How to safeguard your payroll with payroll succession plan
That payroll is an essential business function is understood. Organisations and small businesses alike prioritise the payroll function as everyone understands the necessity and importance of paying employees on time and complying with all payroll legislation. With this in mind, answer the following question: what plans do you have in place to ensure a smooth handover if and when your current payroll manager leaves?
As you think about this, consider the following data:
- 64% of bosses of small and medium-sized enterprises (SMEs) in the UK have no clear plan in place to ensure that their business does not suffer when a key staff member leaves.
- 56% of those aged 18-34 having a succession plan in place.
- 45% of UK SMEs decision-makers believe the biggest threat to their business is the departure of senior executives.
- 62% do not know how they will leave their business - although liquidation is the most common departure plan.
Why is it important to have a succession plan?
If you answered that you don’t have a plan in place, you are obviously not alone. However, if COVID-19 has taught us anything, it is that change can happen in a heartbeat. Businesses no longer have the luxury of assuming that the status quo will remain. SME’s must also be acutely aware that should a vital member of their team need to step away, then without a Plan B, everything can come crashing down like the proverbial house of cards.
Where to start
To avoid a scenario where the only person who can complete a pay run is no longer available, it is imperative that companies implement a succession plan. Often, we associate succession with leaders only. While it is important to have a plan for replacing your CEO or other top-level position, it is incumbent on every business owner to prioritise payroll, given it plays such a critical role in the smooth functioning of a business.
Start with a clear communication plan. Research by Deloitte suggests a lack of clear communication is one of the biggest threats to the successful transition from one generation of business leaders to the next. In some cases, a successor may already be under consideration. If this is the situation, be sure to relay this to them and ensure that the current payroll processor provides opportunities for learning and experience.
What should you include in your succession strategy?
- Establish who needs to know and what - Payroll is a multi-faceted process. Beyond remuneration rates, there are benefits, health insurance, pensions and, of course, taxes. There is also a host of other considerations related to time and attendance. Stepping into someone’s shoes without any understanding of the complexities is risky. Therefore, discuss with the current payroll administrators and plan the project around the full extent of their responsibilities.
- Training - Pretty much all payroll professionals use payroll software to execute payroll. Now is the time to gain an understanding of this technology and decide about training or upskilling existing personnel. For example, BrightPay offers customers a range of online video tutorials and step-by-step help guides covering everything from how to set up an employee on the payroll to processing statutory payments.
- Establish guidelines - Now is the time to build the framework of your succession plan. Identify potential successors and open a dialogue with them around your goals to ensure they align with theirs. If they agree, lay down the steps for their orientation and, if possible, a timeline. If there are no suitable contenders within the organisation, decide how you will recruit externally.
- Tax advice - If you are a small business owner selecting a successor, and someone who oversees payroll, may impact your tax obligations. Talk to a tax advisor to ensure you receive the best advice, especially if the transfer of leadership also means a transfer of ownership of the company. This is particularly relevant if the company ownership is passing from one generation to another within one family.
The most important factor to remember is that compliance and the employee experience rests heavily on the payroll team’s shoulders. Therefore, failing to prepare for the departure of your payroll person leaves you and your employees open to risk and dissatisfaction.
Make sure you’re using an easy-to-use payroll system, facilitating a smooth transition from payroll processor to payroll processor. Book a demo of BrightPay today.