Common payroll errors
The most common payroll mistakes employers make and how to fix them — before HMRC notices.
Articles
Payroll errors: fix them in the payroll, not around it
Almost every payroll mistake — wrong pay, wrong tax code applied, a starter set up incorrectly, an overpayment — is corrected by amending the payroll records and letting the next Full Payment Submission report the corrected position. RTI is designed for correction; what it punishes is corrections that never come.
The wrong response is the side-channel: adjusting someone's net pay by bank transfer outside payroll creates a second error on top of the first.
Overpaid an employee?
Contractually, genuine overpayments of wages can usually be recovered from later pay, but the conversation comes first: agree the fact of the overpayment and a repayment schedule the employee can live with, in writing. Deducting a lump sum without agreement converts an accounting error into a grievance.
In payroll terms the correction flows through subsequent FPS reporting; the employee's tax and NI adjust with it.
Wrong tax code, wrong deductions
Tax codes come from HMRC; the employer's job is to apply the current one promptly. An employee on the wrong code has usually had a change HMRC does not know about — the fix runs through their personal tax account or a call to HMRC, after which a corrected code arrives electronically and the payroll self-rights.
Employers should not improvise codes, however obviously wrong the current one looks. Apply what HMRC issues; get HMRC to issue better.
Errors discovered after year end
Earlier-year corrections are made through an adjusting submission for the year concerned — the mechanism has changed name over the years, but the principle is stable: correct the year the error belongs to, don't smuggle it into this year's figures.
Patterns of error are the real cost: each one consumes admin, erodes employee trust, and draws HMRC's attention through RTI. If corrections have become routine, the process — starters, leavers, change notification — is what needs fixing, not this month's numbers.
Frequently asked questions
I submitted an FPS with the wrong pay. What now?
Correct the payroll and submit — either an amended FPS for the period if your software supports it, or corrected year-to-date figures on the next FPS. The year-to-date totals are what HMRC ultimately relies on, so the next accurate submission repairs the record.
Can I take back an overpayment from an employee's next wages?
Genuine wage overpayments are legally recoverable from wages, but agree it first — amount, schedule, and in writing. Recover at a rate the employee can absorb; a surprise deduction of a full month's error invites a dispute you would lose on process.
An employee says their tax is wrong. Is that my problem?
Your obligation is to apply HMRC's issued code correctly and report accurately. If both are true, the code itself is the issue — point the employee to their HMRC personal tax account to update their circumstances; a corrected code will arrive electronically.
I forgot to report a pay run on time. How bad is it?
Late FPS filings attract monthly penalties scaled to employer size, though HMRC allows limited tolerance and reasonable-excuse claims. Send it immediately with a late-reporting reason. One late run explained is a blip; a pattern is a penalty stream.