Accountants warn businesses to be careful with payroll after a staggering 90 per cent admit to making errors

West Midlands-based Prime Chartered Accountants is urging businesses to take a closer look at their payroll practices after 90 per cent admitted to making payroll errors in 2025.

Payroll mistakes can be costly and it is estimated that businesses lose up to £150,000 per year through payroll mistakes.

At a time when cash flow is already difficult for businesses, losing money through payroll errors could lead to distrust among employees and, where the error leads to a staff member being paid less than the National Minimum Wage, fines from HMRC, according to Prime.

Martin Farrell is the Senior Payroll Manager at Prime. He says: “Payroll errors expose businesses across the UK to a host of legal and financial risks.

“Many businesses view payroll as a fixed target, but in reality, payroll is always changing. With the changes to the Employment Act this year, payroll has become more confusing than ever.”

In April 2026, the National Minimum Wage rose, Statutory Sick Pay became a day one right and day one rights to unpaid paternity and parental leave became the law. Payroll processes have had to adapt quickly to these changes.

Martin added: “Under the new legislation, payroll non-compliance carries the risk of 200 per cent penalties for underpayment, as well as public naming and shaming.”

“The most common mistakes are simple errors, such as miscalculating gross pay, applying the wrong tax code or simply classifying workers incorrectly.

“Even though these issues may seem small, issues with HMRC can arise, companies can have fines of up to 100 per cent imposed for incorrect filings.

“Beyond the compliance issues, payroll errors also affect staff morale, which can lead to higher levels of staff turnover, which brings with it additional hiring costs.”

If businesses discover that they have processed payroll incorrectly, the payment needs to be rectified in the next Full Payment Submission.

However, Martins says that businesses should try to avoid payroll inaccuracies altogether.

“At Prime, we offer dedicated payroll services, taking payroll out of your hands and putting it into the hands of professionals.

“Our team are payroll proficient, ensuring that your payroll is processed correctly and on time to ensure that your business doesn’t face any penalties for incorrect filings.”