Common payroll errors and how to avoid them

As an employer, it is your responsibility to ensure that your staff are being paid correctly.

Without the right systems and support in place, issues can quickly arise within your company’s payroll. This can lead to staff not receiving their correct wage, which could cause larger problems if not quickly amended.

Having a payroll expert on hand can help you avoid problems and promptly rectify any issues that may arise.

Common mistakes

There are lots of mistakes or miscalculations that could lead to your employees receiving the wrong wages. This includes:

  • Misclassifying employees: classifying members of staff as contractors or freelancers, who would not receive the same rights as employees
  • Incorrect tracking of hours and overtime: keeping inaccurate records of your employees’ working hours can lead to both under and overpayment
  • Using the incorrect tax codes: not only can this lead to employees paying too much tax, but if employees do not pay enough, both you and your employees could face penalties from HM Revenue & Customs
  • Holidays and paid time off: sometimes, holidays and paid time off are forgotten or incorrectly processed, meaning employees miss pay from their time off

As well as payroll mistakes that impact on your employees’ pay, you must ensure that you are on top of your obligations. This includes HMRC deadlines and tax liabilities, which if missed could result in a fine for your business.

Help – I’ve made a mistake!

If there have been errors in your payroll, you must act quickly.

Talking to a payroll expert is key, as not only can they guide you through the process of rectifying your mistake, but also ensure that you do not repeat this in the future.

If a member of staff has received the incorrect form of pay, you must contact them as soon as possible.

From here, you should disclose whether they were over or underpaid. If the discrepancy in pay is only over a short amount of time, or a small amount, you can arrange to have the money transferred.

If this is not an option for you, then pay can be docked or added to their next wage payment.

When an employee has been over or underpaid significantly, a payment plan can be set up to reimburse either the employee or employer.

At this stage, you should also conclude where the issue arose in the payroll process, and work with an expert to strengthen the payroll system.

Avoiding mistakes

The first step to ensuring that your payroll is correct is understanding the areas where mistakes are most often made.

Beyond this, you must ensure that records are kept up to date regularly and any issues are quickly resolved.

For a robust payroll, it is best to consult with an expert.

Speaking to an Accountant can give you an experienced insight into your payroll. They can advise you on the best practices for ensuring all information is up to date and ensure that you pay your staff correctly.

There is also the option to outsource your payroll to an accountant.

This can often save you valuable time and money that can go back into the business, as well as ensuring your staff’s wages are in careful hands.

For advice on your payroll, get in touch with our team today.

Posted in blog, Business, Business Advice, Payroll, SME's.