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Payroll errors costing businesses £150,000 a year

UK businesses are losing up to £150,000 a year through payroll errors, according to research from HR, payroll and finance software provider MHR.

The research found 91% of businesses across the UK and Ireland admit to making payroll errors every month, and for companies with 500 or more employees, the cost of doing so could amount to the six figure sum.

Many of the problems may be caused by lack of investment in technology, as almost three quarters (72%) of companies still use manual processes for their payroll systems.

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Claire Williams, chief people officer at HR software provider Ciphr, said a knowledgeable HR team is crucial to payroll running smoothly.

She told HR magazine: "While data accuracy is a fundamental aspect of HR functions, it is even more imperative when it comes to pay. HR and payroll teams need to ensure there are watertight processes in place, with various safeguards and audit steps along the way.

"If you are using a payroll bureau or managed service, make the most of technical integrations to avoid further risks of manual errors, and employ or upskill your HR and payroll teams sufficiently so that they know what to look for and question when working with bureau services to minimise risks of error."

The report also showed the knock-on effect payroll issues had on employees. A quarter (25%) of workers affected by late payment couldn't pay essential bills, while 30% were forced to borrow money using a credit card or a loan.

Steve Tonks, senior vice president EMEA at workplace software company WorkForce Software, suggested an earned wage access (EWA) system as one solution to payroll issues.

Speaking to HR magazine, he said: "Roughly 48% of the UK population frequently feel monetary stress, and inefficient payroll systems only exacerbate this. The solution to this particular worry lies in EWA payroll schemes, which enable employees to access their wages before payday.

“Fortunately, for employers, the technology behind EWA is quite simple – by leveraging modern, cloud-based WFM technologies, employers can combine timesheet data with automated pay rules to ensure accurate and timely payment.

Although 90% of companies said they manage their payroll in house, 50% said they would use a managed or part-managed payroll service to improve their system.

Tonks added that employees would benefit the most from businesses switching to digital payroll systems.

He said: “Most importantly, automating the payment approvals process will ensure that the cut off for hours, especially overtime hours, can be paid during the period in which they were incurred.

"This will not only shorten the time gap between when hours are worked and when employees are paid, but also streamline and simplify payroll operations. This should be a welcome change for employers, who waste over 100 hours manually managing their payroll each year.”