Thursday, 3 July 2014

3 predictions on the impact of the Payroll-2-Pension PAPDIS data standard

Yesterday (2nd July 2014) a significant press release was issued by ‘Pensions BIB’ announcing that they were creating a free data standard (named the PAPDIS standard) to help simplify the transfer of data between Payroll systems and Pension systems. Its significant because if this data standard is adopted it will be used to transfer every UK employees personal information. Including yours.
I had the privilege of being invited as a guest to the last ‘Pensions BIB’ meeting in London, also attended by the Pensions Regulator, The Department for Work and Pensions, The Chartered Institute of Payroll Professionals, the British Computer Society, the Business Application Software Developers group, and other influential representatives of the Payroll and Pensions industry. That gave me an opportunity to thank that group for their efforts so far to create a data standard for what will become an essential business process for every UK company. Now that the press release has been issued I can use this blog to thank them publicly.
But I’d also like to take this opportunity to make three predictions about what the impact of a data standard will do to the auto-enrolment market and its constituents.
  1. My first prediction is that it will firmly cement Payroll as being the IT system in which auto-enrolment assessment and pension calculations are done. At the moment there are several places where assessment can be done: in Payroll, in independent Middleware, or in the Pension Provider’s systems. The reason for this is that its not always been possible to assess staff in Payroll (because Payroll software may or may not have that capability). But PAPDIS assumes that Payroll will do assessment. That’s good news because its the most efficient place to to assessment in terms of business process. If assessment is done anywhere else besides Payroll then Payroll needs to stop and wait for a data feed back from the assessment system containing individual employee Pension deductions. That’s horribly inefficient and just would not work for many SMEs in this country.
  2. My second prediction is that not every Pension Provider will adopt PAPDIS (even if every Payroll system does). That will create a schism in the Pensions world: those Providers that can take a PAPDIS file directly from Payroll and those which cannot. The reason I think some Pensions schemes will not adopt PAPDIS is because they cannot afford (in terms of time or money) to change the way they accept Pension data from 3rd parties.
  3. My third prediction is based on the first two being correct. I predict the role of independent AE middleware will become clearer and better defined as a result of PAPDIS. AE Middleware will be able to take a PAPDIS feed and then do the things that Payroll software is not willing to do. For example, issue employee communications, provide a web-login for employees to monitor their pension payments & other benefits, and perhaps gather in more Employee/Employer data and be able to output a Pensions data file to Pension Providers which are not PAPDIS compliant.
The bottom line is that the creation of a data standard that will be readily adopted by all Payroll software providers is good news for everyone: Payroll practitioners; Pension companies; and Flexible Benefit Middleware companies. It immediately simplifies the ongoing auto-enrolment business process but it also clarifies “who should do what” for auto-enrolment. Something that until now has not always been clear.
So what does PAPDIS it mean for my company: SystemSync?
In the short term: we’re still helping our customers work in a standard-less environment in which every payroll export format differs from the next. We will continue to do this until PAPDIS is adopted by the entire Payroll software community.
In the medium term there’s a job for SystemSync to help with the rapid adoption of PAPDIS. SystemSync can take a PAPDIS file and convert it to a Pensions contribution or AE Middleware input file format. That means SystemSync can help cut the cost and the time for anyone to wishing to work with the PAPDIS format. And that helps with the adoption of this nascent standard.
In the long term the presence of a standard will help SystemSync build seamless end-to-end data integrations because it will mean we don’t need to waste time working out what data should be available, what that data means and how to map that data. But the other thing we desperately need (to build seamless data integrations) are APIs. APIs exposed from Payroll and APIs exposed by Pension companies or Middleware. Once those APIs are in place integration-platforms-as-a-service like SystemSync can remove the dreaded CSV file from the data transfer process and make everything faster and more secure