Can I recover an overpayment from an employee?

In most cases, an accidental overpayment can be recovered from an employee, but you should not simply deduct a large amount from their next wage without speaking to them first. Confirm how much was overpaid, how the mistake happened, how recovery will work and whether a repayment plan is appropriate if the amount is significant.

How can small businesses prevent payroll mistakes?

Simple controls can help: set a clear payroll cut-off, use a standard process for starters and leavers, require approval for overtime and pay changes, reconcile payroll before payments are released, compare unusual movements against the previous month, and review payroll reports before making the final payment.

Payroll 3 September 2026 · 7 min read

I’ve Made a Payroll Mistake – What Do I Do?

Payroll errors happen. The important thing is not to panic — but it is important to deal with the mistake quickly and correctly.

Payroll mistakes happen.

Maybe an employee has been paid too much. Perhaps overtime was missed, the wrong deduction was taken, or you’ve spotted an error after payroll has already been submitted to HMRC.

Whatever the mistake, the important thing is not to panic — but it is important to deal with it quickly and correctly.

Quick answer

Identify what went wrong, correct the employee’s pay where necessary, make sure your payroll records and HMRC reporting are accurate, and consider whether a change to your payroll process could prevent it happening again. The worst thing you can do is ignore it.

Here are some of the most common payroll mistakes and what employers should consider.

1. I’ve overpaid an employee

Overpayments can happen for all sorts of reasons — incorrect hours, duplicated payments, overtime entered incorrectly or a change not reaching payroll in time.

In most cases, an accidental overpayment can be recovered from the employee, but don’t simply deduct a large amount from their next wage without speaking to them first.

Confirm:

how much has been overpaid;
how the mistake happened;
how the overpayment will be recovered; and
whether a repayment plan is appropriate if the amount is significant.

Good communication is particularly important where recovering the full amount at once could cause the employee financial difficulty.

2. I’ve underpaid an employee

If an employee hasn’t received everything they’re entitled to, investigate the reason and calculate exactly what is outstanding.

This could involve:

basic pay;
overtime;
bonuses or commission;
holiday pay;
statutory payments; or
an incorrect deduction.

Where possible, correct an underpayment promptly rather than automatically expecting the employee to wait until the next normal payday.

It’s also important to check whether the mistake has affected National Minimum Wage compliance.

3. I’ve used the wrong tax code

Employers should normally use the tax code provided through the appropriate HMRC notification or the information available when the employee starts.

If you think a tax code looks wrong, that doesn’t necessarily mean you should simply change it yourself.

Check the information you’ve received and follow the appropriate HMRC process. Employees may also need to contact HMRC directly if they believe their tax code is incorrect.

4. I forgot overtime, a bonus or another payment

This is a common payroll error, particularly where information is being passed between managers and whoever processes payroll.

First establish whether the payment can be corrected immediately or whether it will need to be included in a subsequent payroll run.

More importantly, look at why it was missed.

Would a payroll cut-off date help? Should managers submit overtime using a standard form? Does someone need to approve changes before they’re processed?

Fixing the payment solves today’s problem. Fixing the process can stop it happening again.

5. I’ve already submitted payroll to HMRC

Spotting a mistake after submitting your Full Payment Submission (FPS) doesn’t necessarily mean it can’t be corrected.

How you correct it will depend on the error and when it is discovered. HMRC provides processes for correcting payroll information that has already been reported.

The key is to make sure both the employee’s payroll record and the information reported to HMRC are correct.

Don’t simply alter your internal spreadsheet or payslip and assume that’s the end of it.

Prevention is better than correction

The occasional genuine mistake can happen in any business, but repeated payroll errors can damage employee trust and create unnecessary work.

Some relatively simple controls can make a big difference:

Set a clear monthly payroll cut-off.
Use a standard process for starters, leavers and contractual changes.
Require approval for overtime, bonuses and pay changes.
Reconcile payroll before payments are released.
Compare unusual movements against the previous month.
Keep a clear audit trail of changes.
Review payroll reports before making the final payment.

For a small business, these controls don’t need to be complicated. They just need to be consistent.

Made a payroll mistake and not sure what to do?

The worst thing you can do with a payroll mistake is ignore it and hope it sorts itself out.

Identify what went wrong, correct the employee’s pay where necessary, make sure your payroll records and HMRC reporting are accurate, and then consider whether a change to your payroll process could prevent it happening again.

Crawford Consultancy can support small businesses across Central Scotland with payroll queries, payroll processes and practical payroll support — without the need for an in-house payroll team.

If you’ve spotted a payroll issue or simply want more confidence that your payroll processes are working as they should, get in touch.

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This article provides general guidance only and does not constitute legal advice. Payroll and employment situations can vary, and you should seek advice tailored to your specific circumstances where needed.

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