Tips to avoid costly mistakes within payroll

Category: Payroll - Posted On: Jan 31 2024


We know that dealing with the payment of wages and salaries of staff is one of the most complex tasks of owning a business. However, without the right tools, training and resources, your payroll can be a littered with errors that can be more of an issue for your employees – and your organisation – than you may realise. Our EQ Payroll team discuss some common payroll errors, and how to avoid them.

Setting up correctly

Setting up your payroll correctly is the most important step to stay on top of your legal and regulatory duties as an employer. Some outset errors could have a devasting financial impact on employees, leading to numerous negative repercussions for all involved. An efficient payroll system needs to be set up using HMRC-recognised cloud payroll software or outsourced to a payroll company or provider, such as an accountant or a payroll bureau.

Accurate Record Keeping

It is an employer’s responsibility to ensure all records are kept up to date and as accurate as possible. This includes correct employee personnel details, Right to Work checks, timesheets, payments, expenses and any other forms that are relevant to your payroll all whilst ensuring your remain GDPR complaint. To avoid any issues, make sure you have a solid strategy in place for organising your records.

Remember to ‘back it up’

A payroll mistake that frequently goes overlooked is inadequate backing up. If you are not using a cloud based software we recommend taking a backup to an external drive ensures that your payroll is saved elsewhere and can be used to reinstate your payroll if you have PC breakdown or crash.

Misclassifying employees

If you misclassify an employee, it can have a massive impact when it comes to calculating their leave, sick and holiday pay, and tax. To keep your payroll as accurate as possible, make sure all contractors, freelancers, full and part-time workers are classified correctly.

Miscalculating pay

The most common mistakes are human error that anyone can make. Whether you underpay or overpay staff, it’s not a good look. Remember that your payroll errors – such as an inaccurate tax codes, underpayment, or late payments – may have significant impact on your employee so it’s important to get it right first time. Using a good software package or bureau will help eliminate these errors as well as making your payroll process more efficient and compliant.

Missing important deadlines

Timing is everything in payroll but with so many steps in the payroll process, missing a key deadline is not unusual. Late payments can lead to legal issues and may damage employer-employee relations and morale. Make sure your payroll team understand the payroll process, as well as providing them with regular training to make sure they file returns accurately and on time.

Don’t hide from mistakes

Making errors somewhere in your payroll system is unavoidable however, the worst thing you can do is try to cover it up or bury your head in the sand. As soon as a mistake is identified, action needs to be taken to correct the payroll error as not doing so can result in hefty fines and non-compliance issues.

If you would like to outsource your payroll function to our knowledgeable experts, allowing you to focus on the day-to-day running of your business, please contact our EQ Payroll team on info@eqaccountants.co.uk or call 01382 312100.