I make no apologies for repeating this message – passive payrollers can look away now. Active and proactive payroll controllers need to embrace the challenges of preventing and detecting payroll anomalies.
As the complete antithesis of what business owners and leaders alike crave, the consequences of an unchecked anomaly go far beyond incorrect disbursement of funds. One must also consider:
- Employee dissatisfaction & loss of trust
- A strong basis for fines & penalties
- Lasting reputational damage
It begins with underpayments (or overpayments) of employee gross earnings, unauthorised transactions, perhaps even “ghost employees” – and ends in payroll breakdown. Hence, a demonstrable duty of care should become essential to your overall governance framework.
Starting with the right assumptions
Let’s be clear: payroll anomalies rarely originate from payroll calculations themselves, regardless of whether you use an in-house payroll engine or a third-party service provider. That’s because payroll and calculation rules are commonly embedded in those engines.
Assuming correct initial configuration, a payroll anomaly will – more often than not – originate upstream where incorrect, incomplete, or unauthorised data is fed into payroll long before calculation occurs.
Common anomaly drivers include:
- Incorrect employee master data
- Late or unapproved HR changes
- Misclassified employment terms
- Incomplete onboarding or termination workflows
- Manual adjustments outside controlled approval paths
- Disconnected systems and manual handoffs between HR, operations, and payroll
While payroll is rarely the source of the problem, it is where the problem becomes visible.
Payroll process before payroll platforms
Before we examine the role that technology can play in detecting and preventing payroll anomalies, let's consider some vital process-related practices.
For starters, everyone on your team who touches payroll needs to be appropriately trained (an obvious yet neglected tenet in this domain). Payroll teams need clear procedures, controls, and payroll rules they can consistently apply.
On a related note, organisations need to be wary of separation-of-duties conflicts – personnel who input, submit, or authorise individual payroll entries shouldn’t be the same people tasked with signing off on the weekly/fortnightly/monthly payroll.
In my experience, smaller operations can mitigate this risk by introducing an independent sign-off on the final payroll, which remains one of the most effective structural defences against payroll fraud and manipulation.
Payrollers should also – each pay period – sample a percentage of the paid employees, tracing payments back to the source and HR workflows (incorporate all details from the employee onboarding record).
In addition to sampling, organisations should periodically audit the broader employee population to identify systemic issues or recurring anomalies.
Finally, any anomalies discovered by your process checks must be formally recorded for future defensibility – and ideally presented to appropriate senior leadership along with:
- An analysis of the likely cause
- Impact (financial, employee hardship, fraud, etc.)
- Recommended remedial action
Payroll anomaly detection is ongoing (not occasional)
Modern payroll and workforce systems now make it far easier to analyse large, complex payroll datasets and identify anomalies before they become serious issues. It would be a mistake, however, to deem these modern safeguards as one-offs – they need to be a consistent part of your governance framework.
Best-in-class checks, both analytical and predictive, include:
- Comparison of employees paid versus the system of employee records, i.e. searching for “ghost employees” or continued payment of employees who’ve left
- Checking for duplicate bank accounts or employee identifiers to ensure only legitimate employees are paid
- Reviewing unusually high, repetitive overtime payments to employees, which may flag issues with approved or non-approved overtime
- Confirming overtime paid against employees who may be contractually exempt
- Reviewing payroll period movements per employee greater than X% versus the last pay period as a reliable method of identifying erroneous pay items at the employee level
- Reviewing employees on long-term paid absences (due diligence to ensure this is an authorised long-term paid absence)
- Comparing overall payroll gross value versus the last pay period, which may detect a duplicate overtime file or an erroneous bonus pay file
Another practice I’ve previously put in place involves validating the value of payroll against the value of payroll posted to the general ledger. This provides some sensible reassurance that nothing has been altered between validation and posting.
These controls are most successful when performed regularly, during every pay period – not retrospectively as part of a last-minute exercise to “fix” payroll after the fact.
Your ability to detect payroll anomalies has never been more crucial
Payroll anomalies are no longer viewed as isolated payroll mistakes. Regulators, auditors, executives, and boards increasingly see them as indicators of maturity in wider operational and governance.
That, in turn, places clear expectations on payroll teams: not only to maintain accuracy, but also to establish visibility, traceability, and proactive control across the full payroll lifecycle (from onboarding and workforce changes through to final disbursement).
These are just examples of what you could – and should – be doing each pay period.
Exploit the technology you have in-house, or the analytical capability available via your third-party payroll provider. Remember, the data required to surface anomalies already exists within most payroll environments. The gap is usually in the consistency of application rather than capability.
Document findings for each control check and validate that every exception can be traced back to the source for the guarantee of authenticity. Without that explicit link to the origins, anomaly detection is ultimately incomplete.
Your focus on potential payroll anomalies has never been more crucial. Internal business leaders rely on you to prevent them, and third parties – be they commercial or regulatory – are more interested in your duty of care than ever before. They may ask to see it, so ensure you can withstand the scrutiny.
Is your payroll model ready for 2026?
Payroll has always been business-critical. But this year, it becomes structurally unforgiving.
Between legislation changes and the continued uplift in both minimum wages and award rates, the margin for error is shrinking – fast. You need to know:
- Why “delay & correction” payroll models won’t survive Payday Super
- Where payroll risk really originates
- What a healthy managed payroll model looks like in practice
If you want to understand what Payday Super means for your organisation and process, be sure to explore our 2026 payroll guide. For other payroll-related enquiries, get in contact with Xemplo – we’re always happy to chat.
