Getting There

Electronic filing is a major challenge for payroll procedures and technology, but operational savings can be huge. Jenny Machin, payroll manager NTL, tells us how the telecoms provider made the switch

'Electronic filing is excellent. I would not want to go back to how it was before.'

Our payroll team at NTL, in conjunction with provider Capita Payroll Services, has fully automated the transfer between ourselves and the Inland Revenue of the following forms: P6, P9, P45, P46 and P160.

There are, perhaps, two caveats to note: the changeover created both technological and procedural challenges and has to be managed thoroughly. Secondly, we are yet to see how the end-of-year process works - electronic filing of P14s and P35s will follow at the end of 2003-04, one year ahead of the Inland Revenue deadline for larger companies.

I would like to start with the positive outcomes, however. First of all, consider this: we no longer have to key in the thousands of P9 coding instructions every April. That saves a lot of money, time and resources. It also means that there are no third-party coding errors.

Even the P45 has been automated. Before, we would have to complete a form to the Inland Revenue every time someone leaves. Now we just key in the departure date once it is confirmed and the system automatically generates the form and sends it down the wires.

This frees people up to do more value-adding tasks. Instead of robotically filling in coding, the payroll team can go on training courses to learn how to utilise technology more effectively - for example, by producing more accurate costings and forecasts, and accurate payroll reconciliations. The change has also provided more time to search for a fresh approach for improvement to payroll processes. Our work becomes more valuable to the business. It also becomes more interesting.

We have opted for Electronic Data Interchange (EDI), one of the two possible media alongside the Internet. This has worked fine for us, and is popular for the larger employers. There are extra considerations to take into account with the Internet, even though it is newer technology (see 'E-day approaches', Payroll World September 03, 'Money from the Chancellor', on this site).

Capita Payroll Services provides the technology, performs the calculations and prints the payslip, but the rest of payroll administration is in-house.

Overall, conversion to electronic filing hasn't been a doddle, but we have found the problems to be surmountable.

So what are the challenges? One issue with receiving P9 coding notices, and the in-year P6 notices, automatically, is that an error by the Inland Revenue would not be spotted by human eye. In practice, however, systems can be made to be at least as effective. What we do is ensure that a report is created for any anomalous or unusual pay and tax arrangements. So, if there is a large tax refund of unusually low pay that would automatically generate a report.

Additionally, we still keep a check on people's coding on the payslip with 100% checking on keyed data, but a high level spot check on the remaining payslips. More attention is given to the exception reports.

We have had some problems with the Inland Revenue. In one case the IR office sent us information on an individual but only gave the name, not the National Insurance or employee number. If it is a common surname at a large employer, there could be several people with that name.

Also, it is important that the IR offices communicate with each other. We had developed a good relationship with the technical Electronic Data Interchange specialists at the Revenue, but when we contacted our local Revenue office the staff did not even know that we had converted to electronic filing.

As well as checking procedures and software, the hardware must be up to the task. People often think that in the age of the Internet everyone's connected and information is just a button-push away. Not so.

Computers rely on wires connecting effectively and possessing sufficient capacity for the data being sent down them. To take an analogy, you do not want to be loading a full-size freight train onto a toy track.

Problems with capacity can create payroll errors if you are not vigilant. For example, we had inadequate space to accommodate the first batch of P9 notices in February at the first attempt. We have 13,000-14,000 employees, so the number of coding notices is appreciable. But subsequent batches were small enough to go through. This created a potential problem with sequencing, because some of the notices in the earlier, larger file had become out of date by the time it did get through. So checks and corrections had to be carried out.

What has been vital has been to run pilots and tests. I would recommend anyone to begin conversion straight away, and to be experienced by the time compulsory e-filing is upon us - for employers with more than 250 staff, that means from the next financial year. If you are not sure if something will work - try it, test it and amend procedures where necessary.

Teething problems are inevitable with any major conversion, so it is best to get them over with and treat them as learning opportunities.

To repeat, I would never go back to paper and tape. E-filing has saved us a tremendous amount of time and energy, and I have been surprised that others have not rushed to implement it. So go on, be bold.

KEY POINTS

• Electronic filing can replace laborious keying-in tasks
• Payroll staff can be diverted to more valuable and interesting work
• Conversion is a significant change management programme that should take into account both technology and procedures
• Piloting and testing are valuable