Top Five actions to reduce payroll errors

14th February 2017

Payroll errors cost UK employers more than £700 million in the last financial year and sorting out errors can contribute to a downward spiral for hard pressed payroll teams. Are there any simple tips to help teams reduce payroll errors? Here are my Top Five

1)    Create a ‘Nudge’ – How often are you acting after the payroll run to catch up with late submitters. Time sheets and overtime payments.

The ‘nudge’ is all about getting on the front foot with payroll and being proactive. First suggested by business authors Richard Thaler and Cass Sunstein the theory suggests that a ‘nudge’ is “any aspect of the choice architecture that alters people’s behaviour in a predictable way without forbidding any options or significantly changing their economic incentives.”

Gobbledegook? Not really. For example, in payroll getting a note out to teams suggesting that they won’t get paid if they don’t submit overtime claims or timesheets in time can only reduce errors. A sensible ‘nudge’, right?

2)    Complete an Audit – taking a step back regularly and assessing the robustness of your system and data can only be a good thing. Staying close to HR to ensure leavers are picked up and removed from payroll runs quickly can only help to lighten the load, and avoid having to try and recover overpayments from those that no longer have an association with your company.

Regular audits can also highlight whether other anomalies exist, and this can help avoid payroll fraud. Anyone who’s been through this will tell you the huge amount of pressure that falls on payroll teams, both internally and externally, when this happens. Why take the risk?

3)    Pay for expert advice – companies, especially micro employers and SMEs, will be reluctant or unable to pay for expert advice, but they often clearly struggle to navigate or stay on top of the regulatory minefield associated with payroll.

Having a qualified payroll professional is the ideal, but can be expensive for a smaller company. Outsourcing to ensure regulatory compliance is another option that should be considered.

4)    Save the cheerleader? – Internal services such as payroll/HR and finance are often under pressure, and business leaders will seek to reduce headcount by outsourcing parts of their operation. Sounds like a great idea, but care will need to be taken to ensure that the full implications of outsourcing are understood.

What procedures still need to be handled internally? What other procedures does that resource contribute to? (Specialist staff members often have a multitude of other tasks apart from their main role). Cutting too many people too soon is a recipe for slip-ups and errors.

5)    Keep your ear to the ground – in the busy siloed world of payroll it’s easy to forget what’s going on in your company. That’s dangerous. A sudden influx of new staff, a newly acquired subsidiary, some sudden redundancies – all thing that can throw a spanner in your works, put pressure on your payroll system, and create avoidable errors.

Keeping on top of change means that you can plan, thus avoiding the pressure that can lead to payroll errors.