How Payroll Kept Pace with the Pandemic

“Normally, payroll software for reporting pay would be shared with HMRC via an API…”

Since the outbreak of COVID-19, payroll professionals have faced their biggest challenge since the roll-out of auto enrolment in 2012. However, where businesses then had months to prepare for the payroll ramifications, they only had a matter of weeks to prepare for the Government’s Job Retention Scheme (JRS) and the new calculations required to calculate claims in respect of furloughed staff, writes Lindsay Philips, Executive VP, Sage Product Delivery

As the payroll software provider to half of the UK’s private sector businesses, Sage has been working to tackle the implementation challenge head on. Yet, as with any rapid innovation project – combined with unprecedented working conditions – having the right team, the right tools and consistent collaboration with HMRC and customers, was paramount.

Understanding the Complexity of the Challenge

First of all, the complexity of the calculations required to pay furloughed employees, accurately and on time, is unprecedented for payroll professionals.

When financial support for furloughing was announced, it was clear businesses would need more tools to help them access that support and complete the calculations required. Historical earnings, National Insurance (NI) and pension contributions must all be factored into the equation to calculate the correct claim amount. That’s without considering an individual employee’s previous pay, the frequency of that pay (weekly or monthly) and their furlough dates.

In fact, the different variables that have to be considered mean there’s more than 5,000 permutations that could be calculated to get the right information to HMRC to support a claim. What’s more, as there is an immense range of different payroll scenarios and potential changes to government policy, the process has to be continuous. For large companies, with hundreds or even thousands of staff, this requires a large investment of time and resources, with little room for error.

Sage’s priority was to make this process as quick and easy as possible for customers, through automating much of what they need to do to make a valid claim. Working with HMRC, we were able to provide insight into how to deliver a realistic solution for businesses, determine what employers were expected to submit and the basis of the calculations.

Normally, payroll software for reporting pay would be shared with HMRC via an API. Yet the Government’s tool doesn’t connect automatically to payroll software, a choice made by HMRC to enable it to be delivered at speed and with low technical complexity. As a result, payroll teams have to prepare the data and perform any calculations before uploading the data to the portal.

Building a Software Solution: A Race Against Time

To create a tool that could provide an outbound report for customers to easily upload onto the HMRC portal, Sage had its work cut out.

To deliver the needs of the project and ensure a speedy response, Sage assembled a diverse team of developers, testers, UX staff and subject matter experts.

However, this created the first challenge – in normal circumstances Sage would create a war room where conversations and brainstorming could happen easily. To respond to the ‘new normal’, the working group was brought together using Microsoft Teams for virtual collaboration. A clear plan had to be laid out, with stringent deadlines to coincide with the launch of the Government’s own portal.

The team started off by looking at the process of making a claim and the different steps a customer would need to take, then built wireframe models to visualise this journey through the application process. Sage then built a prototype automated in-product payroll functionality to process the complex calculations needed to apply for JRS grants. This was achieved by iteratively building a prototype as an additional module within Sage 50 Payroll. This could be tested outside of the application before being fully integrated into the product. Sage also used its existing payroll data to support the build of the complex new calculations, which were required for the JRS Scheme.

To account for the variation between different customers, the team also developed an underlying model for the tool – a module that could ask the customer questions as they progressed through the process.

After putting in 1,000+ hours over a three-week period, the team had created an operational solution. However, once the design phase was complete, it was crucial to collaborate further, bringing existing customers into the mix to ensure their experience of using the functionality was the best it could be. And, of course to ensure the calculations were correct.

Keeping the Nation Paid: Ongoing Complexity

With over seven million UK workers estimated to have been furloughed, it’s clear the work of payroll is far from done.

We’ve entered a complex period of change, where requirements and government schemes will shift in response to the pandemic. Payroll teams will have to work hard and work smart to keep up with these changes and ensure their business and colleagues get the financial support they need.

It’s possible to innovate and be agile even in a time of crisis. Indeed, speed of response is more important than ever. To do this, you need to have a clear plan, constant collaboration with partners and customers, a strong and varied team, and tools that streamline processes and improve efficiency. And, passion to do the right thing.