Revealed! The worrying true cost of all those payroll errors…
How much could payroll inaccuracies be costing you?
Payroll. Get it right and it’s happy days! But fail to cover the basics and you’re looking at fines, peeved off employees and a loss of reputation. This is what payroll inaccuracies are really costing you as a business.
Payroll in accuracies come in many forms: employee overpayment, underpayment, failure to adhere to legislation and so much more. While the direct costs of these inaccuracies might be visible in your bottom line, the indirect costs might be a little harder to spot. Here is what it could be costing your business.
Overpaying or underpaying tax
Payroll inaccuracies could see your business over-paying or underpaying tax. Of course, overpaying company tax is going to get you into less trouble with HMRC than underpaying it is. Overpayment might see a constricted cash flow and a little more HMRC admin time. However, your overpayment will (eventually) be refunded.
Underpayment of tax is where the real issues come in. Businesses that under pay their tax often find themselves paying back large lump sums to the HMRC with short notice, which ultimately can hurt cash flow. To add insult to injury, the HMRC charge interest on owed money and over time this can quickly build up.
Incorrect employee pay
While your employees might be happy to see an extra zero or two on their payslip, your finance department is not going to be jumping for joy! Both underpaying and overpaying employees can have a huge impact on your business. Overpayment has the obvious impact on cash flow. By law, an employer can usually reclaim overpayments made to employees, but there are exceptions to this.
Spotting, sorting and amending payroll errors, whatever they are, takes time and effort from your payroll department. Costing you and your business even more.
Late employee payment
Paying your employees late isn’t just going to spark some murmurs in the office, it could have a knock-on effect to personal finances amongst employees. Think mortgages repayments, direct debits bouncing and a lack of financial security. Unfortunately, late payroll payments do happen. Smart payroll professional will invest in alternative banking methods, such as Faster Payments, to allow for more time and flexibility when processing payroll.
Loss of reputation
The bottom line is your employees aren’t going to stay around for long if they aren’t being paid on time, or if they are being paid inaccurately. It’s not only the above direct costs, fines and wasted admin that you as a business need to think about, it’s also your reputation as a business.