Payroll Errors in the Private Household: A Practical Guide to Putting Things Right

Payroll administration is one of the least glamorous aspects of employing a personal assistant, and it is the area where honest mistakes are most common. Unlike large businesses with dedicated payroll teams, household employers typically manage these obligations themselves or through a small accountancy service. The margin for error is real.

The good news is that most payroll mistakes are correctable. The process is rarely as complicated as it feels in the moment, and HMRC's approach to household employers who make genuine errors and act promptly is generally pragmatic. The problems arise when mistakes are left unaddressed, or when an employer is unsure whether a particular error requires disclosure at all.

This guide walks through the most common scenarios and explains what to do in each.

The Most Common Payroll Mistakes in Private Households

Before examining remedies, it helps to name the errors that occur most frequently:

Overpayment of wages. This can happen when a PA's salary is not adjusted following a period of unpaid leave, when a bank holiday calculation goes wrong, or simply when a figure is entered incorrectly. It can also arise when an employer continues paying during a notice period that ends earlier than expected.

Under-deduction of income tax or National Insurance. This typically occurs when the wrong tax code is applied, when a PA's secondary employment is not accounted for, or when the employer's payroll software is not updated following a change in thresholds.

Missed Real Time Information (RTI) submissions. Since April 2013, employers have been required to submit payroll information to HMRC on or before each pay date through the RTI system. Late or missed submissions attract automatic penalties.

Incorrect treatment of benefits in kind. If you provide your PA with accommodation, a vehicle, or other non-cash benefits, these must be reported correctly through your payroll or via a P11D. Errors here are extremely common among household employers who are unaware of the reporting requirements.

Failure to apply the correct minimum wage rate. National Living Wage and National Minimum Wage rates change each April. Employers who fail to update their payroll in time may inadvertently fall into arrears.

Overpayments: What You Can and Cannot Recover

Discovering that you have overpaid your PA places you in a delicate position. As an employer, you are generally entitled to recover overpayments, but the method and timing of recovery matter significantly.

You cannot simply deduct the overpayment from the next pay packet without your PA's agreement unless your written contract of employment contains an express clause permitting wage deductions for overpayments. Without such a clause, an unauthorised deduction may constitute a breach of the Employment Rights Act 1996.

The correct approach is to notify your PA promptly, explain the error clearly, and agree a repayment arrangement in writing. Where the overpayment is substantial, a phased repayment over several pay periods is usually the most reasonable approach. Keep a written record of the agreement.

If your PA disputes the overpayment or refuses to repay, you may need to seek legal advice before proceeding. Do not make unilateral deductions.

Under-Deductions of Tax and National Insurance

If you have been deducting too little income tax or National Insurance from your PA's wages, the question of who bears the liability depends on the circumstances.

In general, the employer is responsible for ensuring that the correct amounts are deducted and remitted to HMRC. If an under-deduction results from an incorrect tax code issued by HMRC, the position is more nuanced — HMRC may pursue the employee directly in some cases. However, if the error was yours, you may be required to make good the shortfall.

The practical step is to correct the error in your next RTI submission and make up any underpayment to HMRC. If the amounts involved are significant, contact HMRC's employer helpline to discuss the best course of action before submitting.

When You Must Notify HMRC

Not every error requires a formal disclosure. Minor calculation errors corrected within the same tax year through your normal RTI submissions generally require no separate notification. However, the following situations are more likely to require direct contact with HMRC:

• Missed RTI submissions — these should be submitted as soon as possible, with a late reason code where applicable
• Significant underpayments of PAYE that cannot be corrected through normal payroll cycles
• Errors spanning multiple tax years that require an amended submission or a formal correction request
• Failure to register as an employer — if you have been paying a PA without registering with HMRC, you should regularise your position without delay

HMRC operates a voluntary disclosure process, and employers who come forward promptly and cooperate fully are treated considerably more favourably than those where errors are discovered through an enquiry.

Telling Your PA About the Mistake

Many household employers dread this conversation, but transparency is almost always the better policy. Your PA has a right to understand their pay, and discovering that errors have been concealed is likely to damage trust far more than the error itself.

Keep the conversation factual and solution-focused. Explain what happened, what the correct position should have been, and what you propose to do to put it right. Avoid language that implies blame unless the PA was responsible for providing incorrect information. In most cases, these conversations are straightforward and are resolved without difficulty.

Prevention: The Unglamorous but Essential Step

The most effective response to payroll errors is to prevent them. Use HMRC-recognised payroll software that updates automatically when rates change. Set calendar reminders for RTI submission deadlines, P60 issue dates, and the annual April rate review. If payroll feels beyond your capacity, a specialist domestic payroll provider will typically charge a modest monthly fee and is well worth the investment.