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A Pay Check Guide | How Common are Payroll Mistakes?

As a UK employer, navigating payroll can be tricky at times. It is crucial that you avoid mistakes if you want to ensure smooth operations and compliance with regulatory requirements. Throughout this article, we define the main payroll errors we see in our role as an outsourced payroll company and provide practical suggestions for preventing them in the future.

One of the most prevalent payroll mistakes is using outdated or incorrect tax codes for employees. This can result in over or underpayment of taxes. To avoid this, regularly check and update tax codes to match the latest HMRC legislations. Encourage your employees to provide accurate and up-to-date information about their financial circumstances, as this can affect their tax codes. Additionally, ensure that your employee’s data is safeguarded by implementing robust data security measures that are necessary for compliance with General Data Protection Regulation (GDPR) to avoid potential data breaches.

Missing payroll tax deadlines can lead to hefty penalties. Ensure you are aware of the filing and payment deadlines for income tax and National Insurance contributions (NICs). Create a schedule and set reminders to submit your payroll reports and make payments on time. Consider using payroll software with built-in reminders for added efficiency.

Poor record-keeping can cause major payroll headaches. Keep detailed records of all payroll transactions, including payslips, tax calculations, and employee data. Staying organised not only helps in case of audits but also ensures you can quickly address any discrepancies that may arise.

Failing to stay updated with UK employment laws and regulations can lead to non-compliance issues. Keep abreast of changes in minimum wage rates, employee benefits, and other labour laws to avoid penalties and legal trouble. Consider consulting with legal or payroll experts to ensure full compliance. If you have implemented salary exchange, you must be aware that this scheme could bring your employees' salary below the National Minimum Wage (“NMW”). Employers must ensure that the salary exchange arrangement does not violate employee NMW rules by managing employee expectations.

If you rely solely on manual calculations it can result in payslips errors and possible miscalculated tax deductions. Partnering with reputable payroll companies can be beneficial, they give you expert advice on how you can streamline your payroll processing. Saving you time and money by giving you the payroll software you need for seamless calculations, reducing the overall administrative burden. Additionally, they remain compliant for you by keeping up to date with GDPR.

Additionally, understanding the regulations surrounding pension is paramount for businesses to ensure compliance and uphold financial security for employees. Staying updated with the ever-evolving pension policies and pension auto enrolment requirements is crucial. By proactively managing employee pension contributions and adhering to timely submissions to pension providers, companies can safeguard employee financial futures and foster a culture of financial well-being.

Leading us to the last common mistake most businesses make with their payroll processing: Not having open and transparent communication with your employees. Be transparent and discuss any payroll changes, deductions, or tax code adjustments with them promptly. Encourage them to inform you of any changes with their personal information that may impact their payroll. By staying vigilant and implementing these practical tips, you can steer clear of these common payroll pitfalls and ensure your payroll processes run smoothly and compliantly in the UK. Remember that seeking professional guidance or outsourcing payroll services can alleviate these worries by implementing a smart strategy that will help you to avoid these mistakes.


Written by
Isabella Zermani
Pay Check Limited
+44 (0) 20 7866 4600