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The mandatory payrolling of some benefits (including Medical) from April 2027 might feel a long way off

 

But if you've ever done anything like this before - implemented a benefits platform, investigated insurance premiums or tried to reconcile benefits data with payroll - you'll know how quickly that time can go

 

From April 2027, mandatory payrolling is being introduced for medical benefits, company cars, vans and associated fuel.

 

Some remaining taxable benefits will follow in April 2028 – however most of the key ones are in the first push.

 

While many employers are understandably concerned about this potential compliance headache – and putting off dealing with it until closer to the time – I'd encourage employers to see it as an opportunity.

 

Not just to clean up on the reporting side of benefits

 

But to look at the wider benefits picture

 

Because if you're going to review your benefits, your systems and your payroll processes anyway, why not make sure they're actually working for you and that your employees love them.

 

Over on LinkedIn I’ve been posting & sharing my thoughts from 20+ years of working in benefits and leading on projects like this - helping organisations make these transitions run as smoothly as possible

 

But also to make the most of this opportunity to make benefits easy and engaging for everyone in the process

 

Here are the things that I would suggest organisations should consider between now and April's payroll - starting now

 

1. Assemble your team

HR, Payroll, Finance, Tax, Internal Comms, Legal…

Gather everyone together, find out who owns what, who has visibility on what and get a plan. You don't have to do it all on your own. 

Action: Pull together the project team early and establish who is responsible for what and by when.

 

2. Do you really know what benefits everyone has?

When did you last reconcile your benefits records against your provider invoices and payroll?

Do you know who's covered, who's entitled to what, whether anyone has the wrong level of cover and whether your records reflect employees who've joined, left or changed their benefits?

I've seen employees on the wrong level of cover, systems glitching – it’s often only once employees can see their premiums on their payslip that these discrepancies become visible.

Having a benefits platform doesn't necessarily mean your data is accurate either – I’ve seen some systems with manual work arounds which meant the wrong people were added on or removed from cover – and it was only through their payslips that we found out.

And if your information is wrong now, moving it into payroll won't fix it – it’ll just make it more visible to employees so it’s important now to review your processes and get them as clean as possible before April.

Action: Create an audit of all of the benefits that you have in place, who is eligible for what and what does the company pay for v’s employee

 

3. Are you paying too much for your benefits? And are your employees? (Ahead of your next renewal)

In a recent benefits review, we identified Medical Insurance savings of £350 per employee

For exactly the same benefit – with the same provider

Which was amazing for the organisation and the employees

Because where employers are spending more than they need to on taxable benefits

Employees will be paying more tax

And where there’s big savings like this (around 1/3 of the premium) it could be the difference between an employee taking up cover or not because they don’t think the tax is worth it

Before moving benefits on to payroll, it's worth checking your premiums, cover levels, purchasing arrangements and whether employees are actually receiving the benefits you're paying for

Action: If your medical insurance renews between now and April get onto this with your broker now

And if you’re not working with a broker then it’s time to start as they can save you so much money on your policies! (message me I’ve got some great ones that I work with)

 

4. Are you sure your benefits are being taxed correctly?

I've worked with organisations where benefits were being treated incorrectly simply because they were set up and had always been administered that way

Critical illness cover, not being taxed because it was treated the same way as Life Cover & Income Protection

Additional medical treatment that the company generously paid for in addition to the medical insurance premiums not reported on or taxed

Different benefits can have different tax implications depending on the policy, how it's funded and other factors.

Action: Add a column to your audit confirming the tax treatment of each one with your payroll or tax adviser.

And remember those additional benefits that don't appear on your standard provider reports - who records the cost, checks the tax implications and makes sure payroll receives the information?

 

5. Do you have a benefits system and if so is actually doing what you need?

Having a benefits system that integrates seamlessly with your payroll is the easiest way to ensure that everything is being reported and taxed as it should...if it works as it should

If you’re thinking about implementing a Benefits Platform or have a platform that needs a little fine tuning or additional work to get your integrations running now is the time to start having the conversations

I've worked on plenty of benefits system implementations and rebuilds. Some have taken six weeks, others six months

And providers are going to get incredibly busy the closer to April we get

So if you’re considering looking at platforms, I'd start the conversations now before there’s a massive queue

Not sure it's worth the time? I've seen how apparently small workarounds can create years of unnecessary administration and even errors

Yet once they’re fixed they free up so much time

One of my favourite pieces of advice when working with providers is don't just ask your provider whether they can do something (they'll probably say yes!). Ask them what the best way to do it is.

Then you don’t get stuck in work arounds, you get a solution that works

Action: Start speaking to providers now – well before January. Check whether your existing system can provide accurate information, integrate with payroll and handle changes when employees join, leave or amend their cover.

If you've been thinking about implementing or changing your benefits platform, this could be a sensible time to investigate your options and if you want any help with recommendations give me a shout.

 

6. Your employees will be able to see the tax. But can they see the value?

Something that I’ve seen with every Payrolling Benefits implementation I've done is that once employees can see the value of the benefit on their payslip – along with the tax - it can often make them question the value of the benefit to them and if it’s worth it

Which is why having clear communications about the benefits and tax is even more important than before

Especially when some employees may feel like they're doubling up on tax during that first year – essentially paying tax on their current benefits live through payroll while they're still paying tax relating to previous years through their tax code

Action: Create a clear and easy to understand comms plan. Explain what's changing, what the benefits are and what employees are entitled to, how to access their benefits.

Make sure they understand both the tax implications and the value of what you're providing.

 

7. April is closer than you think

Between now and April, you may need to review your existing benefits, reconcile your data, confirm tax treatment, coordinate with providers, configure payroll, test the process and communicate with employees.

All while dealing with renewals, year-end and everything else on your HR team's agenda

Action: Start now – even if you decide not to make major changes, you'll have time to identify potential problems, resolve them properly and avoid joining the rush in the first quarter of next year.

 

And if you do use this as an opportunity to make changes you’ll have achieved a lot more than meeting a new mandatory reporting requirement!

 

You could have lower costs, more accurate data, less administration, higher employee engagement, fewer employee queries and a benefits package your employees actually understand.

 

Before you start trying to payroll your benefits, make sure you get them right

 

Want to get ahead of the changes?

I'm thinking of putting together some small, free working groups for HR teams and consultants in November / December, where we'll look at what employers need to check and how to prepare – send me a DM if you’re interested.

 

And if you've already identified something that needs sorting?

Here are some of the other ways I can help:

Have a specific benefits problem and need expert advice? Benefits Boost – A focused 60 minutes session to explore your options and agree next steps.

Know something needs to change, but I'm not sure where to start? Benefits Blueprint – A practical 90 minute working session to identify priorities and create an action plan

Want a comprehensive review to know if our benefits are working and where we could improve? Benefits Review – A full audit and benchmarking review to identify savings, gaps and opportunities.

Don’t have any benefits and need to get the foundations of our employee benefits right? Benefits Basics - A practical package to establish your core benefits, simplify administration and give employees a clear understanding of what's available.