88% of UK Businesses Struggle with Payroll Errors. How Can Accountants Help?

Accountants, how do you deal with payroll errors? We know it comes with numerous complexities that make it challenging to handle. Have you encountered errors in your clients’ payroll over the past year?

A recent study by UK-based HR software company MHR found that 88% of UK businesses suffered payroll errors in 2022, which resulted in employees not being paid correctly or on time. The research reiterated the payroll function’s complexity and highlighted the critical issue of errors faced by 9 in 10 businesses.

Consequently, over 80% of companies spent an average of 12 hours correcting payroll errors. This significant wastage of time and effort has reinforced the need for revamped technology, automation, and payroll outsourcing.

In this blog, we will explore some interesting statistics about payroll and its struggles and provide insights on how accountants can help clients with these situations. We will also touch upon the challenges faced by accounting firms and how to deal with them. So, let’s dig in.

Common Causes of Errors in Payroll

Before we assess the impact of payroll errors and how we can curb them, let’s understand the common causes of such errors.

Manual Data Entry: This is one of the most common causes of payroll and accounting errors. Errors can occur when entering employee information manually into the payroll system, leading to incorrect calculations and payments.

Lack of Knowledge of Payroll Laws: Let’s face it, payroll laws and regulations are complicated. These include tax codes and employment laws. For this reason, many accountants rely on outsourced payroll providers UK.

Software or System Glitches: Technical issues with payroll software or systems can cause miscalculations, missed payments, or incorrect deductions if not promptly addressed and resolved.

Apart from these, there are several other causes of payroll errors, such as misclassification of employees, inaccurate timekeeping, changes in employee information, incorrect benefits and deductions, etc.

How Do Payroll Errors Impact Businesses?

Per the above study, 43% of the responding businesses listed inaccuracies as the biggest challenge they face with their payroll operation. More than half (53%) of firms recorded the investigation and correction of errors as the most time-consuming element of the function.

A closer look at the figures reveals that accountants and payroll staff spend over 18 days per business annually on error correction. This is a significant number, and the valuable time lost could be spent on more productive tasks such as speaking to clients, exploring new services, offering advisory, and more. Therefore, this grey area needs immediate attention, and the best way to do this is by upgrading technology and employing payroll outsourcing services.

So, How Can Accountants Help?

Okay, we are now aware of the problem, its causes, and impact. Next, let’s understand accountants’ role in curtailing these errors and ensuring efficient payroll.

To begin with, an increased number of errors means more and more businesses will turn to the professional expertise of accountants to handle their payroll operations. Since accountants possess in-depth knowledge of UK laws and regulations, they can play a crucial role in payroll management with the help of outsourced payroll expertise.

As an accountant, what do you do when you encounter errors in your clients’ payroll? Here are a few ways in which you can help curb the inaccuracies.

Implementing Robust Internal Controls

Accountants can establish and enforce strong internal controls within the payroll process, including segregation of duties, authorisation protocols, and review procedures. This helps ensure that multiple individuals are involved in payroll processing and that transactions are properly authorised and reviewed for accuracy.

Conducting Regular Payroll Audits

Accountants can perform periodic payroll audits to identify and rectify errors, inconsistencies, and potential compliance issues. These audits can include reviewing payroll records, verifying data accuracy, and conducting sample checks to ensure proper calculation of wages, benefits, and deductions. You may also involve your payroll outsourcing provider in this process.

Utilising Reliable Payroll Software

Accountants can recommend and implement reliable payroll software that automates calculations, reduces manual data entry, and incorporates built-in checks and balances. They can also ensure the software is regularly updated to comply with changing regulations.

Providing Expert Advice and Support

Accountants can offer guidance and support to businesses on complex payroll matters, such as employee classification, overtime calculations, and benefits administration. Their expertise helps minimise errors and ensures adherence to legal and regulatory requirements.

What If Accountants Endure Challenges, Too?

Let’s be honest – accountants, too, often face challenges with payroll.

The biggest challenge haunting the accounting industry is staffing shortages. Although this has been addressed time and again, a shortage of skilled resources has affected more than 90% of firms over the past few years.

Technology is another grey area for many practices. Do you have the latest payroll software and cutting-edge solutions, such as cloud integration, within your practice? If not, it may be time to upgrade, or the error cycle will continue.

Also read: The Biggest Payroll Challenges and How to Overcome Them

The above challenges can significantly contribute to inaccuracies and inconsistencies in payroll if not handled properly.

The Solution: Collaborative Tech and Outsourcing

According to the MHR research, 50% of all respondent businesses advocated the adoption of new digital technologies to curb payroll inaccuracies. Thus, technology will be crucial for accounting firms to thrive in the payroll industry.

However, driving technology requires human expertise. Considering the scarcity of resources in the UK, many accounting firms are technologically challenged. This is where the role of payroll outsourcing services comes into the picture.

Both technology and outsourcing are crucial for accounting firms to ensure efficient and error-free payroll. The two solutions go hand in hand and can elevate the benefits of the other when used together. Curious to know how this works? Hear it from our experts and streamline your payroll operations effortlessly.

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Frequently Asked Questions

When it comes to technology and outsourcing, accountants may have numerous questions. After all, stepping into new waters can be daunting. But don’t worry, we are here to answer any question you may have.

Is Outsourcing Payroll a Good Idea?

Yes, payroll outsourcing can be a highly profitable solution for accounting firms owing to its numerous benefits. Outsourcing gives firms access to highly qualified and experienced resources to take up mundane tasks or act as backups during busy periods. The top outsourced payroll providers UK are also up to date with the changing market trends and the latest technology, which can help your firm adapt groundbreaking solutions, streamline processes, and improve efficiency. Outsourcing is also 100% secure if you partner with a GDPR-compliant firm.

Also read: The Two Sides of a Coin: The Pros and Cons of Payroll Outsourcing

Why Do Companies Outsource Payroll?

The outsourcing industry has boomed significantly in the UK over the last few years, particularly since the pandemic. There are several reasons why accounting firms outsource payroll. Some of them are listed below:

• To hire skilled and experienced resources
• To create capacity within their firm
• To cut operational costs
• To eliminate technological challenges
• To reinforce data security
• To improve efficiency and productivity

Also read: 7 Reasons Why You Should Outsource Payroll Services for Accountants

Summing Up

Payroll errors are a grave challenge facing businesses and accounting firms, taking up a substantial amount of their time. An effective way to deal with this challenge is to employ groundbreaking technologies such as the latest payroll software, AI, and automation.

With their wealth of knowledge, accountants play a crucial role in helping businesses eliminate payroll inaccuracies. Accounting firms must adopt the collaborative tech and outsourcing approach to integrate the latest technology within their processes and create capacity for high-value services such as payroll advisory.

Does the above solution sound relevant to your practice? It’s time to break the accountant’s trap and transform your practice. Book a consultation with our experts today to learn more.