From handling the new ways of working, to dealing with IR35 changes, here’s what payroll teams need to be prepared for in 2021

It’s an understatement to say that 2020 has been a challenging year for many of us. The coronavirus pandemic has changed the way we live, socialise, and work, and has dramatically impacted organisations. From employees having to be put on furlough or made redundant, to handling the shift to remote working, organisations have had to take on new responsibilities to get through this tough year. Now, with 2020 coming to an end, organisations need to look back on what they have learnt from this year and prepare for what’s in store for 2021.

For payroll teams, the main focus of 2020 has been to pay employees accurately and on time. In the upcoming year, however, payroll teams need to be aware of what else is coming up, and how it will impact their job.

Off-payroll working rules (IR35)

IR35 changes were due to take effect from 6 April 2020 but as a result of the pandemic, these changes were moved to 6 April 2021.

After 6 April, end clients will have to determine the IR35 status of contractors’ and inform contractors or agencies if an arrangement falls inside or outside IR35. The IR35 changes will only apply to new contracts begun after 6 April, or existing contracts that businesses expect to continue after 6 April and will not apply to payments for work done before 6 April.

If your organisation employes contractors, you will have to work closely with HR to make a number of adjustments to your policies, processes, and procedures in order to comply with the off-payroll working changes.

You should also be prepared to set time aside to complete the additional administrative work that will be necessary, train HR and payroll staff on the new requirements, and prepare for difficulties hiring contractors in the future.

Employment law

Alongside the IR35 changes, payroll teams also have to be aware of any other changes to employment law.

In a recent CIPHR webinar, Amanda Barden – CIPHR’s payroll sales manager – explained that the veterans National Insurance ‘holiday’ relief will be effective from April 2021. As a result, payroll teams will have to work closely with HR as the responsibility falls to the employer to check if an employee qualifies.

In the upcoming year, payroll teams also have to take Brexit into account.

31 December 2020 marks the end of the Brexit transition period and with this comes the need to focus more on data management. If your organisation has employees in the EU and UK, your team will have to stay on top of the legislative changes and compliance regulations.

New ways of working

The pandemic led to many changes for organisations. While remote working, employees and IT teams realised that working from home can increase the risk of hacking and can put sensitive data at risk.

As a result, payroll teams need to ensure they are focusing more time and effort on security in 2021. In order to protect employees’ personal information (e.g. bank details and contact information), payroll teams can invest in payroll software – when integrating payroll software with HR systems, data can be kept secure.

Ethnicity pay gap reporting

In June 2020, a public petition to the Government to introduce mandatory ethnicity pay gap reporting reached over 100,000 signatories. Today, an increased focus on diversity and inclusion has meant that more organisations are being called to report their ethnicity pay gap.

If the government makes ethnicity pay gap reporting compulsory in 2021, payroll teams – who will have to work closely with HR teams if they report the pay gap – have to be able to collect relevant pay data and accurately report on it. As a result, payroll teams may need training next year on how to extract, analyse and use this data.

Along with ethnicity pay gap reporting, payroll teams also have to work closely with HR teams in 2021 for gender pay gap reporting – the submission deadline is 30 March 2021 for public-sector organisations and 4 April 2021 for private companies and charities.

Payroll software can help teams deal with challenges that may come up in 2021. To find out more about PBS’ payroll software and how it can benefit your team, contact us at 0203 855 4297 or email us at