One thing is certain for payroll and HR shared services directors over the year ahead: they will need to be aware of evolving legislation and compliance issues. Here’s some insight into a few of the most important ones.

Compliance: key issues to consider

1. Software reliability, data accuracy, and security

Ensuring data is accurate is vital to ensure compliance and prevent potentially expensive errors from occurring, not in the sensitive area of payroll calculations. Having modern, up-to-date software in place is also vital to help prevent data security breaches and privacy violations.

2. Supplier networks

Increasing numbers of both public and private sector organisations want to see evidence of ethical sourcing when working with partners, which includes outsourcing and managed services. Taking a similar stance with your own network of suppliers is also important, not least in terms of burnishing your employer and wider corporate branding.

Ethical sourcing is about ensuring the right processes are in place to procure products and services in a socially and environmentally responsible and sustainable fashion. A key goal here is to ensure everyone in the company’s value chain enjoys fair, equitable and inclusive treatment. This includes wages, conditions and human rights.

This may sometimes be an issue of regulatory compliance, and not just ESG, particularly where public sector contracts are concerned.

3. Ethical resourcing

Ethical resourcing involves hiring new workers in a fair and transparent way based on their merit. This involves developing, communicating and implementing a company policy that protects and respects employees’ rights. It means putting processes in place to avoid unconscious bias and discrimination when dealing with candidates. It’s also is about ensuring their personal data is handled in a way that ensures confidentiality and privacy.

Legislative developments to be aware of

payroll HR legislation update UK employment law 2023 (3)
1. Employment law changes

2024 will see a number of changes to UK employment law. Here are some of the biggest that will affect payroll and HR shared services functions:

  • From 1 January, employers must pay workers at their full normal rate for at least four weeks of their holiday entitlement. Employees may also carry forward any unused entitlement in certain circumstances.
  • For holiday years starting from 1 April, workers who do irregular hours or only work part of the year will accrue holiday entitlement at the end of each pay period. This will be paid at a rate of 12.07% of hours worked and can act as paid holiday on a rolled up basis, or as a supplement to basic pay.
  • From 6 April, staff will be able to request flexible working from their first day of employment. Carers will have a statutory right to a week’s unpaid leave to look after a dependent. Fathers will also be able to take paternity leave at any time in the first year, which they can now divide into two separate blocks of a week each.
  • In September, a new statutory right to request predictable working patterns will come into force.
  • On 26 October, the Worker Protection Act comes into effect. This requires employers to be proactive in protecting their employees from sexual harassment at work. The Equality and Human Rights Commission plans to publish guidance on what proactive steps employers will need to take to implement this legislation.
2. Salary matters

The Chancellor’s Autumn Statement introduced several new pieces of income-related legislation:

  • The National Living Wage will increase from £10.18 – £10.42 to £11.44 per hour from April 2024. Employers must also pay workers aged 21 at the same rates as those aged 23 and above for the first time
  • Employee contributions towards National Insurance dropped from 12% to 10% as of 6 January 2024.
  • Universal credit and disability benefits will increase by 6.7% from April 2024 in line with the Consumer Prices Index (CPI) rate of inflation in September 2023.
3. Pension reform

Although the Pensions (Extension of Automatic Enrolment) Act 2023 is unlikely to take full effect before April 2025, shared services directors do need to be aware of it. The proposed legislation gives the Secretary of State for Work and Pensions powers to enact regulations that lower the age at which employers automatically enrol their staff in a pension scheme. While the age limit was previously 22 years, it is likely to fall to 18 years.

The Secretary of State also has the authority to reduce or remove current qualifying earning bands from existing legislation. This means pension contributions could begin from the first pound an employee earns, thereby streamlining the contribution process. It could also boost the potential earnings that staff, particularly lower earners, could add to their pension pot over the course of their working life.

The Data Protection and Digital Information bill was introduced into the House of Commons in March last year and is currently at the Committee Stage in the House of Lords. It is expected to be passed later this year.

The goal of the proposed legislation is to replace the EU General Data Protection Regulations and ‘create a new UK data rights regime tailormade for our needs’. But this objective also needs to be balanced against a requirement to maintain data protection adequacy with the EU.

One stated aim of the bill is to reduce costs and the amount of paperwork employers need to fill in to demonstrate compliance. It also includes a narrower definition of personal data and a new ability to ignore vexatious or excessive data subject access requests. The Information Commission, a new body, will take over the governance structure and powers of the Information Commissioner’s Office.

Discover more legislation and compliance updates here.