More than 5.5 million UK employees were put on the wrong tax code in 2013/14, with 3.5 million of those facing a bill after paying too little tax over the financial year.
The average payment error is £300 too much or too little. Employees who have underpaid will have to pay back the money through their contributions over the next year. Some employees on higher salaries will face significantly higher deficits.
The 2 million who have paid too much tax will be reimbursed later this year by the HMRC.
The number of errors is up slightly from 5.2 million in 2012/13. This is despite the introduction of a Real Time Information (RTI) system intended to improve the accuracy of PAYE contributions.
The RTI system allows HMRC to receive payroll information either weekly or monthly from employers, depending on the way the individual is paid. The 2013/14 financial year was the first time the RTI system was used widely by British employers, costing taxpayers about £270 million to implement.
A spokesman for HMRC said it was too early for the benefits of RTI to be reflected and that "it will eventually lead to a reduction in the number of corrections".
Simon Parsons, director of payments benefits & compliance strategies at Ceridian UK, told HR magazine there will be "an element of frustration" among employers that errors have not decreased. He also warned that the benefits are unlikely to be seen for "another year or so".
"I think after that period of time the Government will understand the data they're looking at," he said. "At the moment they're collecting it but it's used more to calculate universal credit than to improve accuracy for employers."
Parsons added that this being a new process for employers, they will also need to adjust.
"They've not had to produce real-time data before," he said. "That will take some getting used to. Previously if there was a problem they could fix it at the end of the year, which isn't possible now."
HR technology company Fairsail's CEO Adam Hale also told HR magazine an integration between HR and payroll systems can help to reduce errors.
"Despite these obvious enhancements that could be made, our recent research tells us that 88 per cent of organisations still don’t link their employees to payroll," he said. "Having an automated HR system will ensure these errors are eradicated, and more importantly, make for a motivated workforce.
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