HMRC overtime pay skyrockets following staff cuts

Efforts by His Majesty’s Revenue & Customs (HMRC) to cut staff numbers and automate services have caused its payroll to increase by 2%, as new research suggests the helpline is being forced to pay through the nose for staff to work overtime.

The Global Payroll Association (GPA) analysed internal workforce management information to explore the number of full-time jobs at HMRC between March 2023 and March 2024.

During this time, while 2,594 employees left their roles, HMRC’s paybill increased to £5.5m. Based on the figures, this was driven by a surge in overtime costs of 45.2%.

In May, a report by the National Audit Office (NAO) found that UK taxpayers spent a cumulative 798 years on hold to HMRC in 2023. The report criticised the tax helpline for its poor response time, adding that “digital services have not had the effect HMRC hoped for”.

HMRC staff cuts

Redundancies and mass layoffs have been splashed across the news in recent months, as businesses cut staffing costs to save money. Among the chaos, customer service jobs have been viewed as easy prey, thanks to their apparent suitability for automation.

Helpdesks have been taken over by virtual assistants, chatbots, and knowledge bases, as firms and customers alike demand cost-effective, on-demand support to replace the lost resource.

HMRC is no different. According to internal information gathered from Gov.uk and analysed by GPA, the majority of the helpline’s cuts have been made in the administration department. The number of roles here fell by -9.3% year-on-year.

Instead of growing reception teams, the helpline has reportedly introduced automated IVR systems to contact centres, to help point users towards self-service digital service options.

Sarah McMann, the department’s chief digital product officer, previously told PublicTechnology, “I would like to be in a state where customers do not have to contact us, but can access information as and when they need it.”

HMRC’s reliance on automation is such that it is also using artificial intelligence (AI) to recruit staff. The Telegraph reported recently that some customer service agents were being hired by the organisation without ever speaking to a human recruiter or hiring manager.

Communication crisis

HMRC’s efforts do not appear to have had the intended effect. The NAO report notes that, while the number of calls placed to HMRC has fallen, the length of each call has increased.

This outcome suggests that robot solutions are not providing sufficient answers to satisfy customers. It seems that human experts are now, ironically, required to fill in the gaps for service users (cue HMRC’s shrunken team of tax professionals working overtime).

The helpline’s struggles are having a direct impact on its customers. In Startups’ survey of 564 businesses, 15% said tax is the most difficult topic to access information on.

Veteran entrepreneur, Sahar Hashemi, is among those who have criticised HMRC. Hashemi says its slow response times have left founders struggling to access two tax relief schemes: Research and Development (R&D) and the Enterprise Investment Scheme (EIS).

The government has already been forced to step in to block the tax agency’s pacy automation plans. In March, Chancellor Jeremy Hunt forced the helpline to repeal its decision to close for nine months of the year – just one day after the change was announced.

The perils of AI adoption

In response to the NAO report, an HMRC spokesperson commented: “While customer service standards on our phone lines are still not where we want them to be, we’re making strong progress in our efforts to improve our customer service.”

Nonetheless, HMRC reportedly aims to reduce its customer service team headcount by a further 14% in 2024-25 to meet budgeting goals set by the Treasury.

The GPA findings might cause leaders to question the effectiveness of that strategy. As GPA notes, the helpline’s job cuts appear to have resulted in more taxpayer money being spent.

As the business world hastens to adopt smart technologies, companies must remember to consider the impact on customer experience. HMRC shows how unhappy buyers can lead to overstretched teams.

For HMRC, that means stepping up overtime pay, and an uncomfortable conversation with the Treasury. For a business charting a similar path, it could mean an unexpected bite into its profits.