The economic fallout of the COVID-19 pandemic created an urgent need worldwide for financial assistance programs and government relief benefits. This, in turn, created widespread and immediate legislative changes affecting the payroll industry. The pandemic also created an urgent need for payroll professionals to accurately interpret these changes and provide the government with payroll data to help determine the eligibility of individuals and businesses for these programs.
“Most governments had to address and balance various issues—for example, protecting citizens from the disease by limiting movement and gathering, versus increased unemployment and business closures,” said Fatima Niri, Junior Policy Advisor and Government and Legislative Affairs for the National Payroll Institute (NPI). Niri is also one of the authors of the NPI’s COVID-19 Global Analysis Research Paper.
With an unemployment rate of 13.7% in April 2020, Canada, like other nations, introduced numerous measures to soften the economic impact on its citizenry. Therefore, it became evident to the Canadian government that the payroll industry was an essential service.
“Many of these programs relied heavily on payroll data,” said Peter Tzanetakis, President of the NPI. “This highlights the importance of access and usage of payroll data, which is a rich source of information for government and society as a whole.”
The paper assesses Canada’s pandemic response related to payroll and compares it to the United States, the United Kingdom (U.K.), and Australia. Niri says these case studies revealed the importance of three major factors:
- Inter-regional harmonization
- Representation of payroll professionals in government consultations
- The impact of access to real-time payroll data
Inter-Regional Harmonization
The lack of inter-regional harmonization in Canada and the United States was problematic, as provinces and states implemented rules that differed from one jurisdiction to another. In contrast, the U.K. had minimal differences because COVID-19 relief programs were similar between England, Scotland, Wales, and Northern Ireland. Australia set the gold standard in this respect, as the six states in the country effectively collaborated through the establishment of a National Cabinet that convened state governments to collaborate and coordinate responses to the pandemic.
Canada’s response demonstrated the lack of legislative harmony amongst provinces and territories, which had different policies to address pandemic pay, leave rules, and eligibility criteria for programs related to critical workers. In the midst of this disharmony, payroll professionals were further challenged early in the pandemic to manage a massive volume of Records of Employment (ROEs) triggered by interruptions of earnings and used by employees to apply for employment insurance benefits.
In the United States, the variability of program eligibility was a major challenge to the government’s COVID-19 program.
“The criteria for eligibility for government assistance benefits varied from state to state,” said Niri. “In addition, new legislation was often retroactive, increasing the workload of payroll professionals.”
An additional challenge in the United States has been related to remote employees working in a state different from their job location during the pandemic.
“The increased mobility of employees has made payroll processing a lengthier task,” said Niri. “Payroll professionals, who were otherwise unfamiliar with other states’ legislative payroll requirements, faced an additional hurdle.”
A McKinsey Global Institute report that compared different governments’ responses to the pandemic recognized the Australian government’s response as being particularly effective. State governments were able to harmonize under the federal government’s direction and this garnered a great deal of public trust, all while promoting a collaborative environment.
Representation of Payroll Professionals in Government Consultations
Those who were consulted prior to the announcement of relief programs had an easier time adjusting to changing legislative requirements. Payroll professionals in jurisdictions that did not promote stakeholder consultations found it difficult to adapt and had to spend significant time and resources advocating to alleviate problematic program design issues.
According to the Pew Research Centre, while 88% of Canadians felt the government did a good job of addressing the pandemic, there was an unseen impact on the many complexities of the payroll industry. Of the overall relief efforts in Canada, 40% had a direct impact on payroll.
Not all jurisdictions had an opportunity for extensive stakeholder input. Much of the legislation was developed and implemented with little time to consider the downstream implications.
“Payroll professionals were faced with the herculean challenge of deciphering rapidly changing legislation, which often lacked the clarity typically provided prior to implementation, all while ensuring that Canadian employees continued to be paid accurately and on time,” said Niri.
In the U.K., COVID-19 relief programs included financial assistance provided to businesses, funding towards healthcare, and income support for all, including the self-employed. The response also included access to loans for businesses that required further assistance to continue operation. But the numerous iterations of the relief programs created challenges. Many of these legislative changes were introduced quickly and required payroll professionals to put in long hours to ensure accurate calculations.
The Australian Taxation Office held meetings with The Association for Payroll Specialists (TAPS) to discuss how the country’s digital payroll system—Single Touch Payroll (STP)—would assist with the roll-out of programs. Governments also ran a separate consultation session for payroll software providers to ensure they were included in the discussions and to prepare their systems for changes coming down the pipeline.
Niri notes how “Australia’s government proactively consulted payroll professionals and utilized their expertise to benefit delivery throughout the pandemic. Having a digital payroll system already in place meant that payroll data became ingrained in COVID-related financial assistance policy development.”
Access to Real-Time Payroll Data
National digital payroll systems provided decision-makers with data that enabled the changes that need to be made to COVID-19 financial assistance programs. In Britain, the Pay As You Earn (PAYE) system allowed for cross-checking of accurate payouts of benefits and provided data that helped determine payroll decline by sector. Governments were able to determine which industries needed assistance. Having PAYE already in place pre-pandemic provided the British government with access to real-time payroll data. This digital payroll system reduced the chance of employee and employer fraud with government assistance benefits. Similarly, Australia’s STP assisted in delivering the JobKeeper program and helped ensure that employers were using the subsidies appropriately.
The NPI is engaged in ongoing conversations and advocacy with the Canadian government to effect change and address some of the challenges identified in the research paper.
“Ultimately, having a digital payroll system in place could have allowed countries without a national system in place to collate and utilize data during the pandemic,” Niri concluded.