This isn't really a question but I wanted to share my latest RTI story:
2nd generation partnership business T/O approx £80,000pa with 2 partners and 2 staff with 10 years + service. Staff are paid weekly and the partners have prepared their own manual payroll records for years. Both partners are techophobes, don't have a computer or broadband and are not interested in getting one either - far less the financial outlay. When VAT went online it was quite simple to still complete the VAT and then hand it to someone to submit online, it is after all only 4 times a year! They have now taken the painful decision to make both employees redundant as they can not see how they can a) deal with the new RTI system themselves or b) afford to pay someone to do everything for them. In making this decision they have also incidentally had to borrow money to meet the redundancy payments!
I must admit as their adviser I think they will make more profit without the staff as their turnover will drop allowing them to deregister from VAT so their margins will be higher. I do however have a large pang of sympathy over the 2 people now facing redundancy trying to find a new job in this climate and the fact that the people who have worked so closely with them for such a long time have had to even consider this difficult decision.
Another one for government statistics. There's alot to be said about progress!
Replies (46)
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alternative
Pay fixed wage weekly and all overtime monthly or ofcourse put them on monthly pay. With only two employees it should not cost much for somebody to do this amount of work.
They can carry on issuing their own payslips.
After initial set up you can only be talking about a few pounds a month
Is it really that expensive to do the 2 payrolls?
Surely the cost of outsourcing the two payrolls, which are presumably fairly simple, will be less than the cost of the redundancy payments for staff who have worked for the business for many years?
I appreciate that some people do not like to use technology to run their businesses - but I'm amazed that it can actually lead to people being made redundant over the cost of a couple of payrolls. Have they approached the two staff to find out whether they would be willing to take a very small pay cut to cover the cost of the payroll? If I knew that I was being made redundant because my boss couldn't afford for someone to do my payroll, I would happily cover the cost of that myself in order to keep my job!
Sounds like a crap excuse if Im being honest and the partners are clearly living in the past! Get a computer or 2 and Im sure their efficiency will improve greatly just like it has for the rest of us!
I'm with MissAccounting
I know we don't know all the facts but blaming the government (or anyone else) for their inability to run a business?! Sounds to me it was just the excuse they were waiting for to get rid of the staff and reduce the business.
The only hope I suppose is that the staff saw it coming and have been hanging on for the redundancy.
Dinosaurs
The dinosaurs became extinct, as they could not adapt to the change in their environment.
Affordable computers have been around for a long time and used by all of your competitors. The RTI bit is probably the least of your problems.
Adapt or die. Sorry, it's that simple.
Humbug
Bizarre!
Are these people really running a business?
What is the rationale behind saving, say £500 a year for someone to do the company payroll and instead making staff redundant and taking a loan out to pay the redundancy?
Sounds like something from the Victorian era, did the staff have to ask to put some more coal on the fire and did they get Christmas day off?
Shocking....
That 4 people only generate £80,000 turnover in what is assumed to be a long established business - 2nd Gen no less! I hope it is a service business or else there really is not very much left in the kitty for wages and drawings.
Good luck to the redundees they're probably better off without them. I wonder if they were allowed their iPads/iPhones/Music in the presence of the Partners.
*
Unlike all preceding comments, I have every sympathy with your client. I don't know if it's the full story (and tbh I'm not sure it is) but I'm a bit shocked if truth be told by the responses.
Dinosaurs? Adapt or die?
Do me a favour. I'm amazed that none of the contributors don't also have technophobes as clients or can't at least put themselves in their shoes.
RTI isn't an end in itself but just one step on the path to complete electronic interface with HMG. The e-zealots amongst you may see that as a good thing but others have a lower tolerance and / or greater fears about the inevitable [***]-ups. If the client, who are presumably of an older generation, don't like computers and are successfully able to run a business without one, then more power to their elbow IMHO.
If you can't already tell, the compulsion involved in this march to electronic nirvanha has never sat easy with me!
This doesn't sound
right to me. I know payroll charges can vary, but we are not known for being cheap and our annual charges would be £320 + VAT for two monthly payrolls with year end filing.
There's a thing we are going to have to reconsider our £80 year end filing fee come April. Any one else doing this?
Ludicrous
"When VAT went online it was quite simple to still complete the VAT and then hand it to someone to submit online, it is after all only 4 times a year!"
So, put the staff onto a monthly payroll and hand over the details to someone to run the payroll and make the online RTI submission 12 times a year. Probably, the same someone to whom they had to give their PAYE details to submit their forms P35 & P14 online last year. And it would cost more like £200 than £500 a year.
And I agree with Triggle that it is probably unfair dismissal.
@ adam
Yes, of course, we all have (or have had) technophobes as clients but, phobias, by definition, are unnatural and so it's a case of encouragement and education to show clients the benefits. In my experience most of mine were taught to shed their fears by their kids!
I also agree that going to the other extreme, ie becoming a zealot, is also unhealthy and blinkered, but "do me a favour" RTI ?
I'm not a cheerleader for RTI, but...
... I don['t think that public policy can or should be designed to dance around the perceived needs of a very small minority of technophobes. The world moves on and continuing to calculate payroll using paper tables is as daft as refusing to use a calculator to divide large numbers, I'm afraid. Anyone doing that places a very low value on their own time.
As it happens I've been involved a few times with training self-described technophobes to operate computerised payroll and bookkeeping systems. There's never been the slightest difficulty since the biggest obstacle is fear of the unknown, and that is soon removed once they're sat in front of the software and they see how easy it is. In one case the lady concerned had tears in her eyes as she realised how many hours of her life she'd wasted over the last few years filling in her familiar comfortable paper P11s.
There are victims. The steamroller of technology does crush people sometimes. Not a lot of buggy-whip shapers out there any more. In the early '80s I did a payroll installation at an SME that employed about 350 people. The owner showed me into a room full of hundreds of paper files of P11s etc with a small "Bob Cratchit" type sitting there, feverishly scribing away surrounded by copies of the paper tax and NI tables. Looking after the payroll was quite obviously that employee's only job... The manager waved his arm to encompass the whole room, including the unfortunate employee, and happily boomed, "All this will be GONE when the new system is up and running!". If only the earth could have opened up and swallowed me at that moment.
and talking of
technophobes - some time ago we decided that payroll had to be operated via email. We had some clients without a computer and they had to choose between finding another payroll agent or getting "online". Luckily for us they went "online" and generally have been pleased about being nudged into the modern world.
Hmmm
I'm not a technophobe pretty much by definition since I'm on this forum.
Despite that, I can't find it in me to suggest that technophobes are irrational, need to be educated or that they must move with the times. Clearly, by comparison with you lot, I'm being too soft on my clients but I must say I am rather surprised by the overwhelming volume of illiberal opinions on the subject.
Obviously, RTI is going to happen and I'm not necessarily saying that it shouldn't. To some people, however, that's going to be just another swipe in death by a thousand cuts. If exemptions can be given to people with esoteric religious beliefs, why is it so hard to believe that others may also prefer not to e-file for their own reasons / beliefs?
Harsh but fair
My comment about dinosaurs may seem harsh, but I believe it is fair, particularly in the context of where someone is thinking about laying off employees just because they feel unable to learn how to use a computer or outsource the payroll.
If you look at the accountancy profession, it has been impossible for some time to have a meaningful practice without some form of IT system in place. I know plenty of technophobes in the profession that can just about handle e-mail, Word, Excel and accounts production / tax software. That's fine, nobody has to be an IT expert, but the reality is that if you can't acquire these basic IT skills then you will struggle to earn a living. I'm not saying it's right or wrong - that's just the way it is.
The same is true for many other businesses. To be honest, I'm surprised that a partnership with 2 partners and 2 staff has survived this long without ever having a computer.
Like I said, I suspect RTI is the least of their problems.
I agree
with adam.arca.
And in fact, despite being far from a technophobe, I had already also decided top sack my one employee in March because I just can't be bothered with RTI on my payroll.
Re Unfair dismissal observations above: Not really my field but I thought it was pretty rare for redundancy (as long as not unfairly selected) to be unfair dismissal?
How difficult?
with adam.arca.
And in fact, despite being far from a technophobe, I had already also decided top sack my one employee in March because I just can't be bothered with RTI on my payroll.
How difficult were you expecting it to be to add RTI to existing payroll operations?
In our software, and I imagine many of our rivals, it is an additional mouse-click per week (or per month if paying monthly)
chipped up
in a few years time, it will be compulsory for all homos erectus to be fully chipped up, in the same way that dogs and other 4 legged animals are chipped now.
this new chipping system will also be called RTI, or Real Tagged Individual.
remember you read it here first.
Filing your payroll online will be the least of your worries.
homos erectus?
in a few years time, it will be compulsory for all homos erectus to be fully chipped up, in the same way that dogs and other 4 legged animals are chipped now.
this new chipping system will also be called RTI, or Real Tagged Individual.
remember you read it here first.
Filing your payroll online will be the least of your worries.
Homines erecti, perhaps? But what happened to [***] sapiens?
Pedantry aside, I'd agree with the general point that we're sleep walking into a Brave New World of electronic surveillance and central databases if that's what you're driving at. That's far too big an issue for an accountancy forum but would certainly be one of the drivers for my rant earlier on.
Which is considerably more mouse clicks
than I currently indulge in and, more importantly, there is the question of remembering to do it. Currently I just pay by dd and sort it out at the year end. Works for me. :-)
Software for companies with less than 9 employees is free for RTI. If only monthly payroll for 4 employees then will probably take an extra 10 minutes a month. Extra 10 minutes effort a month versus 2 redundant employees what a Joke just an excuse by the sounds of it!
@adam
Regardless of the technology aspect, the business decision to make long standing employees redundant (big severance payments) rather than pay to have an RTI compliant payroll is bizarre.
True, there probably is more to it than the OP states.
@Kent
Regardless of the technology aspect, the business decision to make long standing employees redundant (big severance payments) rather than pay to have an RTI compliant payroll is bizarre.
True, there probably is more to it than the OP states.
I'm entirely in agreement with you on that which is why I said in my initial comment that I didn't think we had the full story and why I didn't comment on the redundancy side of things.
What about the infrastructure?
Personally my sympathy lies much more with those clients and others who are now to compelled to complete various function online but who cannot get access to a decent broadband service to do it. Down here in north Devon it is a big problem. Well over 90% of the telephone exchanges here are still on first generation broadband meaning many people get no connection at all. We have clients with sub quarter meg connections trying to complete VAT returns online. They can pay us to do it, but it should be their choice not because they are effectively forced to.
Personally I believe if you are going to compel anyone to do something in a specific way then the infrastructure must be in place first. We are getting government central funding down here because the broadband situation is so bad (worst in the UK I believe) but that is another 4 years to reach 90% of premises which in itself is potentially a very misleading statistic. There is something like 101 exchanges in north Devon most of which are small. You can reach a large % of premises by simply upgrading the few large exchanges but doing nothing on the vast majority of them leaving those with the worst services still no better off.
So no problems in adopting technology but give us the tools to do it first.
RTI
At Clear Books, we are cheerleaders for RTI.
Nowadays, people have the ability to send messages and money around the world more or less instantly. Business owners have been freed from the desktop by modern cloud accountancy software. Aweb itself represents the real opportunity offered by pooling intellectual resources together - mediated by modern technology. It seems natural that payroll and benefits systems take advantage of the new opportunities offered.
There are certainly sociological changes arising from the efficiency, accuracy, and breadth of modern information systems. While there are certainly negative manifestations of these changes, we believe that RTI is an almost unqualified good. There will be fewer unlit spaces for those indulging in benefit or tax fraud to hide. Tax overpayments and underpayments will become a thing of the past, There may be teething problems, and there may be individuals to whom RTI is a serious inconvenience, but taken as whole, RTI is surely something we should welcome.
VAT & Margins
"I must admit as their adviser I think they will make more profit without the staff as their turnover will drop allowing them to deregister from VAT so their margins will be higher"
Have I missed something ? De-Register VAT & get higher margins ?? Obviously no VATable purchases. Buy @ £100 + VAT, Sell @ £200 + VAT, Margin £100, Sell @ £200 - no VAT = NO VAT Recovery, hence Margin £80.
B2C Sales
"I must admit as their adviser I think they will make more profit without the staff as their turnover will drop allowing them to deregister from VAT so their margins will be higher"
Have I missed something ? De-Register VAT & get higher margins ?? Obviously no VATable purchases. Buy @ £100 + VAT, Sell @ £200 + VAT, Margin £100, Sell @ £200 - no VAT = NO VAT Recovery, hence Margin £80.
A business selling direct to consumers derives considerable competive advantage from remaining just below VAT threshold. Loss of VAT recovery on purchases is greatly offset by keeping entire takings, not just 5/6 of them.
Outsourcing
Oh honestly. Outsource it. There are plenty of small time payroll experts out there who would charge far less than the time it must take dinosaurs to do the work manually. And in addition you would shed the responsibility on to someone else & you can get on with what you do best running your business.
Business not viable
With a T/O of £20K per employee the business isn't viable anyway. It sounds like a labour intensive business with little added value. I suspect RTI is just an excuse to get rid of staff.
Doesn't make sense
As others have said, getting their accountant to run the payroll monthly is the sensible decision.
I would charge about £300 per year.
I wonder how they can afford to get their accounts and tax returns done!?
Re outsourcing
Being one of the many small time payroll experts I totally agree that for a small fee, under £200 per year a monthly payroll could be run. Slightly more if a weekly payroll, but to be honest all they need to do is pay their employees weekly the same amount as before and a 4 weekly payroll run could gather it up onto a payslip. I already do this for one of my clients to save money.
I do wonder at the accountant who has brought this to our attention, surely he could have advised that outsourcing the payroll would be cheaper than redundancy.
Scaremongering
This is a classic case of a non story being used to assume the Government are always against us all. The reality is the business is underperforming and has to get rid of two of its staff because it is not prepared to adapt.
Irrational beings
And I don't mean those who baulk at involving themselves with the computer age. To read the comments of many of those above is to indulge the world of fairy tale land. I have been involved with computers since the sixties, have studied them, programmed them, designed software for them, audited them and used them in my business since I set it up over 20 years ago. And I still remember the comment my senior lecturer made about software back in the early eighties. 'The hardware is so far ahead of the software that it is unlikely that it will ever catch up'. He was of course referring to the internal software design and architecture. To read about the comments above is to think that the great HMRC systems crash in 2008 never took place. It is to think that the con of Vista was never visited upon us. It is to think that hacking and viruses are an invention of Stephen Spielberg.
Have those who made their utopian comments never suffered a software failure or conflict or never suffered a duff software update such as happened recently with McAfee and Kapersky? Computers were designed by mankind, are maintained by mankind and suffer the failings of mankind. To pretend otherwise is fanciful and naive. Of course they improve operational efficiency and hopefully profitability, but if they go wrong the results can be a quick and disastrous business death. To doubt your ability to cope with new technology under those circumstances is perfectly natural and is not deserving of derision. The job of an accountant under those circumstances is to seek ways to alleviate the client's problem in the most cost effective way.
What is your point?
To doubt your ability to cope with new technology under those circumstances is perfectly natural and is not deserving of derision. The job of an accountant under those circumstances is to seek ways to alleviate the client's problem in the most cost effective way.
Most of us accountants have been doing exactly that - alleviating the client's problem by recommending them to outsource their payroll at a cost of £200-£300 a year.
Which comes first?
"Being one of the many small time payroll experts I totally agree that for a small fee, under £200 per year a monthly payroll could be run. Slightly more if a weekly payroll, but to be honest all they need to do is pay their employees weekly the same amount as before and a 4 weekly payroll run could gather it up onto a payslip. I already do this for one of my clients to save money."
Payroll or payment?
It will have to be payroll under RTI.
Irrational beings?
I think I have arrived at a different conclusion about who is irrational!
Why avoid something that can do so much good just because there can be occasional problems? I had big computer problems in December and it cost me a couple of thousand pounds to put right plus a few thousand pounds in lost time but that was nothing compared to the money I have made from using computers. As long as you have a good backup system then you limit your potential problems.
RTI
I am saddened by some of the comments.
RTI was clearly designed to pass HMRC costs onto the taxpayer.
HMRC may then claim they are "Saving" money. That is the story of tax legislation over the previous two decades.
Being a technophobe is normal. How many of us are able to correctly operate a TV remote?
A USA survery quoted in the "New Scientist" came to the conclusion that the maximum penetration for use of computers in the USA would never exceed 80%. I guess the UK would be similar.
Except in exceptional circumstances a two or three man business with a couple of staff does not need a computer for its accounting and or administration.
The time spent faffing around with the computer with the capital costs, will exceed the time actually needed to do the work involved.
I speak as a sole practitioner with three assistants and five computers.I wonder how many of my professional colleagues would certify that more than 5% of their clients who use computers for accounts and administration, actually do know what they are doing with them.
My experience is that these are the old "Paper bag" jobs, except that the bag has been replaced by a PC. Personal computer, or Politically Correct- you choose.
Seemed reasonable to me
"I am saddened by some of the comments."
Why?
Most people use computers to save time. If people want to avoid computers they can do so but it would make sense to pay somebody to use a computer to prepare and submit their payroll rather than doing it manually even ignoring RTI requirements.
Technology
But it's nothing new. How many tradesmen still shoe or feed horses? My electric car is a whole new thing when it comes to maintenance, even for an industry that's had considerable changes through computerisation. I don't see why payroll should be different. It just changes what we do ourselves versus what we get someone else to do, and of course it can be painful.
Difference
The big difference is that if you shoe or feed horses you are not dealing with any third parties.
It seems reasonable that everybody should make an effort to make tax collecting as efficient as possible.
@ David Gordon
Hi David - might I suggest from your comments and ethos that yours is a self fulfilling prophecy? In other words, if you keep telling your colleagues and clients that, not only do they not need IT, but that, if they get it, it will be a waste of time, then you'll end up with a bunch of confused and frustrated people watching everyone else using IT.
You say that RTI is clearly designed to pass on HMRC costs onto the tax payer. Only if you don't use computers. The current system of PAYE is over 65 years old. This might still be cutting edge in your firm but in mine it's never been up to date and results in a mess of inacurate or missing codings and the grief of wasted time & fees. For this reason I'm pretty sure I voted for some sort of RTI when the condoc did its rounds.
"Being a technophobe is normal"? Again, speak for you & yours, I started using computers to prepare payroll and bookkeeping over 30 years ago and have always embraced it as an opportunity to do things more efficiently.
Of course a 2-3 man (or woman?) business or anyone else doesn't "need" a computer. I didn't need a microwave or toaster just now to make my lunch and can still multiply & divide wth pencil & paper, without the need for a calculator, but would that make me throw away the technology?
"Faffing around" with computers? Again you are pinning your experiences on everyone else.
I can certify that closer to 95% of my clients who use computers for acounts and admin, know what they are doing with them. As I say, if you take the attitude you do with your clients then I'm surprised you manage 5%.
Just in Time Philosophy
RTI is great as it will generate more fees for payroll service providers. However, the failures that occurred with self assessment filing fiasco and the response of HMRC remind me of the JIT method of management. In that scenario it was not until just before the final deadline was reached that HMRC announced a filing extension with the resulting confusion. What does that tell us? That their management process was flawed and unable to respond early to a problem that was known to exist. This suggests that HMRC have serious internal problems and most probably means that the introduction of RTI has more to do with meeting targets than with modernising a system that is struggling to deal with current conditions.
That is the wrong scenario for the introduction of new technology and the imposition of new work systems and infrastructure onto multiple users. It makes one fear that in the event of an operational problem within the HMRC system that chaos will ensue and this will spread to users. The record of HMRC here is not very good. They have a penchant for inflicting costs and disruption on users for the benefit of themselves and their political masters. I remember one of the canons of taxation that I was taught and which still apply, 'tax should be easy to understand and administer'. That was not for the benefit of the taxman, it was for the benefit of society. Tax is no longer easy to understand in this country, so are we now looking to depart from the other part of that canon? So there is no doubt, I do understand that the PAYE system has weaknesses that need to be addressed and RTI may well be the most appropriate response, but current HMRC weaknesses fill me with dread of what can so easily go wrong with an organisation that has serious quality and operational deficits.
Not a good philosophy
We all know that HMRC are far from perfect but I don't agree with the philosophy that, because a relatively small number of people can't or wont use computers and there's the risk of HMRC getting things wrong, then we shouldn't try to make things more efficient.
We should keep a sense of proportion.