Published by Jessica Weisman-Pitts
Posted on December 12, 2022
By Suzanne Gallagher, UK Product Manager of KeyPay
A lot of people are doing it quite tough right now.
As interest rates rise in a battle with inflation, regular workers are feeling the squeeze on both ends – costs are still high, but now mortgage rates are too.
Businesses who want to help face a similarly grim economic picture, with the UK expected to slump into a recession. This will make giving raises to employees who seem to be genuinely struggle more difficult than it might usually be.
But that doesn’t mean payroll teams and bureaus can’t do their bit to help with the cost of living. Here are three key strategies payroll teams should consider for helping employees struggling with the cost of living.
1. Build a system that can do one-off flexible payments
A payrise of the scale needed to keep up with inflation might not be possible. But some employers might instead look to provide a one-off Cost of Living payment – a bit like a bonus, but issued on a wider basis and not based on performance.
Payroll bureaus should make sure they have built a system that accommodate this kind of one-off payment while remaining compliant. Some employers might want to chop up the payments so that those earning under a certain amount get the payment, or a larger one – so make sure your system can manage that.
Most payroll software platforms should be able to handle this, but some may make it a serious headache, especially if tax rates have changed since the last time you did a bonus. A good way of working out how well your payroll system might adapt to new situations is to look back at furlough – was that relatively straightforward, or a nightmare? If it was the latter, you might want to consider an upgrade.
2. Make sure employees have good visibility of their payslips.
An employee feeling good about his or her finances is unlikely to be running a ruler over every payslip.
But one feeling a bit more insecure will want visibility over their payslip to make sure they are getting exactly what they are owed. This is especially the case for employees who work irregular hours, with pay rising and falling every month thanks to a differing amount of hours worked. They shouldn’t have to email their HR team or payroll administrator to get a recent payslip – it should be readily available to them. And if they want to query something on the payslip, there should be a clear way to communicate with payroll.
Good modern payroll software can generally do this, at least on a web browser. Our WorkZone app at KeyPay goes a step further by allowing employees to see their payslips on their mobile phones.
3. Consider out-of-the-box ideas like annual leave selling
Annual leave typically sits as a liability on a company’s books – one they would be happy to clear off if possible.
Most employees value their annual leave as actual time off – and well-rested employees are typically better ones. But with times this tough some employees may be interested in selling some of their leave for extra cash.
This can be complex for payroll to administer and employees will have to be made aware that as this increases their gross pay, it will increase their tax obligation.
Some care is also needed – you cannot sell leave that takes employees below the legal minimum for annual leave. But after the pandemic ruined most holiday plans a lot of people have extra leave built up, or stipulated in their contracts.
This isn’t the only out-of-the-box idea you might consider from a payroll perspective. Employers might also be happy to get another liability off their books – redundancy payments – and buy back these redundancy payment at a reduced rate from their employees. Not every employee will want to sell off their redundancy package, but some will.
Again this is not a simple process for all payroll systems or software, so it is a good idea to get prepared in case a client suddenly comes running in ready to buy back oodles of redundancy or annual leave payments.
Payroll teams cannot solve every issue for struggling employees. But they can provide a solid basis for some action by employers looking to help their staff. And with clear processes, frequence communications and easy acess to payslips for employees, they can help build and retain trust between management and staff too.
