June 3, 2013

Real Time Information: What’s the big idea?

Branded one of the biggest changes to payroll legislation since the introduction of PAYE, Real Time Information (or RTI), was rolled out in April 2013 at Her Majesty’s request. While the nuts and bolts of PAYE remain unchanged, the ‘how’s’ and ‘when’s’ of payroll processing have caused quite a shake-up within the industry.

In a nutshell, this new system means that employers must submit information to HMRC every time they pay their employees, allowing the folk at HMRC to monitor legislative processes in real time. The reasoning behind this? Well, when PAYE was first introduced back in 1944, people were likely to stick with the same employer for the long haul. Now, however, employees have a tendency to switch roles more frequently, resulting in major difficulties with tracking earnings over at HMRC. It seems fair then, that the legislation should move with the times and cater to modern employment culture. Right?

Since it was announced, the reform has been met with mixed reviews by analysts and employees alike. In one corner are employers, particularly SMEs, who feel that they are unprepared for the change. So unprepared, in fact, that 25% of businesses polled by the FSB ‘Voice of Small Business’ Survey Panel, hadn’t even heard of RTI just six months before it kicked in*. In recognition of these worries, however, HMRC has thrown small businesses a bone and temporarily relaxed the rules for organisations of less than 50 staff. Under this leniency, smaller organisations who pay employees weekly (or more frequently), but only process payroll on a monthly basis, may submit PAYE information once a month. This applies until October 5th, when all businesses must make a full commitment to the new RTI rules.

Other employer concerns are over the costs associated with updating or investing in payroll software. But, while RTI will require an upheaval within many payroll departments, the cost implications need not strike fear into the heart of your HR or Financial Director. Outsourcing payroll services with the right provider won’t break the bank, and there are a range of affordable solutions available which can be catered to individual business needs.

So who’s welcoming the changes? Well, in the other corner, are employees, the majority of which are overwhelmingly in favour of RTI. Fed up of paying incorrect tax, UK employees are pleased to see that HMRC has introduced measures to help minimise mistakes. As it stands, more than one in ten people are unsure whether they are paying the right amount of tax, or are under the impression that their tax deductions are incorrect*. While the benefits may not be obvious to many employers from the outset, it can’t be denied that ensuring employee’s information is up to date is a crucial step for any HR department, helping to improve employer/employee relations and create a sense of true professionalism in the workplace.

Since RTI came into effect, there have been a number of changes and issues. For the latest on the legislation and how it will affect your business, download our whitepaper, ‘RTI: Where Are We Now?’

Click here to download the white paper.

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