HR and finance directors often have an integral role in helping to select and manage a company’s chosen workplace pension solution, but not all workplace pension systems are optimised to help companies with their payroll challenges.
Workplace pension contributions can be a real headache for HR and accountancy departments. It is one of the areas of payroll where errors are most commonly made. Therefore, a workplace pension system that can automatically calculate employer contributions is the dream for many.
Our data shows that 67% of workplace pension provider systems have the ability to calculate employer contributions. Of these systems only one (Aviva Designer) requires any kind of manual input, the other all calculate employer contributions automatically.
Not all workplace providers are able to support all payrolls frequencies however. Whilst all are able to support weekly and monthly payroll, 24% are unable to support quarterly payroll and 38% are unable to support yearly.
Aviva Designer, Fidelity, Fidelity (Master Trust), Hargreaves Lansdown, Royal London, Scottish Widows (GSIPP), Scottish Widows (Master Trust), Standard Life, and Standard Life (Master Trust), are the only providers able to support all payroll frequencies.
Pro-rating is another area that some workplace pension providers are unable to support. For 24% of providers if a contribution is applied of a split payroll period, their system is unable to handle split payments.
All workplace pension provider systems are also able to accept multiple payrolls with no restrictions or limits, with only Standard Life not able to accept multiple PAYEs. Our data shows that Royal London and Scottish Widows unable to accept multiple bank accounts, and that only Salvus and True Potential are unable to accept data from multiple sources.
Payroll processing, payroll tax processing, and pay-slip creation are three areas of payroll that are commonly outsourced. However, 66% of payroll managers would not want to change these outsourced services and only 13% were open to a change of vendor in a survey for a recent report by global accountancy giant EY(1). Therefore, good integrations with existing third-party providers is key for many employers when choosing a workplace pension provider.
Third party payroll system integration is an area where Aegon ARC, NEST and Royal London perform very well. They particularly flourish in terms of active integrations with common payroll providers where they integrate with everyone including SAGE, Oracle, Xero and Workday. For the most case these are API level integrations. The chart below highlights which payroll providers each pension provider can integrate with.
NEST is the only provider whose workplace pension system does not have the functionality to sort or cleanse employee data to assist in mitigating the risk of errors. The majority (86%) of providers automatically sort employee data in this fashion and 10% have the functionality to do it manually. However, this is not the sort of thing that NEST was set up to achieve. It was established by the Government following the Pensions Act 2008 and the start of Auto-Enrolment in order to be a low cost option to ensure that every employer can have access to a workplace pension scheme.
Support for payroll issues is an area where many providers seem offer more options. NEST, Royal London, Scottish Widows, Scottish Widows (GSIPP), Scottish Widows (Master Trust), Hargreaves Landsdown, Fidelity, Fidelity (Master Trust), Aegon (Master Trust) and Aegon Workplace ARC all offer hard copy, online and telephone guidance for advisers, employers and also to the employee. Standard Life and Standard Life (Master Trust) offer guidance online only. Other providers offer support from a range of sources.
- 2019 EY Global Payroll Survey Report