Getting payroll right

Staffing costs are a school’s greatest expenditure and typically account for 70% of the total budget. With changing legislation and government policy, payroll has become increasingly complex and, if not managed correctly, you may have disgruntled employees and the HMRC knocking at your door

Payroll 101

The situation for academies is different to maintained schools. Joanna Waddy, payroll manager at the London Borough of Hounslow, explains the situation. “Our maintained schools are on one tax reference and one payroll. They don’t interact with HMRC as an employer because they’re considered employees of Hounslow; tax and NI payments, and compliance with HMRC, are managed through us.” However, academies are allowed to set their own pay and employment conditions and have their own accounts with the tax office; these schools and SBMs will interact more with HMRC directly and must be attuned to statutory regulations.

In-house vs. outsourced

“A question that schools must ask is, ‘Who is maintaining and updating the data being collected?’” Derek Stewart, payroll manager at Newham Partnership Working (NPW) says. What are your options? You can choose to contract with your LA or payroll specialists, use in-house payroll software or a combination of these. Sharon Carlyon, business manager at Laurance Haines Primary School, uses the LA for payroll administration. “We can rely on the authority for payroll expertise and specialist knowledge. That said, the information we send to the authority must be accurate.”

Depending on the skills and resources you have to hand, processing payroll in-house may be a cost-effective solution; you gain autonomy in relation to process and security in terms of employee data and other sensitive information. However, you will need to be fully informed on PAYE and payroll, be HMRC compliant and have payroll software that can handle your school’s needs.

Maintain full records or HMRC may estimate what you must pay and charge you a penalty of up to £3,000.

Accuracy

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“Keep costing structures as simple as possible and make sure the information you pass to your provider is coded correctly,” Joanna advises. Accurate information provided means an accurate report returned. “In Newham, schools’ payroll data is sent to schools electronically to import into school finance software allowing effective identification of anomalies,” Chris Fagan, MIS operations and account manager at NPW, says. Reports, typically, include information on staff contracts and salary – choosing a provider with an adequate reporting system will help make balancing your school’s accounts easier, Joanna adds.

An effective payroll report will break down each staff member’s salary against your school’s return. “This data is then inputted against a staff salary monitoring report. Actuals are inputted and variances checked and monitored,” Sharon explains. “This gives me an ongoing variance budget/actuals so I have an accurate picture of our current financial forecast.”

Compliance  

When it comes to ensuring your school complies with the main statutory legislation surrounding payroll a good starting point is the annual School Workforce Census, published each November. “This obliges schools to have contracts of employment and accurate salary information within school MIS systems/personnel modules,” Chris says. And it’s critical that accurate information is maintained, he adds. It’s also important to be aware of any payments that are outside the usual payroll perimeters. “For example, make sure you’re processing all employees – even those declared as self-employed – correctly and through payroll and be aware of the rules surrounding this,” says Joanna.

School to academy – conversion challenges:

  • Understanding new requirements: governance, statutory, pension schemes, etc.
  • Consider employee contracts: new and existing contracts must be fit for purpose
  • Data collection: i.e. absence management (sick schemes), PAYE references
  • Pensions: new registration, transfers and opt-out provisions
  • Set up BACS mandate
  • Vet your software/payroll suppliers.

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