Key Tips to Avoiding Payroll Overpayments


Overpayment of wages can be a difficult issue to deal with, not least because it places financial strain on both employer and employee Such instances can be notoriously hard to correct historically and even when a professional solution is found it can still leave human headaches in place. Here, we look at 3 areas in which businesses can apply practical improvements to the payroll process and avoid overpayment issues before they occur.


As in other areas of financial management, it’s important to have an efficient payrolls process in place. But businesses should be wary of seeking too much short-cutting in this area, particularly because the monthly wage bill often represents a company’s largest recurring expenditure. Full training for all payroll staff is essential, and additionally it’s important to have good procedures and systems in place across all departments. This ensures that the most accurate and up-to-date information is constantly being fed into your HR and Payroll professionals.

Details like notifications of changes in hours, pay increases, and leaving dates should all be funneled into a standardised workflow process. Some might consider this back to basics, but where outbound payments are concerned, diligence is key. Different checks are vital when running payroll to reduce human error. It is important to check that any adjustments for the month have been entered correctly on the payslip, and in-turn payslips can be checked against the previous month’s record.


Strong communications may seem like an intrinsic component of any business practice, but in this area it is something to be especially mindful of, on multiple levels. As well as inter-departmental communications, maintenance of the employer-employee relationship is key. If any errors do occur, it’s important to discuss them with the staff member who has been overpaid before you take action. If you were to request full overpayment be returned in one go for example, this could have negative financial consequences for the employee and also damage morale.

Communications efficiencies can actually be increased even further by adding more people to the process. There is a growing understanding that in an age of AI it can be useful to have additional sets of human eyeballs looking over the changes that have been made within a given month. If somebody finds an error somewhere within the chain, that will be communicated.


Of course the march of technological advancement cannot be ignored, and in areas of quantitative work new technologies and the accuracy/efficiencies that they bring can be particularly useful. Dedicated payroll software makes running the payroll easier and more efficient, automating certain areas of the process to free up staff time for supervision/checks. Larger companies could even look at introducing HR software to link to payroll software, providing an electronic way of notifying changes.

The key is to find software that would benefit your business, whether big or small, and will generate cost-savings. It’s also very important to have backup systems ready in case of an IT glitch or a security breach. Beyond this, you might also like to consider bringing on-board a specialist third party provider. They are likely to be working with the latest technologies in this area and keeping a keen eye on the latest legislation, as well as offering that all important additional level of human checks.

However you approach your payroll process, it has traditionally been an area of business that is open to errors, particularly in terms of overpayments. By looking more closely at the three related areas of process, communications, and technology, it is possible to head-off more payroll problems before they occur.

23 November 2018