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Payroll errors costing FTSE 100 companies £30 million

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Payroll errors cost the average FTSE 100 company between £10 million and £30 million per year, according to PwC

The Making payroll pay: Managing risk and compliance in an unprecedented era of change report warned that the financial and reputational risks of processing payroll late or incorrectly, not adhering to evolving data privacy and protection regulations, and the disconnect between finance, HR and payroll systems create “a countdown to a potential disaster”.

The report states that global mobility also adds complexity to the payroll process in a number of areas including secondments, dual contracts, split payroll, business travellers, currency translation and compensation.

Jonathan Dowden, payroll expert at Sage UK, warned businesses of the impact that payroll errors could have on staff morale.

“Many businesses see payroll as a back-office process that doesn’t necessarily affect business performance,” he said. “These findings challenge that way of thinking by showing that payroll can have an immediate effect on staff job satisfaction with just one misstep, and could even jeopardise recruitment.

“Payroll is something employers must get right. With a clear potential to transform staff morale, influence employee engagement, and make an employer more appealing to current or future talent, it should be brought into the spotlight for businesses.”

Chris Watt, Payright business leader at PwC, suggested that the landscape of payroll has changed. “The rapid rise of social media, smart devices, big data, and cloud computing has opened up avenues for improvement,” he said. “At the same time employees are becoming more savvy through demographic change, increased expectations and empowerment.

“As [organisations] increasingly look beyond domestic boundaries, the complexity of their payroll operations grows too. It’ s crucial businesses have a payroll that’s not just fit for today, but is capable of dealing with the increased complexity and regulations coming in the future."

He added: “Technology and social media are making employees better informed, more connected and more vocal – get their payroll wrong and with the power of social media you and the wider world will very quickly get to know about it."