Six Most Common Payroll Mistakes: What Can Go Wrong in the Payroll Process?

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Businesses of all sizes and in all sectors must get payroll right.  Mistakes in the payroll process can not only lead to disgruntled employees with incorrect figures but perhaps penalties from HMRC and a bad reputation. Ensure that your company avoids such issues by understanding six of the most common payroll mistakes.

1. There are Errors to Resolve

One of the most common payroll mistakes has to be inaccurate data,  often occurring if there’s an issue with data entry, such as an error with an imported spreadsheet. Human error will always be a factor when you’re relying on individuals to process data manually, especially if there are more complicated calculations to perform. Manually inputting information for 100+ employees means that the risk of mistakes and inaccuracies is more likely to occur.

We advise caution at the point of data entry because this can create inaccuracies later on. But mistakes will still likely occur when you try to run payroll regularly. One way to avoid this is to use automated payroll software. With Staffology, you can set up all the required automatic processes for running payroll, drastically reducing the likelihood of data errors.

2. Time Limitations

Manually running payroll can often feel only as effective as the resources available.

For example, running your payroll can be time-consuming if you have a significant headcount. Payroll becomes complicated where you have to enter data manually and perform complex calculations, which will place a very noticeable strain on your resources.

Automated payroll, however, can free time and energy to focus on the daily running of your business. Automated payroll is associated with efficiency because it can handle routine tasks like filing tax deductions or pulling payroll reports.

3. Under or Overpayment

Incorrect payments are another potential aspect that can go wrong in the payroll process. If you pay an employee too much or too little, paying the wrong amount leads to problems for the accounts department and possibly the HR department if an employee becomes upset.

Incorrect payments are usually issued if you make mistakes during the manual input of data. It only takes one typo for an employee to get paid for 4 hours instead of 40, along with tax and National Insurance (NI) complications.

Paying incorrect amounts could result in angry employees looking for the rest of their wages. You could also be relying on honest employees informing you that they’ve received more than they should have. There is also the issue of retrieving it. Often an agreement will need to be made, where the employee either pays back the money over a few months or you dock it from a few salary payments. As well as pay adjustments, tax, National Insurance, and pension contributions will need to be resolved retrospectively. Again, you can avoid issues like these by using an automated payroll software service, like Staffology.

4. No Back-up Data

A common payroll mistake that frequently goes overlooked is that of inadequate backup. Some payroll software does not provide a backup system that reliably stores payroll data.  Therefore, if you have an error or a virus infiltrates the system, important information can get lost. Loss of such information will likely cause problems for the business.

It can be quite a task to re-gather all the required personal information that’s needed for payroll, from every member of staff, plus there will likely be concerns among those staff regarding what happened to their information in the first place. This becomes an even tougher feat if payroll is run by a small team or even just one person. It’s important to use a payroll service, where your data is reliably backed up.

5. Tax Errors

One of the more serious things that can go wrong in the payroll process are errors that impact employees and company tax.

Ultimately, payroll information must be accurate so that HMRC has the correct data to charge people and companies the right amount of tax. Inaccurate information will lead to incorrect tax payments, which can then go on to lead to fines and penalties.

The incorrect classification of employees is one of the most common payroll mistakes where tax is concerned. Employees need to be listed as full or part-time, temporary, or independent contractors. If the information supplied is incorrect, it could affect an individual’s income tax, as well as the company’s employment tax. It could also have an impact on the worker’s entitlement to benefits and other compensation.

Payroll teams are also known to experience problems surrounding HMRC deadlines. As well as adhering to the national tax year dates, there are regulations regarding supplying payroll submissions, P11Ds, P60s, FPS & other RTI updates.

Those running payrolls must have a good, up to date understanding of all the information you must supply to HMRC, including all relevant deadlines. When companies do not meet HMRC regulations, they may receive fines if they do not rectify the issue promptly.

6. GDPR Non-Compliance

While most companies have got to grips with the intricacies of the 2018 GDPR law, there are some payroll teams out there who may continue to fall short of the requirements. GDPR law states that individuals have rights over their personal information and how you should provide payslips. Understanding this and other data protection laws is essential to ensure your company stays fully compliant. Again, GDPR non-compliance can lead to fines and penalties. Learn more about GDPR and data protection legislation on the UK government website.

What Are the Consequences?

A common complaint among employees when it comes to payroll is that of late payment. Again, this will often happen if payroll is run manually by individuals who may take longer to process all the necessary information. Other delays could occur if payroll staff are away on holiday, off ill, or if you identify mistakes that take time to rectify. Late payments may also occur if/when a company moves to another payroll provider, as teething issues can present during the first few payment runs.

Staffology payroll software is relied upon by companies all over to pay their staff correctly and on time. Using our software means you do not need to upload information manually every payment run. You can amend details as and when necessary, such as if an employee’s circumstance changes. Never receive complaints about late payments again with Staffology, which offers integrated faster payments.

Why Use Staffology to Reduce Payroll Errors

Avoid the most common payroll mistakes simply by using an automated payroll software such as that offered by Staffology. The beauty of our software is that it is reliable and flexible. You can make changes as and when necessary, but otherwise, payroll will run correctly and efficiently every time.

With the seamless integration with several other accounting and HR programs, Our payroll API can pull/push data as required. This makes it even easier to make changes to employee information across all programs so that there are fewer payroll mistakes. Talk to a member of the team to find out more.

Duane Jackson, May 11th, 2022

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