Payroll providers have a key role to play in the auto-enrolment process, but employers must make sure systems meet their needs.
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- Payroll providers are a key part of the auto-enrolment process.
- However, not all payroll providers offer an integrated service.
- Employers should identify any gaps in their payroll provider’s service support as soon as possible.
The payroll market spent much of last year under fire from employers and pensions advisers because of the time it took a number of providers to clarify their auto-enrolment services.
After catching up, payroll providers are now working with employers to make sure they hit their staging dates. But how can employers be sure providers are offering what they need?
Rudi Smith, a senior consultant at Towers Watson, says: “The first thing [for employers] to understand is what platform they are on and what support [payroll providers] are giving for that platform. There are a number of payroll providers with a variety of payroll platforms, and the development isn’t the same.”
One consequence of this system disparity is that some payroll providers have legacy systems that are not fully integrated. Smith adds: “If employers are on the newest platform, they will get the all-singing-and-dancing thing that [payroll providers] are building. If they are on something else, they may just get enough to meet their standard requirements.”
So, employers should be clear about the benefits of upgrading their payroll system and not feel under pressure to do so. “Buying a payroll system is a really big issue and while auto-enrolment is very important now, in the long term it is not the reason [an employer] replaces a payroll system,” says Smith.
Bill Thompson, principal business consultant at NorthgateArinso, says: “We have 450 employers using our flagship [payroll] product.
We then have a number of legacy products that have less auto-enrolment functionality, such as administration, producing letters and interfaces. We have found that employers on the legacy products have tended to use these to do the assessment [of staff eligible for auto-enrolment], but have done everything else in-house in terms of communication, or used their pension provider.”
Pressure to upgrade systems
But Henry Tapper, director at First Actuarial, is concerned about payroll providers putting pressure on employers to upgrade their systems to provide functionality that should already be integrated. Employee assessment is a case in point, he says.
“Some payroll software providers will say ‘we could do it for you if you go for our super upgrade’,” says Tapper. “[Employers] are quite uncomfortable to upgrade their payroll for something that should be available anyway.”
But Thompson says NorthgateArinso’s ability to undertake the assessment process is determined by pension providers’ technology “We have to come up with a solution that works with the pension provider the employer uses,” he says. “Everybody has developed their system independently.”
Therefore, employers should be talking to their payroll provider about the impact of auto-enrolment. Melissa Goddard, director of pension solutions at Ceridian, says: “One of the real challenges is getting people to understand that auto-enrolment is more about operational impact to payroll than about communications,” she says. “It took a huge amount of focus in the early days to get the right [pension] scheme in place and get the governance right. Payroll was an oversight for many people.”
Workshops with all third parties involved in an employer’s auto-enrolment process, including payroll, can help to identify any gaps in support and the cost of filling them.
Smith says: “Employers must work out what they really need because if they buy all the bells and whistles a payroll provider suggests, it could end up costing a fortune.”