Are You Real-Time Ready?

Sarah MacKinlay takes stock of some of the question marks that persist over the government’s Real Time Information initiative

Real Time Information (RTI) is one of the most hotly debated topics within the payroll industry, since it emerged following a controversial consultation process in 2010.

This was highlighted by Payroll World conference delegates that year, who spoke at length of the insufficient time they had to air any concerns about the initiative.

One payroll professional told Payroll World: “Consultation appeared to consist of discussion around two options: the centralised deductions method, which was obviously flawed; and the proposed RTI. It appeared to be cleverly designed to point towards RTI as the lesser of two evils. Consultation seems to have been with payroll providers rather than with employers.”

The same year as the consultation, HMRC published an impact assessment of RTI in which it stated the aim was to support the government’s wider tax and welfare agenda, reduce costs borne by employers, individuals and HMRC, increase the number of individuals who are subject to the right deductions, and reduce fraud and error in the credits and benefits systems. A lot to achieve in a short space of time.

In place, on time

The expectation to deliver RTI effectively and on time is so great that many people in the industry are uneasy about the tight deadlines. Payroll manager Debbie Beckham of Feist Hedgethorne says: “There is a huge question mark over whether it will be fit for purpose. It’s not as straightforward as many have been led to believe.”

She says companies that will find it hardest to implement RTI are “those that process the payroll but are not really payroll professionals”.

Although training on the forthcoming changes is available, some have expressed concern that it is costly, and combined with the additional software costs will create a financial burden for employers.

Meet expectations

PAYE consultant Peter Tucker explains that not all software developers have the software in place to meet HMRC’s requirements. “Before an employer starts the RTI system, it will have to undertake an employer alignment process that involves providing HMRC with information of current and past employees. Many payroll software packages do not provide this type of facility; in other words, the ability to produce a list of current and past employees at a particular point in time,” he claims.

Tucker believes employers will be subject to additional costs for the upgraded payroll software that will be required to operate RTI and produce information for HMRC every pay day. “This means the employer will have to spend time, money and human resources in obtaining this information, or pay for a software solution,” he adds.

He also questions why, if an employer will have sent HMRC information for every employee who has left, there will be a need to repeat this process and provide the information again. “This is unclear, but as shown on the HMRC website, it is essential,” says Tucker.

However, John Black, product manager at MidlandHR, which is taking part in the RTI pilot, says he is working closely with clients between now and October 2013 to transfer data and payroll processes to the RTI system, ensuring the process of sending payroll information under RTI rules is quick and painless.

This is the most significant change to PAYE since its inception. Black says, “It is vital to engage at the earliest possible stage and build resilience, accuracy and ease of use with rapidity.

“One of the biggest mistakes that can be made in software development is to take a specification, write some software and turn it on expecting immediate results. Instead, feedback, lessons learned and practice will ensure a better product,” he says.

Black concedes, nevertheless, that RTI does “change the goalposts for many payroll systems extending beyond just the mechanics of the ­electronic exchange of information. The ‘real-time’ nature of the information being sent to HMRC means organisations will need to sharpen processes and employ best practice to ensure that the right data is captured.”

Review quickly

Black says employers must plan early to review their data quality and give themselves time to implement more robust processes of data capture. One result of RTI is that companies will need to be able to regulate and produce data of a high quality.

And while developers such as MidlandHR promise that RTI implementation will be smooth, many practitioners remain sceptical it will be rolled out free of blips, some even questioning whether HMRC will be ready and able to cope with the initiative when all employers start reporting PAYE data in real time.

A payroll manager’s view

Payroll manager of Isos Housing, Rosi Strasshine, says her experience some years ago with HMRC has left her skeptical that RTI will launch successfully. While running six separate payrolls some years ago, HMRC mis-calculated payments to the wrong PAYE reference every month and then passed all the accounts back to Strasshine to reconcile at the end of the year. As a result of this error, Strasshine says she “has her doubts about the Revenue’s ability to deliver the project”.

“Confidence is not high and another major change is likely to throw up numerous problems, particularly when so many will be going live concurrently,” she says.

Strasshine is concerned about the lack of support for employers and all the talk about incurring penalties: “There is sparse communication about what support networks there will be for employers, but considerable talk about penalties for non-compliance.”

There is also something of a prosaic problem associated with RTI that is less discussed, but which is nevertheless a cause of concern: much of the publicity surrounding RTI focuses on it being a time and labour-saving exercise, removing the burdensome year-end project.

At least this is the message subliminally fed to senior executives. As Strasshine points out, “They will expect payroll departments to absorb this increased burden and responsibility, with no extra resources. The reality is many will default and perhaps become subject to penalties before the true picture emerges. Add to this the forthcoming auto-enrolment and the phrase used by John Harding of PwC – ‘perfect payroll storm’ – and it is an uncomfortable reality.”

Responsibility for accuracy resides with the payroll department, which is undoubtedly going to increase the pressure on it to undertake every calculation correctly and without mistakes. “Senior executives are far too removed from the details. Universal Credit relies on accurate information on individuals’ income changes, fed by RTI data from payrolls. Errors, not necessarily within payroll, will lead to increased payroll queries.

“There is a high level of responsibility to ensure accuracy as errors will impact directly on employees’ benefits,” says Strasshine.

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