It’s not very often that payroll makes headline news – and certainly not in the entertainment section! But one story cropped up in January 2024 that highlighted how even the slightest error can have major consequences.

Tom Hollander is a well-known British actor, and a former winner of a BAFTA for his part in the BBC drama The Night Manager. In a conversation on the American talk show Late Night with Seth Meyers, he revealed that he had unexpectedly received a seven-figure payment in his bank account. Once he saw that he’d received an email with a payslip labeled “Box office bonus for The Avengers”, it became clear that the money should have instead been paid to Tom Holland, star of several Marvel superhero films in recent years.

“It was an astonishing amount of money,” Hollander said. “It was not his salary. It was his first box office bonus. Not the whole box office bonus, the first one. And it was more money than I’d ever [seen]. We were with the same agents briefly and people in the accounts department got confused.”

It’s a very high-profile example of the consequences of a mistake as seemingly small and innocent as confusing two people, in the same line of work, who have very similar names. But it’s served as a real conversation starter in the payroll world: what are the most common payroll errors, and what can you do to avoid them?

Why is error minimization so important?

Firstly, it’s vital to consider why these errors should be cut out at every opportunity. Obviously, from a business point of view, mistakes in how, what, and when people are paid can lead to non-compliance issues, investigations, and large penalties. But payroll errors affect the workforce at a much deeper level, especially in the current climate where personal finances are often stretched.

In the UK, for example, a CIPD survey revealed that more than two-thirds of businesses thought employee financial wellbeing had suffered in recent years – although less than half had established any sort of financial wellbeing policy. Many employees already feel stressed about their finances, and unnecessary payroll errors can only add to that stress if it means they suddenly can’t cover their housing costs, utility bills, or other financial commitments. 

All this can have a real impact on the mental and physical health of employees, and that can quickly come back to bite employers. Stressed, ill workers are less productive, less motivated, and are more likely to want to leave for pastures new. This can have a long-term effect on the bottom line, from deteriorating quality and quantity of work, to struggles retaining and attracting talented and skilled staff in a highly competitive job market.

What are the most common payroll errors?

In our experience, there are a few payroll errors that come up more than most, and while some of them may seem trivial, they can quickly cause big problems further down the line:

• Employees classified incorrectly: if workers are filed with the wrong job role, or have been put down as a contractor instead of an employee (or vice versa), their payroll data and processes will naturally be mishandled and generate all sorts of issues
  
• Missed deadlines: more or less every task in a payroll process needs to be completed by a certain fixed point in time. One missed deadline can delay the rest of the run and result in employees being paid late, or taxes not being remitted to authorities in time
  
• Pay calculated incorrectly: it could be a slip of the finger on the calculator, or a typo in an Excel spreadsheet formula, but one miscalculation can lead to major discrepancies in pay – and very disgruntled employees as a result
  
• Tax rates applied incorrectly: businesses can unsuspectingly make incorrect deductions, because of human error, or because of unknown changes to tax and social security rates. International companies are especially vulnerable to this, as they have to keep track of multiple tax regimes simultaneously
  
• Failure to keep detailed payroll records: poor record-keeping means that payroll practitioners can’t rely on having timely, accurate information – and neither can auditors. Key metrics such as withholding forms, payroll taxes, benefits, deductions, timesheets, time off information, and pay rate details should all be retained and updated regularly
  

So how do you get it right?

The good news is that a diligent approach, adding support in the right areas, and a dash of good old common sense can all help keep these errors to a minimum. But on a more practical level, we recommend these three strategies:

• Use payroll software for maximum accuracy: using new software, especially platforms that integrate with one another, can remove the risk of inconsistency or data duplication. For example, CloudPay’s integrations with leading HR software like Workday ensure that metrics like timesheets, tax calculations, and paid leave are all synchronized and up-to-date
  
• Embrace self-service solutions: giving employees the chance to conduct payroll and HR duties autonomously means there’s no chance for requests to be lost in translation, or for delays to creep in. This can apply to leave applications, expense forms, updating bank details, and even flexibility in receiving pay thanks to on-demand pay tools like CloudPay NOW
  
• Encourage employee feedback: every employee should feel empowered to engage with the payroll team and share their experiences – whether they’re positive or not. Getting honest feedback is vital to identifying any errors or process issues and resolving them as quickly as possible. It can also be useful for discovering ways to support specific employees, such as flexible pay or financial wellbeing programs

Getting all these right is important, but it can take a lot of time, consume a lot of payroll team resources, and generally put payroll practitioners under greater pressure – which can lead to more mistakes creeping in, not less. This is where technology like CloudPay’s global payroll platform comes in, automating and integrating a huge range of processes for maximum efficiency, accuracy, and timeliness. Find out more about how it works here.