How to check your payslip for signs of payroll fraud

Why is it important to check your payslip?

Checking your payslip is an important way of making sure that you have been paid correctly and that the tax and other deductions shown are broadly what you would expect. However, sometimes even if your payslip looks right on the face of it, there can be problems behind the scenes with things like payroll fraud. This means that you might need to do extra checks. 

What is payroll fraud?

Payroll fraud can happen when an intermediary, such as an umbrella company, takes responsibility for running your payroll and operating PAYE, but keeps tax or other deductions instead of paying them to the relevant body. Your payslip may show the deductions and the correct net pay may reach your bank account, even though the intermediary has not passed on the deductions. If the intermediary does not pay over your tax and National Insurance contributions (NIC) to HMRC, your tax and NIC records may be incorrect.

HMRC have processes for recovering unpaid amounts of employer PAYE, and workers should not usually have to pay the same tax and National Insurance contributions twice. Even so, incorrect records can cause problems in the short term, for example if you expect a tax refund or need to claim benefits based on your NIC record.

What should I look out for?

You should check your payslips regularly. Don’t just rely on the amount going into your bank account looking about right! 

Based on HMRC’s new guidance – How to avoid payslip fraud – and our own experience, we recommend you should:

• Check the employer name – does it match the engager or intermediary you expect to be paying you? Be particularly alert to unexplained changes in the employer PAYE reference. 
• Check your pay – does your gross pay reflect the hours you worked, your agreed rate of pay and any overtime, bonuses or other payments you were expecting? 
• Check your deductions – make sure income tax, National Insurance, pension contributions and any other deductions, such as Student Loan repayments, are ones you recognise and expect. Ask about anything you do not understand or that seems vague.
• Check your tax code – is your tax code correct? An unexpected change in your tax code could affect the amount of tax deducted from your pay. 
• Check your net pay – does the amount you actually receive match the payslip and seem broadly right for the work carried out? 
• Check your year-to-date figures – these show how much you have been paid and how much has been deducted so far during the tax year. Compare them with earlier payslips so that you can spot unexpected changes or gaps, rather than looking only at the current pay period.
• If you are an umbrella worker, check that you can reconcile both stages of the payment: first, the difference between the amount paid to the umbrella company by the agency or end client and your gross pay; and second, the difference between your gross pay and your net pay, after deductions.

None of these checks on their own will tell you that payroll fraud has taken place. There may be legitimate explanations for changes or discrepancies. But anything you cannot explain should prompt you to ask questions and, if necessary, seek further help.

What if I don’t get a payslip? 

It is the law that workers get payslips. You should make sure that you get a payslip each pay period. Not receiving them, stopping receiving them, or losing complete access to online payslip systems should be considered a red flag. 

One or two missing payslips do not necessarily mean that fraud is taking place. However, repeated gaps are a warning sign because you may not have the information you need, and are entitled to receive, to check your position.

What if my payslip doesn’t include all the details that allow me to check it? 

You can only meaningfully check a payslip if you have enough information to understand what has happened.

The ACAS website explains the minimum information that the law requires a payslip to include. Those minimum requirements are limited, but many employers also include helpful details such as the tax code being used and year-to-date figures. Although these details are not required by law, they improve transparency and make it easier to reconcile the figures.

If your payslips do not include this information or are difficult to follow, ask your engager or intermediary to explain the figures and provide any missing details.

Can the authorities help me check my payroll arrangements?

One of the limitations of checking payslips is that it only tells you what your engager or intermediary says has happened to your pay. This is why it may be helpful to carry out some additional checks.

Workers can use their Personal Tax Account or HMRC’s App to check information HMRC holds about their employment and pay and taxes. This can provide another useful way of identifying potential problems. For example, you may be able to see whether an employment has been reported to HMRC and check the tax code HMRC has allocated to you.

However, workers should be aware that there is an important distinction between information being reported to HMRC and an engager or intermediary actually paying the tax and NIC that it has deducted. The information on your HMRC record can therefore provide a useful check, but it is not necessarily proof that the tax and NIC deducted from your pay has been paid over to HMRC. 

There isn’t really a worker-facing facility that shows, pound-for-pound, that their engager or intermediary has remitted each deduction to HMRC. You may, however, be able to check other deductions directly. For example, pension providers and the Student Loans Company should be able to tell you quickly and easily if any amounts deducted have been credited to your account (although there may be a time lag between deductions being made and the amounts being received and credited by the relevant organisation). 

What should I do if something doesn't look right?

If you spot something that you do not understand, the first step is generally to ask your engager or intermediary to explain it.

If you are unable to resolve the issue with your engager or intermediary, or you remain concerned that deductions from your pay may not have been handled correctly, you may need to seek further advice and, if necessary, report them. We have guidance on how to do this on our website. 

If you work through an umbrella company and you need additional reassurance that they are dealing with your pay and taxes correctly, you can request a free ‘payslip audit’. The payslip will be audited by SafeRec software, which has kindly been made available to LITRG for free. 

Takeaway

HMRC’s new guidance is a useful reminder not to assume that your payslip is correct. Check each payslip carefully when you receive it, raise any queries promptly, and keep your payslips and other records of your work and pay somewhere safe.

These simple steps can help you identify warning signs early and make it easier to establish what happened if a problem arises. If your payslips itemise deductions for tax and National Insurance, keeping them should also help protect you if HMRC later seeks to recover amounts that have already been deducted from your pay.