The most common payroll mistakes

A dependable payroll system is essential for any business to run smoothly. Payroll ensures everyone is paid the right amount on time and in line with the latest tax, NICs, sick pay, and other regulations.

Here are some of the most common payroll mistakes, and tips on how to avoid them from happening.

Common payroll mistakes to avoid

• Incorrect classification of workers: Misclassifying workers as employees, contractors or freelancers can cause issues with calculations, tax, and benefit entitlements.
• Wrong employee information: Entering the wrong employee information, such as National Insurance numbers and addresses, can cause errors in calculations and payment delays.
• Inaccurate records: Accurate records are crucial for compliance, and failure to keep them accurate can lead to penalties from HMRC.
• Late payments: Late payments can lead to legal issues and may damage employer-employee relations and morale.
• Getting tax codes wrong: Incorrect tax codes can cause over/underpayment of taxes, which may cause issues for employees.
• Not keeping payroll systems up to date: Payroll systems must be updated regularly to make sure they are working properly and to prevent inaccuracies and errors.
• Failure to provide payslips: Employers must provide payslips. Failure to do so may cause legal issues, as well as confusion among employees.

How to fix payroll mistakes

Fixing payroll mistakes means identifying the error, correcting it, and making sure that any affected employee's pay is corrected.

1. The first step is to identify the mistake. Review the payroll records and payslips for the affected employee to identify the error. The error could be an incorrect tax code, employee details, hours worked, salary, deductions, etc.

2. The mistake must obviously be corrected as soon as possible using the correct procedure. Incorrect tax codes need updating with HMRC, while incorrect salary details should be corrected in the next pay cycle.

3. Inform the employee of the mistake in their pay and assure them that it has been resolved. Provide them with a corrected payslip and explain any changes made.

4. Keep records of all mistakes, taking note of any and all actions taken to fix it. Keeping these records will help prevent the same or similar mistakes in the future.

If you aren't sure how to correct a payroll mistake, you should seek professional advice from a payroll specialist who can help you resolve it.

Preventing payroll mistakes

Use reliable payroll software

When managing payroll by yourself, we strongly recommend investing in good payroll software that can automate the process and reduce the chances of manual errors. Accounting software for payroll can calculate taxes, overtime pay, and other deductions accurately.

Keep employee records up to date

Make sure all employee records are regularly checked and kept up to date. If an employee's salary, hours worked, or personal information changes, this needs to be updated in the payroll system immediately.

Stay up to date with tax regulations

Tax legislation can change frequently, often at least once a year, so it's important to stay informed and comply with the latest rules. You can consult a tax expert or use your payroll software to help you stay compliant.

Schedule payments on time

Ensure that payroll payments are made on time to avoid penalties and interest charges. Payroll software will usually include this functionality, allowing you to arrange all payments in advance of payday so that funds are transferred exactly when they are expected.

Double-check calculations

It's essential to double-check calculations to avoid errors that could result in overpaying or underpaying employees. Even if the system is automated via accounting software, we recommend double-checking both inputs and calculations.

Accurately track employee leave and absences

Keep track of employee leave and absences to ensure accurate payroll calculations. This can be done with automated systems that allow workers to request and manage their leave. Regular audits of time-off requests and attendance records are recommended to help identify inaccuracies and discrepancies.

Train your employees

We recommend ensuring that your employees understand the payroll process, as well as providing them with regular training on how to use the payroll software. This can benefit both internal payroll staff, as well as workers who may use the software to manage their leave, sickness and pay slips.

Outsource your Payroll

Managing payroll efficiently and accurately requires time and expertise, which is why it is often a larger task than the internal management of an organisation can take on. This is where outsourcing is an attractive option.

By outsourcing your payroll, you can ensure all of the above measures are taken to ensure your workers are paid correctly, on time and with no further issues along the way.

The Shorts Payroll team brings over 100 years of combined experience to your business, so you can relax in the knowledge that your team is paid accurately and on time.

• Learn more about Shorts Payroll