Payroll Audits: Why March is the Best Time for a Compliance Check

March is a crucial month for businesses to conduct a payroll audit before the new tax year begins. A payroll audit ensures accuracy, compliance, and efficiency—preventing costly errors before they roll over into the next financial year. Here’s why March is the perfect time for a payroll compliance check and what businesses should focus on.

1. Reviewing Payroll Records & Tax Codes

Payroll records need to be accurate and up to date to avoid tax discrepancies. Employers should:

  • Verify that all employee tax codes are correct to prevent under or over-deductions.

  • Ensure that all overtime, bonuses, and deductions have been processed correctly.

  • Check for any missing employees who should be added or removed from payroll.

2. Ensuring Pension Contributions Are Correct

With automatic enrolment rules in place, businesses must ensure that pension contributions are being calculated and deducted correctly. Key checks include:

  • Confirming that the correct employer and employee contributions have been made.

  • Reviewing whether any salary changes affect pension contributions.

  • Ensuring compliance with The Pensions Regulator to avoid penalties.

3. Checking for Payroll Fraud Risks

Payroll fraud can happen when ghost employees, unauthorised overtime, or false expense claims are processed. A payroll audit can help businesses:

  • Identify any duplicate payments or unexplained payroll discrepancies.

  • Ensure that terminated employees have been removed from the system.

  • Implement stronger internal controls to reduce fraud risks.

4. Avoiding Underpayment or Overpayment Errors

Incorrect payments can lead to employee dissatisfaction and potential legal issues. Employers should:

  • Compare gross pay vs. net pay for consistency.

  • Double-check holiday pay, sick pay, and statutory payments.

  • Ensure that minimum wage increases (April 2025 updates) are correctly applied.

Final Thoughts

A payroll audit in March allows businesses to address payroll issues before the new tax year starts, reducing compliance risks and improving payroll efficiency. If you’re unsure about payroll compliance, outsourcing to a payroll bureau can save time and ensure peace of mind.

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