Switch to RTI system to be made compulsory in 2013… HR will have to adapt to changes in how staff data is processed in the next 18 months as businesses get to grips with the move to Real Time Information (RTI).
The new system will mean that employee details that are normally sent at the end of a tax year like date of birth, address and national insurance number will instead have to be provided every time an employee gets paid.
The introduction of RTI is intended to optimise the running of the PAYE tax system so that recipients of the Universal Credit receive precisely the appropriate quantity of benefits every month relative to the salary they earn at work.
A pilot scheme of the transition to RTI will begin this Summer as 1,300 employers try out the new system while another 250,000 employers are expected to implement RTI between November 2012 and March 2013. Employers will then have to make the compulsory switch to RTI between April and October 2013.
Although a large part of the burden for transitioning to the new system will fall on payroll departments and payroll software, HR has a responsibility to ensure that processes for inducting staff and updating data are fit for purpose, experts told the CIPD Reward Forum in March.
Phil Nilson of HMRC’s Stakeholder engagement team commented:
“Data quality is vital for PAYE and under RTI it will become even more important. It could be even something as simple as NI numbers, an employee’s full name and their date of birth; 80 per cent of the problems we have are caused by problems with those three factors. We are begging employers to make sure those three are correct… my message today it is time to start thinking about cleaning up your employee data.”
Managing Director of software provider SBC Systems James Markham said that employers will have to tighten up on their approach to HRIS and payroll because information will be sent to HMRC every pay-day making errors more likely to occur and more difficult to correct than was previously the case. He said:
“Reward functions are going to be under new pressure internally and from the government to get things right first time, otherwise the poor payroll person who has their finger in the dyke is going to have 12 times as much work to make amends as they’ll be doing it monthly rather than once a year,”
Markham recommends straight-through processing software to deal with the new RTI system. STP works in a similar way to how credit card payments are processed and will not allow the processing of information unless the correct information is entered in the relevant fields.
“The problem with real time is that the computer does exactly what you tell it to do. You experience this every time you type in your credit card online: if it doesn’t match up, no payment. You need to force the people doing the data capture to enter the right details. It’s not a technical problem – it’s nothing to do with the technology – it’s a case of ‘Stop doing it this way, Peter or Sheila – I know you did it that way before but that’s not going to work anymore.”
RTI will be a reality in the workplace in 2013 and the days of manually filling out P35 and P14 forms are coming to an end. P46 and P45 forms will continue to be used but will no longer need to be sent to HMRC. It is estimated that employers will save £330 million in administrative costs as a result of the move to RSI as British businesses move further into the paperless age.