The biggest cost for any school is its workforce, which means that an efficient and effective payroll system is essential.
Whether you are in the independent sector, a free school setting up alone or one of the hundreds of schools contemplating conversion to academy status, the need for advice on organising your payroll system has never been greater.
Get the basics right
Clive Gutteridge is interim finance director at Trinity School, Lewisham, and an expert in school back office services. He says that schools’ first priority should be to pick software that fits their needs, whether they are setting up their payroll services from scratch or looking to change provider.
“The most difficult thing is to identify the right software to do most of the work for you,” he notes. “Once you have that piece of software, you have to make sure you have a good forecasting tool of what your payroll is going to be.”
Certain payroll costs are easy to predict - staff members’ monthly salaries, for example, as well as the monthly national insurance and pension contributions that schools have to make on their behalf. But Gutteridge warns that too often schools fail to put an adequate system in place to identify overtime payments. Finding a reliable “pre-assessment” system to track these payments can save school leaders from problems further down the line, he says.
Check, check and check again
Once you have chosen your software, you need to set up fixed payments for each staff member’s monthly salary, plus those monthly national insurance and pension contributions. You will also need to set up your system for tracking overtime payments.
After you have inputted all the data, the system should produce what is known as an “acceptance print”; this will help another member of staff to carry out a mini-internal audit.
According to Gutteridge, a good system should have acceptance prints at the end of each stage so the data can be checked. “You need a series of acceptance prints at various stages,” he says. “The acceptance print is checked [against] the paperwork of all overtime claims, increases in salary and all those sorts of things.”
Before the payroll is sent to the payroll service provider or the bank, it has to be checked once more.
“So you should have three layers of control to make sure things are being done correctly,” Gutteridge suggests. “The first is the payroll clerk, the second one is the internal audit and the third is the acceptance prints that have to be seen before the final payroll is agreed.”
Payroll processing - choosing the right service
The next step is to decide the best way to process the payroll. A local authority-maintained school will have this service provided for them by the council. But independent schools, academies and free schools will need to decide on the most suitable arrangement for them and Gutteridge warns that it is a case of “buyer beware” with each of the following options.
- Local authority: academies and free schools may decide to buy in the local authority payroll service via a service-level agreement. The council might have the personnel already in place to process the payroll services, and have experience in the complex nature of teacher pensions. But, Gutteridge notes, the service will “only be as good as the people employed”.
- Payroll provider: an alternative is to pay another private company to take care of payroll. Countless providers are available, which can offer a straightforward service for smaller organisations.
- The DIY option: you could, of course, look after payroll yourself, but Gutteridge advises that this is best avoided unless a school is in the position to hire someone with sufficient experience and expertise. The person running the payroll system will need to have in-depth knowledge of PAYE tax systems and pensions, he says, adding: “The problem if you do it yourself is that you set yourself up for a fall because things like teachers’ pensions are extremely complex.”
Try before you buy
For schools breaking away from their local authority, or for new schools, be they free schools or independents setting up on their own, Gutteridge says the best option is to “try before you buy”.
Smaller schools with staff numbers of up to about 100 would be best advised to buy in the payroll service, he says. But this only works up to a point. When a school gets to a certain size, it makes more sense to do the job in-house.
“It’s like every job in life: when you are building a business it starts to become hard work to continuously go outside [to get things done],” Gutteridge says. “So at that point you would appoint a person, maybe part-time, or part of another job in the finance department, to do the payroll.”
Whatever decision you make, Gutteridge warns it is crucial that schools do not try to scrimp or cut corners when it comes to setting up their payroll. Getting things wrong can mean “a mess” later on, he says.
“From a management point of view you must have a good system place to support your payroll system,” he says. “If you don’t have systems in place, the whole thing breaks down. Then you need a forensic accountant like me to come in.”
Michael Hickey is an education writer
