10 Common Payroll Mistakes

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Recently the Lincolnshire Police were left red faced and out of pocket after a mix up with the wages left them owing £4000 to hundreds of their Community Support Officers (PCSO).  This is likely to cost the police over £1 million in one off payments.

The mix up is thought to have taken place in 2006 when PCSO’s were first introduced to the Lincolnshire area. Problems in calculations after a change in shift patterns left hundreds of employees underpaid. Now that the mistake has come to light the Lincolnshire Police have come forward to say that it is “morally and ethically correct” to repay their staff and that the mistake will be rectified.

This isn’t the first time a high profile company have come under fire for staff missing payments and it won’t be the last. It’s not just underpayments that companies need to worry about either. A small error made by someone in a payroll department could result in a company overpaying thousands of employees. Additionally, there are many rules and regulations which the payroll department need to be up to date with, and if any of these are missed due to either ignorance or human error, a company can incur large financial fines. It’s not just large companies that need to worry – an American study showed that on average small businesses will incur $845 charges due to payroll errors annually.

So what should your business be looking out for? Here are the 10 most common errors in payroll.

1. Missing deadlines set by the HMRC

Mark all deadlines in a calendar.

2. Depending too much on the payroll system

The system is only as good as the person who inputs the data.

3. Failing to keep records

Business should store records for 3 years to prove compliance with auditors.

4. Failing to back up records

You will receive little sympathy from HMRC if you fail to back up records.

5. Inexperienced staff

Ignorance is not a defence if you face charges from the HMRC. Most problems are due to human error.

6. Confusion over payments such as SSP

Again, if your staff lack the adequate training and experience then it’s likely that mistakes will be made – and this will cost your company.

7. Payroll Infrequency

Completing a company’s records on the same day of the month ensures accuracy.

8. Using the wrong tax codes

Many companies will reuse codes they are familiar with rather than picking the tax code off the employees P45 and P46.

9. Under or over payments to staff

This can often come from a lack of attention to detail – resulting in payment difference in shift changes, and sometimes results in employees being paid for months after they’ve left.

10. Year-End submission mistakes

Minor errors may be made during the year that go unnoticed but will have a big effect on year-end figures. Errors may also happen because of inadequate training.

Why not outsource your payroll to avoid potential headaches? All of the above can be simply remedied by handing your payroll responsibilities over to a dedicated team of specialists. For any information please get in touch with the team at CPS.

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