There are many aspects of payroll that employers should know about — from payroll taxes and scheduling to the more granular side of things, such as how to calculate payroll and assigning payroll numbers.
Payroll numbers are essential for any accounting department because they help identify employees and their corresponding salaries. They act as a way of centralizing important information so that payroll can be carried out quickly and effectively, minimizing errors and headaches for both the employer and employees.
In this guide, we'll go over what a payroll number is, how it works, and other important things to know.
What Is a Payroll Number?
A payroll number is a unique identifier made up of numbers and letters that businesses use to identify employees, usually using a payroll system. They’re sometimes called payroll ID numbers or Unique Reference Numbers (URN) instead. This number serves as an added layer of protection to help pay employees securely. As a result, companies can more efficiently keep track of employees by linking them to payroll ID numbers.
Crucial employee details can be linked to a payroll number, such as an employee’s name, contact details, job title, salary, and more. Having this sensitive data linked to a payroll number can limit how much confidential data you're sharing and storing across the different databases your company uses. By using payroll numbers, you can limit the amount of personal information that might be released in a data breach. This is especially important when it comes to international payroll processing for global teams.
It’s worth noting that payroll numbers are separate from payroll tax account numbers. While a payroll number is used to identify an individual employee, payroll tax account numbers are used by the local tax authority to identify an employer.
How Do Payroll Numbers Help Businesses Run Smoothly?
By simplifying crucial and sensitive employee information with one payroll number, businesses - especially larger teams that use payroll management software - find it much easier to stay organized and secure. Payroll numbers have a myriad of employee information tied to them, which helps businesses centralize their most crucial data.
While most manual payroll processing does not require a payroll number, automated payroll software does. This is so that larger companies, or those who employ a multitude of employee types (i.e., salaried and hourly workers), can automate the process and minimize payroll errors.
Additionally, payroll numbers assist in keeping accurate records for when it comes time to pay taxes or in the event of a financial audit.
How Is a Payroll Number Created?
If you have an in-house payroll or HR team, you can often decide how to create your payroll numbers. If your team is responsible for creating payroll numbers, stay consistent in how you do it.
If you use an outsourced payroll service or payroll software, you can have them generate payroll numbers that are consistent with their systems. However, not all payroll software is equipped to create payroll numbers automatically, so make sure to research what capabilities a software has before making a purchase.
Where to Find a Payroll Number On a Payslip
Payroll numbers are usually three to eight characters long and can include letters and numbers. The payroll number usually appears on the upper left-hand or right-hand corner of an employee’s pay slip.
If it doesn’t appear on the pay slip or if the employee doesn’t regularly receive one, they may be able to find their payroll number on their timesheet, internal memos, or other official employment documentation.
Important Things to Know About a Payroll Number
As companies continue to face increased threats from cybercriminals, there are a few other important things you should know about payroll numbers:
What to Know About Payroll Numbers and Data Protection
Data protection has become increasingly important during the world's shift into digitization. Local laws have tried to keep up with protecting our most sensitive data to ensure it doesn't get into the wrong hands, sometimes at a significant operational cost. However, considering the average data breach costs businesses around $4.24 million USD, the expenses for such preventative measures are almost always worth it.
Laws such as the General Data Protection Regulation (GDPR) in Europe require employers to take extra precautions when protecting sensitive employee data, putting the burden on HR departments. However, practices such as securely distributing pay stubs and employing the use of automated payroll have become commonplace.
Be sure to check your local data protection regulations to ensure your HR and payroll teams remain compliant.
Common Payroll Issues to Avoid
The most common payroll issues your business should avoid include, but aren’t limited to:
- Miscalculating pay: Pay miscalculations are not only time-consuming, but they can also weigh down employee morale. Most employees know exactly how much they are going to receive and when they’ll receive it, so when they receive less than what they earned, they may have issues budgeting for the near future.
- Misclassifying employees: Are your employees full-time, part-time, hourly, salaried, or contracted? Each of these classifications, and more, require different tax paperwork and may be subject to differing pay periods/pay cycles. Be sure to properly classify each and every one of your staff members to avoid legal liabilities.
- Disorganized recordkeeping: This is especially true for smaller companies that perform the payroll process manually. Disorganized records will ensure that solving any payroll errors will take more time, effort, and HR resources. It also sets you up for failure in the event of a tax audit, which may open you up to legal liabilities.
Is PAYE Reference the Same as a Payroll Number?
No, a PAYE reference number is different from a payroll number. Pay As You Earn reference numbers are issued by a country’s tax authorities, whereas a payroll number can be assigned by a business.
Pay as you earn is a tax system applied to earners where taxes are deducted from paychecks throughout the year. If there is a discrepancy between the amount of taxes deducted and the amount the employee had to pay, the employee will have to pay that additional tax at the end of the year, or vice versa, in the case that more taxes were deducted.
Pay as you earn is a fairly common system, although it goes by different names in different countries. It is frequently referred to as “pay as you go,” as well.