Running payroll is about much more than paying employees on time. Even small mistakes can lead to penalties, unexpected tax bills and unhappy employees.
The good news is that most payroll errors are avoidable with the right processes and regular checks.
Missing payroll deadlines
One of the most common mistakes is submitting payroll information late.
Employers must send their Full Payment Submission (FPS) to HMRC on or before employees are paid. Late submissions can result in penalties and may cause problems for employees receiving benefits or Universal Credit.
Using incorrect tax codes
HMRC regularly issues tax code notices, but these are sometimes missed or overlooked.
Using an incorrect tax code can mean employees pay too much or too little tax, resulting in corrections later.
Employers should apply HMRC notices as soon as possible.
Incorrect National Minimum Wage calculations
National Minimum Wage compliance is more complicated than simply paying the hourly rate.
Deductions for uniforms, salary sacrifice arrangements and unpaid working time can all affect whether a worker has been paid correctly.
Many employers accidentally underpay staff without realising it.
Holiday pay errors
Holiday pay is another area where mistakes are common.
Workers with variable hours or variable pay may need holiday pay to be calculated using average earnings rather than current pay.
Keeping accurate payroll records makes these calculations much easier.
Forgetting statutory payments
Statutory Sick Pay, Statutory Maternity Pay and other statutory payments have detailed eligibility rules.
Paying the wrong amount, or missing an entitlement completely, can create unnecessary problems for both employers and employees.
Not keeping payroll records
HMRC requires employers to keep payroll records for a set period.
Good record keeping also makes it much easier to answer employee queries and deal with any HMRC compliance checks.
Relying on manual calculations
Spreadsheets are useful, but manual calculations increase the chance of mistakes.
Using modern payroll software and reviewing reports before payroll is finalised can reduce errors significantly.
Where can I find official guidance?
Start with these official resources:
- PAYE and payroll for employers
- Keeping payroll records
- Payroll forms, tables and helpbooks for employers
- Employers and the minimum wage
Need some help?
Payroll rules change regularly, and even experienced employers can find it difficult to keep up.
If you want someone to review your payroll process or take payroll off your hands completely, get in touch with us.