The United Kingdom has become a global leader in payslip inefficiencies, with almost one-third of employees receiving incorrect pay documents more than three times.
At a time when more British workers are living from paycheque to paycheque, a new report has suggested that an increasing number of employees struggle to consistently receive the correct payslip information each month.
The UK Payslip Anxiety Report, which was published by Access Paycircle, has found that more than 31% of employees have experienced errors in their payslip at least three times, with some having to live with pay inefficiencies more than 10 times.
According to the data, one quarter (25%) of employees have experienced payslip errors between three and five times, while 5% have reported disruptions to their pay between six and 10 times.
Worryingly, 2% of respondents have claimed that they have had to put up with more than 10 payslip errors throughout their employment.
Given that recent research has found that almost half (49%) of the UK workforce is living from paycheque to paycheque, receiving the incorrect pay information could carry severe ramifications for worker wellness.
Receiving the incorrect pay cannot only cause more employees to struggle financially but can also cause unhappiness, disengagement, and even staff turnover for those willing to take drastic action to protect their economic well-being.
Counting the Cost of Payslip Inefficiencies
Employers only need to look back a few years to count the true cost of payslip inefficiencies. In the midst of the UK’s inflation challenges and wider economic downturns in 2022, retailers Asda and Next were both found to be distributing incorrect pay to staff due to system errors.
In the case of Next, some workers were forced to turn to food banks as the clothing giant began paying store staff at a lower rate than Living Wage Foundation recommendations.
Asda had been struggling to provide accurate pay to workers consistently, and in 2024 thousands of workers were forced to go three consecutive months without the correct pay, leading to masses of resignations for the retailer.
According to Gethin Nadin, chief investment officer at Benifex, the impact of incorrect pay can carry huge consequences for employees when, even in stronger economic conditions, most employees hold £500 or less in savings.
This negative impact appears to ring true today, according to the UK Payslip Anxiety Report. With over 46% of workers claiming to have experienced anxiety over their pay, it’s clear that UK employers should be taking their payroll responsibilities seriously.
But how can decision-makers take decisive action in ensuring that incorrect payslips are stamped out? Let’s take a deeper look at four key measures to take in building payslip efficiency:
1. Correct Errors with HMRC
If you’ve found that you’ve made an error in your Full Payment Submission (FPS) filing with the HMRC, it’s important to make the appropriate corrections to ensure that you’re not charged as a result.
According to government guidance, businesses will only be charged for payroll mistakes if they were made without sufficient care or are deemed to be deliberate errors.
If you’ve reported the wrong pay or deductions in the current tax year, it’s essential that you update your year-to-date figures in your next FPS filing to maintain a level of consistency with the correct pay.
2. Upskill HR Teams
Payroll systems are constantly evolving to keep up with the digital transformation needs of modern employers, and many solutions have the ability to work alongside employee management systems and cross-border remote work obligations.
However, these modern cloud-based and AI-infused solutions are only as effective as the capabilities of their adopters, and this means that businesses should invest in training HR staff to minimise the risks associated with payroll inefficiencies.
Possessing a well-trained team supported by a modern automated system means that businesses can become less error-prone and more accurate when it comes to timely pay.
3. Get Rid of the Guesswork in Time Tracking
Payslip errors can stem from the failure to accurately log overtime hours and flexible working patterns, which can often lead to employees being underpaid for their contributions.
The simple solution for businesses that rely on shift work or regular employee overtime is to incorporate a digital time tracking system into their operations. This can automatically record employee hours and overtime, meaning that anyone working through their break times, logging more hours than their contracts stipulate, or spending time travelling between sites can all be appropriately remunerated.
4. Keeping Incorrect Tax Codes In-Check
Another common form of payslip issue stems from tax code errors that are especially prevalent when new starters are placed on emergency codes or when HMRC notifications go unactioned.
This inefficiency often results in either instances of underpayment or overpayment, which can be damaging for both employees and employers alike.
To effectively counter this issue, it’s essential for employers to quickly process HMRC updates while regularly reviewing the emergency tax codes of employees. Many automated systems can pick up the slack of tax code management, helping more HR teams of large businesses to keep on top of inaccuracies.
Overcoming Payslip Challenges
Payslip errors can be a challenging time for employers, but for the employees who are negatively impacted by incorrect pay, the physical and psychological toll can be severely damaging.
Given that employees have reportedly been forced to use food banks as a result of incorrect payslips in the past, it’s clear that businesses must do more to meet their duty of care to staff.
Fortunately, with the right oversight and adoption of automated systems, payroll problems can be more effectively managed, paving the way for greater workplace satisfaction and a lower risk of damaging errors.
