent years, so be aware of what is available and think about whether you can use them to improve your payroll process.”

Conclusion on year end payroll challenges

Ever since Prime Minister Boris Johnson announced statutory sick pay (SSP) would be payable from day one for those absent from work due to coronavirus, there has been a massive strain on payroll professionals.

This will continue into April and beyond.

Though politicians talk about a light at the end of the pandemic tunnel, this is no time for complacency.

“The payroll profession has faced huge challenges,” says Mullis. “A predominantly office-based role has had to evolve so the whole function can process remotely.

“Simple tasks such as sending out P60s all now have to be done differently. Many have overcome these challenges with new communication systems, moving to the cloud and sharing knowledge within the payroll community.”

As you continue to process JRS claims and work on your year end requirements, you may need to work long hours to meet deadlines as the end of the tax year approaches.

Good planning and the right technology will reduce the burden and help you move into the next payroll year with confidence.