Payroll and Remote or Hybrid Workers

The way we work has been in a state of flux since the initial Covid-19 lockdowns in March 2020 – over five and a half years ago – and it’s likely that things will continue to change, year to year, for some time, as businesses and workers experiment and find the balances that work best for them. For businesses with hybrid and especially with fully remote workers, this has an impact on the process of payroll. For the most part, these impacts are straightforward, but if your payroll people aren’t aware that they need to be taken into account, these aren’t addressed – and that can lead to compliance issues down the line.

Worker Diversity

If we set aside the question of ‘Inside IR35’ contractors for the time being, employees and contractors can be assumed to have very different tax, pay, and benefit profiles, meaning that they need to be handled differently in payroll for the employer to remain compliant. It’s easy to overlook, but location can also affect payroll in a number of different ways. Taking a relatively common example: If an English company employs a member of staff based in Scotland on a remote arrangement, that employee will be paying the Scottish tax rate rather than the English. So far, fairly obvious – you only need to know that the Scottish rate is different. (Tax codes are the same except for the S prefix). However, there can be another wrinkle. There is no legal requirement to follow either the English or Scottish bank holidays, but obviously one set will have to be chosen. This obviously has knock-on effects on hours worked in a given month. (And potentially knock-on effects for scheduling!) To go into the full range of possible challenges, especially as some employees or contractors might live or work overseas, is obviously beyond the scope of this blog, but whatever the situation, it will need to be taken into account, and this should be done by people who are already familiar with relevant legislation and other regulations.

Hybrid Benefits & Payroll

Commuter subsidies and work-from-home allowances are often offered by businesses with a hybrid workforce. As these brush up against expenses, they have tax implications, and in some situations these may be complex enough to be time-consuming. For a large enough business, this can mean payroll takes longer to run each month, or that external experts – like our outsourced payroll service – need to be brought into play.

Futureproofing Payroll

Above, we’ve pointed out a number of potential stumbling blocks that remote or hybrid work can create in payroll – but that doesn’t mean there aren’t benefits too, and those may well have more value to you than avoiding these added complexities. Making sure those responsible for your payroll are aware of these challenges and understand how evolving legislation can affect them means your business is prepared for whatever comes in the future. To discuss this further and identify the best solution for you, why not drop us a line? We’ll be happy to discuss the specifics relevant to your business.