The common technical pitfalls of payroll

Payroll is one of the most crucial elements to get right when it comes to business operations. Beyond its role as a transaction at the end of the month, it represents the livelihood of employees and the financial health of an organisation. It’s a signifier of steadiness and security for the entire company structure. It also gives employees confidence and respect towards their employer.

However, despite the importance of payroll management, there are some common technical pitfalls that businesses fall into. Jake Elms, Payroll Operations Manager at Westcotts, outlines a few of these and how you can avoid them.

What are the common technical pitfalls of payroll management?

Salary sacrifice

A salary sacrifice is an agreement between an employer and an employee to negate some of the employee’s gross salary. Written up as a contractual agreement, instead the employee receives a non-cash benefit. This could be a cycle-to-work scheme where the employee is loaned a bicycle. It could also be childcare vouchers, a pension, or a company car. So, how can this cause issues when it comes to payroll?

These agreements mean a drop in a person’s annual salary which can affect financial agreements such as mortgage applications. These arrangements also cannot reduce an employee’s cash earnings to below the National Minimum Wage (NMW) rates. Whoever is in charge of your business’ payroll should monitor this closely and make sure any salary sacrifice offer is not made available to those that pose this risk.

There is also possibility for it to affect other benefits a person has such as life cover, as a reduced annual salary may mean that your life cover is reduced. During maternity or paternity leave, reduced entitlement to statutory payments and a lesser salary can affect the amount you receive in this period. If your earnings are particularly low but above the NMW, it can also prevent your entitlement altogether, if earnings are reduced below the Lower Earnings Limit (LEL).


There are numerous, great benefits to taking on apprentices and they can be a valuable asset to your company. It’s a chance for you to pay someone for their work while they gain a qualification. Once the end of their study has been completed, you also have someone with experience in the company should they choose to stay on.

A common pitfall when it comes to payroll management can occur when it comes to paying apprentices. If employing someone aged 16-18 you can pay them the apprentice rate throughout their qualification. However, for apprentices aged 19 and above, they can only be paid at this rate for the first year. Thereafter, their pay must increase to the NMW for their age. Anyone aged 16-18 must increase to the NMW once they reach their 19th birthday. This is provided that they have been employed for a year or more.

Record keeping for this is vital, whilst ensuring they are also paid for their college and study days, as this is part of the agreement you take when employing an apprentice.

Work-related deductions

Work-related deductions are often seen as a simple option to make deductions from employees pay for various expenses within the workplace.

These deductions can pose a risk to compliance when it comes to NMW. These can include purchases from the employer if you work in retail, for example. Costs could also be incurred for:

  • Uniform
  • DBS checks
  • Training costs
  • Travel costs
  • Food and drink
  • Tools and equipment
  • Damages
  • Accommodation

Also, the admin fee applied to attachment of earning orders (AEO) can often be overlooked.

Westcotts payroll services

Payroll can be a technical and time-consuming part of running your business. Staying on top of these common technical pitfalls will help you keep your payroll management under control.

At Westcotts, we have the experience and resources to take on your payroll to free up your time and valuable administrative resources. We can also give you access to a wealth of expert payroll knowledge. For more information, please get in touch with Jake Elms or Liz Marker from our Payroll team today by calling 01752 666601 or emailing

Written by Jake Elms

February 12, 2024

Category: Blog

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