Key trends in HR and payroll in 2023

The last three years have seen the worlds of HR and payroll go through tumultuous change. HR departments were challenged by the need for homeworking and latterly the rise of the hybrid workforce, the onset of the Great Resignation and the subsequent war for talent. At the same time, payroll teams were wrestling with requirements for ongoing national insurance changes and earned wage access to combat the impacts of the cost of living crisis, such as rising energy bills.

Now, the Autumn Statement has defined new policies and procedures, many of which have contradicted the mini-budget in September, that have placed greater strain on payroll teams as they rush to ensure accurate payments from April 2023. This has included tax band changes and rises to the National Living Wage.

Today the landscape of HR and payroll is moving once again, and as we look forward to 2023, this blog highlights three key predictions of how the sector may change.

• The balance of power will start to shift once again from employee to employer

Throughout 2022, it has primarily been an employee’s job market. Many organisations have been impacted by skills shortages, with people quitting businesses in record numbers and joining new organisations where they have often been able to command better pay and benefits.

As we enter 2023, we are seeing a change. Salaries are starting to drop again and supply is beginning to outpace demand for some skillsets. Salary values have also been diluted by record-highs in inflation, with a 10.7% figure in November 2022. The UK labour market is heading for a turning point, as pay growth nears its peak and unemployment rose slightly to 3.7% in October. Employers are now more often choosing employees, with competition for job roles looking set to increase as the UK looks expected to fall into recession by the end of 2022. As employees become more likely to stay with their business, timely salary payments and the ability to access support services will be critical.

• HR professionals and leaders will have a stronger voice

HR leaders will continue to gain credibility within businesses through 2023. There is widespread acknowledgement among boards of directors that HR professionals have done a great job of developing and ‘bedding in’ robust new hybrid working models over the past two years, and there’s good reason to keep them in place. 83% of workers polled in a survey reported that they want to work remotely at least 25% of the time. Top directors are aware that positive employee engagement depends on these policies and programmes and they are increasingly prepared to reward the HR managers and directors that deliver them. 

• Businesses will expect the unexpected

The Autumn Statement performed a U-turn on a number of policies set out by the mini-budget. Payroll departments will need to pivot quickly over the coming months to ensure that accurate salary amounts are paid as income tax rates are amended. For the world of payroll, the only certainty will be that it looks set for another year of unpredictable challenges. Agility and stability will be key as businesses need to be ready to bring in measures to support staff struggling with rising costs, from one-off payments to newly modelled contacts and financial wellbeing measures, as and when required.

As uncertainty continues into 2023, organisations will need to support their staff during a period of economic turbulence. HR managers will be a vital component in business setups and payroll will need to be ready to pivot at a moment’s notice.