01 November 2021

The CIPP policy and research team discusses how mistakes are inevitable as payroll professionals are human – the key is how you learn from them

Payroll professionals process payroll for millions of people throughout the UK, with guidance and legislation ever-changing. Making a mistake is easily done and it can feel like the end of the world. __Changing your outlook on this, however, can have a significant impact on, not just how you process your payroll, but how you lead and manage your team. Mistakes are an opportunity to learn, review and amend.

Hearing that someone else has made the same mistake as you can make you feel ‘human’ – that you are not alone in making a mistake and that it is common for these things to happen.

Here, we will look at some common mistakes that occur within payroll, how they can be avoided and the opportunity for learning where errors do arise.


Incorrect employee set up

Let’s start right at the beginning of an employee’s life cycle on the payroll.

Setting an employee up on payroll software should be a simple task, however, it is an area in which mistakes are commonly made.

Best practice would be to include a starter checklist as part of an employee’s starter pack. Her Majesty’s Revenue and Customs (HMRC) offer both an online and printable version for employees to complete, however, an employer can use their own on the proviso that the same information is included. Although an employer cannot complete this on behalf of the employee, explaining the importance of completing the correct details is something that can benefit both employee and employer.

A frequent error when completing the starter checklist centres around the student loan (SL) section. Within this section, it asks if an employee had a SL for studies that ended prior to the start of the current tax year, which isn’t being repaid directly to the Student Loans Company (SLC). If so, a box should be ticked which relates to the type of SL they had. Not ticking at all, or ticking an incorrect box, would result in SL deductions not being taken, or being taken, but using incorrect thresholds. Explaining and communicating this information to new employees could drastically reduce the number of mistakes at this stage but ensuring you and your team understand the logistics of SLs will also help immensely.

Incorrect National Insurance numbers (NINos) are another area of error. This could be because the NINo has been recorded incorrectly by the employee, or due to a keying error made by the payroll team. Asking employees to double check their NINos and having a checking process within your team could reduce the number of errors in this space.

Not assigning the correct details to your employees will impact where their NI contributions are held, therefore, it is crucial to get this right.

Other things to consider at this stage of the process are the input of P45s and using the correct tax codes for employees. Incorrect tax application is a sensitive area as when mistakes are made, this can cause frustration for employees, potentially resulting in a loss of faith in the payroll department.

Again, having checking processes in place and using the information provided on a P45 or applying the tax code relevant to the information provided on a new starter check list will minimise the risk of error.


Overpayments to leavers

This could be the most common error that occurs within payroll departments – the key to tackling this is communication.

The primary reason this occurs is because the notification that an employee has left the business isn’t given to the payroll department in time or, sometimes, even at all. Typically, the human resources (HR) team will be responsible for ensuring payroll are aware of this, but on some occasions (especially in the current climate with employees working remotely), this information trail can be lost, with payroll being the last in the business to find out. This can be resolved by having clear and concise procedures in place that everyone in the business is aware of. A simple leaver checklist could be introduced; however, clear communication really is the key in preventing this happening.

Where overpayments of this nature do occur, the payroll department will need to make the employee a leaver first, issuing the ex-employee with a P45. If the employee has been overpaid, then a letter stating how much the employee has been overpaid should be produced. This is simple if the employee has been overpaid for a whole pay period, as you will be requesting that the monies physically paid to the employee are returned, but as we know, this is typically not the case. The payroll department will need to recalculate the employee’s final pay and request they repay the net overpayment figure.

The ramifications of not communicating leaver details should be explained to all involved – they may not be aware of the impact caused by failing to communicate the information on time, or even at all.


Communication is key

We have briefly touched upon some of the common errors that occur within payroll departments. The key to avoiding these issues is effective communication. Having robust processes in place and open dialogue with all involved in each process will ultimately reduce the number of errors. However, using errors to improve procedures and viewing them as a learning curve will only make processes stronger in the future. 


Featured in the November 2021 issue of Professional in Payroll, Pensions and Reward. Correct at time of publication.