Guest blog: Payroll and Pensions - the impact of COVID-19

Revolut Contributor

 · July 14, 2020  · 07/14/2020

Ceri Thomas, Head of Payroll, Smart Pension

The coronavirus pandemic has affected so many lives in a negative way, yet at the same time we are also witnessing a surge in creativity and ingenuity driven by it. Creators, inventors, scientists and developers are all pooling resources to create new and alternative ways to support our new living and working patterns. These range from small and creative ideas, from people like London-based designer Steve Brooks who has invented a ‘hygiene hook’ that allows you to open doors without touching them, to household names like Apple and Google joining forces to partner on COVID-19 contact tracing technology.  

There is even talk of blockchain applications that could monitor disease outbreaks over time by creating 'ledgers' that are both secure and updated hundreds of times per day.

But what about pensions and payroll?

Have we seen innovation in this sector in these challenging times? Have pension providers and payroll software stepped up to the mark to support their clients?

As Head of Payroll for Smart Pension, I am fortunate enough to have witnessed first-hand the support that many payroll software partners have quickly developed and released to help UK businesses in processing furloughed staff.

Payroll professionals across the country have been inundated with requests for help in recent weeks. They have had to get to grips with new rules and processes that have been released by the government and HMRC. I’m sure that any payroll professionals reading this will agree that the support they have had from the payroll software industry in facing these challenges has been very much welcomed.

We recognise the importance of payroll software in processing pension contributions. Our payroll software partners have been in contact with us regularly to keep us updated about new features they have released. We have seen a number of them rise to the challenge in very quickly deploying enhancements to their processes. As an example, they have had to include COVID-19 sick pay options for employees who are required to self-isolate, enabling them to earn sick pay from day one rather than after the usual four consecutive days of illness.

In a very short period of time, the majority of payroll software providers have made it possible for payroll professionals to process furloughed employees and split out the wage costs of furloughed workers in preparation for the grant claim. Improvements like this will save valuable time for payroll professionals when they come to process claims for furloughed members of staff.

A key piece of functionality that many payroll software providers have added to their product suite is the additional reporting ability for furlough workers reclaim reports. This will support both employers and payroll professionals in submitting the required data to HMRC.

It will be interesting to observe the next round of changes, as the country prepares to come out of lockdown and to witness how these new reporting functions will enable the industry to deal with flexible furlough, or to close off furlough all together.

As for us, we have definitely tried to be on the front foot in looking at what our clients need, and wherever we can we have deployed changes to support them.

The government and The Pensions Regulator have said that employers must still comply with their auto enrolment duties during the COVID-19 outbreak. It is important that employers continue to meet their obligations and pay contributions that have already been deducted from wages. This applies equally to employers who have furloughed workers under the Job Retention Scheme, although employers can claim for some pension costs for their furloughed workers, as long as those costs are paid over to the pension scheme and meet the statutory minimum percentage requirements.

From our own point of view, there are two main things we’ve been doing to help our clients and scheme members.

  • We know that many employers are worried about their financial position and concerned that they will have trouble with their cash flow or in meeting payment deadlines in the short term. Many of them have been waiting for grants and furlough payments from the government.

    That’s why we have recently worked with many employers to arrange a payment plan for their pension contributions to allow them extra time to pay the contributions owed once the payments have been received.

  • Similarly, we have seen an increase in the number of scheme members who are worried about their finances and have contacted us because they want to stop making pension contributions. Naturally, this is understandable at the current time. However, we also want to make it as easy as possible for them to re-join the scheme, and to restart saving for their retirement, in due course.
  • That’s why we have been proactively communicating with members who have chosen to leave the scheme after 1 March but not left employment. We have offered them the opportunity to pause, rather than cease, their pension contributions. They can choose to pause them up to either their August, November or February 2021 paydays. We have also made it possible for people who are looking to temporarily stop paying contributions to do this online.

Thanks to our technology-first approach to pensions, we have been able to introduce these changes quickly and seamlessly. Doing so means that we can continue to help employers remain compliant, as well as supporting both employers and employees with payment pausing options.

In more general terms, naturally, we are all by no means out of the woods yet. However, I think that with a continued joint effort from across both the payroll and pension industries, we will make it through to the other side.

Smart Pension has set up a payroll support group on LinkedIn please feel free to join here. The group has access to multiple software providers and payroll professionals, as well as members of our Smart pension team, so you can ask any pension or payroll related questions you may have.

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