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Why are UK businesses losing up to £150,000 a year in payroll errors?

20th Sep 2022
Brought to you by
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The payroll solution that provides all you need for Auto Enrolment.

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We’ve discussed losses from payroll errors in the past, but recent research highlights just how common these issues are, and how costly. Recent research has found that UK businesses are losing up to £150,000 a year through payroll errors – and it’s happening to the vast majority of companies to some degree.

According to the survey, 91% of businesses admitted to making payroll errors every month. This is especially serious for companies with 500 or more employees, where the cost of getting it wrong could amount to the huge figure above.

Here we explore why these mistakes happen, what the cost is for businesses and how the right online payroll software can help.

The limits of manual processes

Payroll is famously data intensive. Running monthly payroll requires bringing together a wide range of information, including salaries, hours, holiday allowances, tax codes and more. Gathering, checking and combining this information manually is time consuming, inefficient and complex. It’s somewhat surprising, therefore, to see in the above research that  almost three quarters (72%) of companies still use manual processes for their payroll systems.

Manual processes put immense pressure on teams managing payroll. The report indicates that 90% of companies still manage their payroll in-house, meaning that many of those working on payroll each month may well have other responsibilities in the business and less time to focus on managing the payroll process specifically, especially with ongoing issues in staffing and recruitment. 

These issues directly affect employees, creating unnecessary stress, financial instability and damaging employee satisfaction levels. For businesses managing their payroll, as well as bureaus and accounting firms providing payroll services, choosing the best payroll software  can have a major impact on reducing errors, streamlining processes and improving employee satisfaction.

Why payroll software is a must-have

Working with the right payroll software makes the payroll process faster, more accurate, more compliant and more valuable for your clients. Modern tools can use automation, APIs, app integrations and analysis to close gaps in your current processes to reduce payroll errors and improve  employee satisfaction.

Key ways to reduce errors in the payroll process include:

Streamlining client data review

Getting the inputs right for payroll is the foundation of a strong process. However, given the large number of employees and data points for review, it’s easy for mistakes to slip through. One of the most effective ways to tighten up this process is to share the load between bureaus and clients, who know the details best. 

BrightPay Connect, BrightPay’s cloud extension, enables real time data sharing with your clients via our dedicated employer dashboard. With all their information in one place, your clients can:

  • Add new starters as they join
  • Enter and review their employees’ hours 
  • Add additions and deductions that have been set up by the bureau in the payroll software
  • Review and authorise payroll details for the pay period

Working hand in hand with your clients, you can reduce risk of error, saving on incorrect payments and improving the employee experience.

Automating manual data entry

Declaring your information isn’t just about compliance – getting the right data squared between HMRC, pension providers, bank files and your accounting software has a direct effect on the payments taken from paychecks, as well as the company’s own tax and pension obligations. Creating and sending reliable reports of salaries, tax and disbursements manually, however, is slow and meticulous work.

Like any manual process, it’s a prime opportunity  for human error to creep in – a near certainty once you reach a sufficient scale. One of the primary advantages of digital solutions for accounting and payroll is their ability to connect to each other via direct API connections, automating data transfer and reducing the possibility of missed or miscommunicated information.

BrightPay Payroll Software connects directly to HMRC,  leading pension providers including NEST, The People's Pension, Smart Pension and Aviva, 12 of the top accounting packages and a direct payment platform, reducing paycheck errors at every stage of the process and saving your clients on expensive mistakes.

Helping employees help themselves

Getting employment details right, including tax codes, personal details, salary and working conditions is essential for an error-free process. In busy companies, however, these can change often, meaning that payroll data can quickly get out of date. 

Since it’s employees who lose out the most when paychecks go wrong, they have a strong incentive to make sure their information is correct. That’s why BrightPay Connect includes a self-service employee app where they can:

  • Browse and download their history of payslips and other documents
  • View their payroll calendar, including annual leave, sick leave and parenting leave
  • View their leave taken and leave balance
  • Request annual leave on the go
  • View and update their personal details

More accurate data means better payroll, saving your clients time, money and stress.

Build a cost-saving payroll process

In a challenging economic environment, getting payroll correct is a huge benefit for businesses and their employees alike. BrightPay and BrightPay Connect, our cloud extension, give you and your clients the power to catch errors early, check information efficiently and automate time consuming, inefficient workflows.

To find out how BrightPay can close the gaps in your payroll process, book a free online demo of our software. We also offer 60-day free trials if you would like to try it for yourself and see how you can save time and money with the right tools.