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7th December 2022

How Payroll Errors can Impact your Business

Everyone makes mistakes – we’re all human. However, there are certain mistakes that can damage brand reputation, profitability and get you into trouble with the government.

Payroll is one area where mistakes can have implications for employees, HMRC compliance, and if not identified in a timely manner, could cost your business thousands.

Earlier this year, The Scottish Sun reported that Police Scotland paid 589 staff and officers

for public holiday shifts due to confusion caused by irregular shift patterns throughout the pandemic.

The mistake, which meant more than £40,000 in overtime was erroneously paid, was discovered during an internal audit.

The police chief did not want to penalise the officers for the error so there will be no docking of wages or repayment. Find out more about payroll mistakes made by big businesses and how to avoid them.

The impact of payroll mistakes

If you can’t recoup the funds or the error is not identified for months, your company could suffer losses that can’t be recovered. For small business owners struggling to maintain payroll for their employees, any errors can jeopardise the health and future of the business.

How to avoid payroll errors

So how can you prevent payroll errors in your business?

Eliminate manual processes

The first step is to eliminate any manual processes. Spreadsheets are commonly used to manage payroll and are most likely to be the source of errors. They depend on the person creating the spreadsheet and the data that is entered. If one formula is incorrect, the spreadsheet is useless, and the payroll calculations are wrong.


Automate your payroll processes

The second step is to automate payroll with software that provides real time updates to regulations and provides reporting to identify problems or errors before payroll is run. Getting rid of manual data entry each month reduces the potential for errors in the process.

Ensure your data is up to date and accurate

The next step is to make sure the data you’re keeping about employees is accurate and up to date. This includes contact information, changes in surnames, addresses, bank details and more. The same goes for any reporting and any payments made.

According to GOV.UK you should keep the following:

●       Employee deductions and payments

●       Reports made to HMRC

●       Payments made to HMRC

●       Employee leave and sickness absences

●       Tax code notices

●       Taxable expenses or benefits

●       Payroll Giving Scheme documents, including the agency contract and employee authorisation forms

Failure to keep full records can lead to a penalty of up to £3,000.

Be compliant with regulation

One way to ensure you’re not making payroll mistakes is to make sure all of your records are up to date, and the data you store is GDPR compliant.

The best way to avoid any implications is to outsource your payroll. Payescape is authorised by the Financial Conduct Authority under the Payment Services Regulations 2017, and Certified Information Privacy Professionals (CIPP) compliant.

Get one platform to manage your employees with customised reporting, real-time access to your payroll, and automated changes to regulations and avoid making those all too common payroll mistakes. You can directly file with HMRC and ensure compliance for your organisation. Talk to our team about our easy-to-use, integrated workforce management solution. Request a demo today.

Need help to understand what solution is best for your business?

Speak with our expert team today on 028 2764 1060

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Payescape Limited is authorised by the Financial Conduct Authority under the Payment Services Regulations 2017 (register number 821826) for the provision of payment services.

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