The big auto enrolment story for 2016 is that around 500,000 small and medium-sized businesses will reach their staging date and start the continual payroll process of managing automatic enrolment, says Chris Deeson of pensionsync.
An event for each employer, but nothing compared to the aggregated impact on payroll bureaus, accountants and bookkeepers, who will suddenly have to manage AE tens or hundreds of times over. This impact will be so huge and profound that payroll professionals will need and demand streamlined processes.
On current evidence, running all of the AE processes doubles the average length of a standard payroll run. More than 80% of this additional time is spent managing the data after the AE calculations have been performed (most of the other 20% is spent managing opt outs and communications).
Roll it out across a bureau and this is unsustainable.
How does data automation help? Well think how long it takes to send RTI data to HMRC compared with sending AE data to a pension provider.
So, reason one is efficiency.
Compare the current process for handling data (on the left) with the automated process – to illustrate, let’s assume two errors in the data (say five minutes to fix).
Step CSV file process Automated process
1 Process AE in payroll Process AE in the payroll
2 Download a CSV file Click and transmit the data
3 Open CSV file and manual update
4 Log into the pension provider’s website
5 Upload the CSV file
6 Download a CSV file with the errors View errors in payroll
7 Correct data errors manually in CSV Correct data errors in
8 Correct data errors in payroll – or skip
this step and repeat step 7 next pay
period)
9 Log into the pension provider’s website
10 Upload CSV file Click and transmit the data
The CSV file process outlined averages 30 minutes, compared with seven minutes for the automated process (and remember five minutes of that was fixing errors).
With efficiency savings like that, it is a no-brainer for payroll professionals to demand data automation from their payroll software.
Reason two is the growth of cloud payroll.
Cloud payroll providers are on the march. Global companies such as Xero and Intuit Quickbooks are aggressively looking to steal market share from the incumbents. Smaller UK players are also looking to expand by providing technology extolling efficiency and ease of use.
SMEs like the flexibility of the cloud – almost the polar opposite of large corporates. Bureaus and bookkeepers like efficiency.
CSVs data transfer from cloud payroll is oxymoronic. Cloud payroll is embracing data automation and its growth will make data automation mainstream.
Reason three is that payroll users (including bureaus) are already switching payroll software to embrace better AE efficiency and away from CSV solutions. Changing payroll software is a big move for a bureau, so if this trend continues expect software decision-makers to take heed.
Reason four is cost. Cost impacts two different players:
- Payroll: Reason one highlighted the efficiency gains, but staffing costs are set to rise.
If everyone continues with CSVs, then the payroll industry needs to recruit more than 7,500 additional staff. Those people aren’t out there, so salary increases to retain existing staff will tighten payroll margins even further.
- Pension: The support costs for maintaining non-automated solutions for SMEs is so burdensome that pension providers have either pulled out of the market entirely or have introduced employer charging. Pension providers will favour automated solutions for economic reasons.
Employers will therefore have more choice and lower costs if they use data automation solutions.
Reason five is ease of integration.
For those payrolls that have integrated with pensionsync the amount of time to analyse, plan, develop and test is two to three months FTE.
For those integrating with a single provider, the timings appear to be similar (maybe slightly shorter); but you only get access to a single provider.
Regardless, the over-riding message is that the timing and complexity of integration is not going to be a reason to stop software development. [Albeit if you want to go it alone and have to spend two months each on six separate integrations it may get a bit steep].
Five reasons then why AE data automation is set for a rapid expansion in 2016 and why it may not even be a discussion point in 2017.
Chris Deeson is CMO at pensionsync.
AccountingWEB has launched the No-one gets left behind campaign to alert as many accountants as possible to the obligations implied by auto enrolment. Read our simple eight-point statement which sets out the auto enrolment facts you need to know.
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The UK Country Leader for KeyPay, I work with an amazing team focussed on transforming the way that payroll and workforce management is administered in the UK, AU and NZ.
I am a Fellow of the Pensions Management Institute, a member of BASDA and work in the industry for better communication between payroll and pension providers,...