A payroll number is a unique sequence of numbers and letters which an employer can assign to each individual employee working at a company. Particularly useful for large companies, important personal data can be linked to their number to maintain secure and efficient tracking.
While it is not a legal requirement for a company to assign payroll numbers to their employees, many companies will use these unique identifiers to protect employees personal information and reduce the risk of mistakes within the payrolling process.
To help you understand how a payroll number can contribute to data security within your company, we explain the payroll number in more detail and explore common payroll number issues.
How to find a payroll number
A payroll number can be found on a payslip, usually beside the employee’s name at the top of the slip. The number may appear different depending on each company, however it could look something like this: 0123456.
When deciding how to format your company’s payroll numbers, there are no strict formatting rules or regulations, however it is worth deciding on a consistent process to stay organised across the business.
For example, your HR or payroll manager may wish to distinguish between departments or roles by adding a short prefix of letters before the string of numbers. If you use an outsourced payroll software such as Mitrefinch’s Flexipay, payroll numbers can be generated for you. This can help ensure a consistent formatting process and reduce the risk of duplicate numbers across the business.
You can find out how to read and understand a payslip in our guide.
The difference between a PAYE reference and payroll number
If your business is registered to use PAYE, an employee will be given a PAYE reference number by HMRC. This is completely separate from a payroll number as it relates to how HMRC collects tax and national insurance contributions.
A PAYE (pay as you earn) reference number consists of a three-digit HMRC office number, followed by a unique number which is linked to your company. It can look like this: 123/AB12345.
On a payslip, this number shows employees how much tax they have paid whilst working for your company. For a company, the PAYE reference will be used to complete the end-of-year PAYE Returns.
Common payroll number issues
There are a number of common payroll number issues which can occur. Errors, especially when identified too late, can be difficult to amend and can lead to payroll issues, such as an employee not being paid correctly.
For example, if an employee leaves and is re-employed by the business, a new payroll number must be assigned – they cannot be linked back to their old identifier. This is because a payroll number is used for each employment, rather than a singular person.
If you wish to change an employee’s payroll number throughout their employment, it must be reported quickly and accurately to the PAYE system. If not, employers could accidentally create a duplicate employment, rather than simply updating the existing one.
How does a payroll number help protect employee data?
Companies, especially those larger in size, will benefit greatly from using payroll numbers to track their employees.
As a large amount of personal data is linked to each number, excessive employee information may be unnecessarily stored across several databases across the company. A payroll number can help reduce this information down to a singular number, reducing the risk of damaging data breaches.
Also, if there are multiple employees with the same name, there is the risk that sensitive information may be sent to the wrong employee – leading to a serious breach in data security. A payroll number ensures the correct information, including salary and personal information, is linked to the relevant employee.
Adhere to strict GDPR law with Mitrefinch
Ultimately, using a payroll number can help your company to meet stringent GDPR and payroll requirements, avoiding costly fines and severe reputational damage.
If you would like to learn more about payroll and compliance, or you’re looking to reduce payroll errors by working with the experts, get in touch online or call us on 0330 726 0066. Our payroll software, Flexipay, is used by more than 3,500 UK based companies, find out why by speaking to our team today.