By Abigail Vaughan, Chief Operating Officer, Zellis (www.zellis.com)
As a result of COVID-19, care homes have taken the spotlight over the past 18 months. Although restrictions are starting to relax, there is another problem which has been bubbling under the surface for some time – and has worsened as a result of the pandemic – in the form of a payroll crisis.
There is always more to payroll than meets the eye – and care homes are no different. Through our work with many health and social care organisations, we have identified three main challenges.
Low pay risks
This will come as no surprise. Frontline workers in health and social care are typically low paid. Long hours, ever-changing shift patterns and overtime routines add complexity to the payroll, especially when it comes to calculating hourly rates and keeping an accurate record of what has been done and when.
Plus, there is a heightened risk of payroll errors inadvertently causing a breach of national minimum wage rules, which can result in reputation issues, hefty penalties and, of course, damage to employee trust and wellbeing.
Monthly payroll cycles
You might think it is easy to keep track of working patterns and overtime. Whilst it should be, many care homes are currently operating in monthly payroll cycles and either don’t have a robust system for tracking time and attendance or, if they do, it isn’t used correctly.
The problem with this is that a lot can happen in four weeks, especially in health and social care. Overtime can be offered, promotions can occur, resignations are issued, sickness happens. Essentially, there are lots of factors which can contribute to miscalculations within a payroll cycle. If you have to wait four weeks in order to address an issue or a change then, not only can it be missed, but the latency can have a major impact on budgets and employee wellbeing. There is the option of making corrections mid-payroll cycle, but this is costly in terms of both payment fees and time.
Lack of management oversight
Often the payroll is signed off by a Finance Director who is very far removed from the day-to-day operations and running of the care home. Whilst they have clear understanding of the budgets, they aren’t necessarily aware of the intricacies of the payroll – who is doing the work, and when.
For example, at the end of the month they know they normally pay Janet £X per month. But Janet was asked to do X hours of overtime by her manager, and it wasn’t logged in time. The Finance Director doesn’t know to correct this, so Janet is underpaid for the work she has done. As a result, the budget for that month is lost, perhaps never to be rectified or, if it is, taken from the following month’s overtime budget, impacting other members of staffs’ hours.
If there was a strong segregation of duties, then underpayment wouldn’t occur, and the Finance Director would have better control over the overall budget, knowing that back payments weren’t going to be claimed the following month and additional overtime could be offered in the month to come. At the same time, the frontline manager would be assured their staff were being paid correctly and be more confident in ensuring the best level of staff for the budget.
Another major problem in care homes along with underpayment is, in fact, overpayment. Again, this is closely linked to inadequate processes and information not being passed to the payroll team quick enough. For example, if someone resigns at short notice, which is often the case in such a high turnover industry, and isn’t correctly taken off the system in time, all too often they will still receive a wage for a job they haven’t been doing.
Overpayments are hard to reclaim in any industry and, in the case of care homes, which are often under immense financial pressure, it could be the difference between being able to operate or not.
Health and social care organisations need to rethink their payroll in order to address these challenges and mitigate the impact of pandemic pressures. We would recommend taking the following steps as a starting point to reduce risk, improve the employee experience, and optimise the pay bill:
1. Putting checks in place, ideally via automated solutions, to reduce the risk of minimum wage underpayment.
2.Join up the payroll and benefits processes to help staff understand the total value of their employment package, including both the base salary and benefits-in-kind available to them.
3.Move from monthly to more frequent pay cycles to reduce under- and overpayments; with the uptake of technology such as Faster Payments, payroll teams can be a lot more flexible in how often and how quickly they pay employees, while also having the ability to instantly correct potential errors.
4.Develop strong internal processes for reporting and segregation of duties in order to improve the overall efficiency of payroll processes and control for management teams.
5.Consider partnering with a specialist who can take care of payroll and compliance, so the business can focus on providing high-quality care.