Payroll management factors to consider when restructuring your business 

Organisational restructures, whether due to cost-saving, mergers and acquisitions, or strategic changes, create challenges for payroll teams as employees change roles, salaries, packages, or work through the redundancy process. 

In this month’s article, we look at the factors that influence how payroll is managed during restructuring or transformation projects, the risks and opportunities that may evolve, and how to work cross-functionally to keep processes accurate and efficient. 

If your organisation is transitioning through a restructuring or transformational period, please speak to our team, who can provide support and guidance for payroll departments.  

Transitional payroll management quick summary 

Fix the HR to payroll handover process as early as possible in project timelines:   

Creating a robust process for notifying payroll about starters, leavers, new roles, and new packages as soon as possible will cut down a lot of issues further down the line. 

Agree on department decision cut-off dates early: 

Building a joint calendar of key milestones and dates for departments and employees will ensure the payroll team is prepared when the changes come into force. 

Match your resources to the increase in workload: 

Increase the payroll team capacity using outsourced payroll service providers during the restructuring period.  This will offset the impact of the additional work during the transition. 

Prepare for increased employee communication: 

Create internal communications to answer anticipated frequently asked questions, queries around final pay or changes to payslips and payroll information regarding redundancies. 

If you require payroll specialists to help you through your organisational transformation, please click here and speak to our team. 

The management process between payroll and HR 

The working relationship between payroll and human resources teams depends on the structure of the organisation.  Some businesses will have a blended team where HR is also responsible for payroll tasks, which means communication lines are very short, but perhaps individual expertise is lower for advanced payroll processes. 

Other organisations will have separate payroll and HR teams, with a greater depth of payroll specialism available to the company, at the expense of a longer communication chain. 

Blended HR and Payroll teams 

For combined HR and payroll teams, the challenges are usually focused around resources, time dedicated to payroll processes and the level of expertise required for advanced processing, such as redundancy payments.   

As organisational structures begin to shift, department heads and team leaders will be leaning on HR more for guidance, legislative advice and employee liaison.  This will come at the expense of time available for payroll checks, quality control and processing changes effectively during each pay period. 

Time is the most restricted resource for most blended teams.  So, to mitigate the risk of inaccuracies that could lead to tribunals or penalties, ensure extra resources are made available for HR to temporarily increase the number of heads in the team and inject expertise where it’s needed while lots of changes are underway. 

An outsourced payroll services provider such as MSP Payroll is an excellent option for combined payroll and HR teams.  Outsourced support can be recruited quickly on a temporary or fixed-term basis, seeing you through the transitional period without the need to add additional FTEs.  You can also lean on a Payroll Services partner for consultative advice on processing final pay and termination payments, the requirements for National Insurance Contributions and tax and the impact other factors such as benefits in kind may have during redundancy. 

Speak to MSP Payroll and ask us about temporary resource increases during organisational restructures. 

Separate HR and Payroll teams 

Payroll teams will be challenged by the speed of changes, the number of alterations required during each pay period and the increase in special payroll processing (such as redundancy payments), for instance, over a short timescale. 

Good management will involve implementing tight communication deadlines from the start of the transformation project. A clear estimate of the number of employees that may be affected by the transformation and the order in which they will be addressed will help payroll teams prepare fully and find additional resources, or clear other projects aside. 

Issues usually form as the restructuring takes place: information becomes garbled in the communication chain, delays to processes loom as HR and department heads struggle to get information into the system quickly enough, and this will result in errors in final payments and potential legal ramifications. 

Cross-functional working between payroll, HR and senior team leaders will mitigate a large portion of issues. 

Speak to our team if you would like advice or guidance on the common issues payroll teams face during organisational change. 

Processing statutory redundancy pay 

An employee who has a minimum of two years’ continuous service and has completed a redundancy consultation will be entitled to statutory redundancy pay.  The amount they receive will be linked to their period of employment, weekly earnings, and their age. 

For a full explanation of statutory redundancy pay, please see our full article here.  From a payroll management perspective, however, the key areas of concern should be: 

• The notification of redundancies happening during the reorganisation and the departments affected 

• The timescale for consultation periods, when they will end, the decision-making timeline and when final pay periods will be executed 

• Information will need to be updated in HR and payroll systems consistently, accurately and within a suitable timeframe to ensure payments are processed correctly. 

• Payroll teams should be notified if employees will receive statutory or enhanced redundancy pay 

• HR and payroll teams will have to work together closely to ensure redundancy payments are separated or defined clearly apart from ex gratia or PILON payments. 

Issues usually occur when the timeline between consultation, decision and final pay periods is too short for all the processes to occur efficiently and accurately.  Errors in calculating redundancy pay will result in a disgruntled employee and poor employer reputation at its simplest level, through to tribunals and fines at its worst. 

For help building effective payroll final pay processes, or additional resources for actioning final payments for redundant employees, please speak to our team here. 

Employee communications with payroll teams 

Restructuring can be a very confusing time for employees.  There are those who may go through a consultation period, and others who may be offered new roles with new packages. 

This means the information in their payslip may change, or the information included in the slip may be difficult to understand.  From PILON to salary sacrifice, payroll terms are sometimes as clear as mud for employees! 

Common queries to prepare for during reorganisation 

• What will final payments be, and when will they be processed? 

• What will the NIC and tax ramifications be for employees with redundancies or compromise agreements? 

• There will be questions on tax codes and net pay for employees who have had changes to salary or benefits 

• Employees who are leaving the business will have queries about their pensions and remaining holiday pay 

Prepare for these queries with the payroll team, create briefing documents and frequently asked questions sheets to help provide a speedy response.  Communication requests often peak after announcements about restructuring and towards tax year end for employees who have changed roles. 

Dedicate resources for employee communications, identify team members who are adept at answering queries and triage common questions so they are answered by supporting documentation.  This way, the more complex questions can be fielded by the team without getting bogged down. 

We can provide additional resources for your payroll processing, freeing up your team to handle employee queries.  We can also provide consultation around common questions faced during restructuring periods. Speak to our team here. 

How can MSP Payroll help? 

Our experts can provide comprehensive support for payroll teams supporting an organisational restructure. This could include: 

• A flexible hybrid outsourced payroll service to suit your requirements 

• Facilitating BACs payments for your organisation to employees 

• Calculating or reviewing payroll submissions before they are completed 

• Consultancy support for communications, processes or resource management 

• Corrections and error support when needed 

• We are specialists in all payroll regulations and provisions, including statutory redundancy payment calculations, SSP, SMP, pensions, holiday pay, benefits in kind, PAYE and National Insurance Contributions. 

Contact us here if you would like to discuss implementing payroll support. 

Payroll Management During a Restructure: Frequently Asked Questions 

How should a payroll team prepare for a restructure announcement? 

Employees will be understandably concerned or nervous when a restructuring announcement has been released.  Payroll teams should expect employees to contact them at a much higher-than-normal rate.  The important thing is to triage the comms effectively; if it’s not relevant to payroll, then move it to another department.  If it’s a common question regarding payslips or similar, then prepare an FAQ document to send to employees and then only personally tackle the in-depth or critical communications. 

How far in advance should payroll teams plan for additional resources or capacity? 

Once the estimate of the number of affected employees is known and the extent of the restructuring has been announced, then payroll teams should consider the additional capacity they will require.  If the reorganisation is small or limited in scope, without redundancies, then current resources may suffice.  If it’s a merger or acquisition, or a wholesale change of structure, then capacity should be increased as soon as the extent is known. 

What changes for payroll when a restructure involves a merger or acquisition? 

M&A restructuring is extremely complex as two organisations become one.  Payroll teams will need to go through their own restructure, merging payroll systems, pay calendars and different job specifications first before moving on to other departments.  Many employees will receive new contracts, which may in turn require new benefits and salary levels.  There will also be a wide range of different pension options, and benefits in kind may be spread across lots of vendors.  Payroll teams should work in close collaboration with merger project management and HR to ensure accuracy is preserved throughout the transition period. 

Other Articles You May Be Interested In. 

https://www.msppayroll.co.uk/what-does-ex-gratia-payment-mean/ 

https://www.msppayroll.co.uk/multiple-pay-schedules-and-payroll-management-services/ 

https://www.msppayroll.co.uk/termination-payments-explained-guide-part-1/