What payroll reports should a business review each month

Why monthly payroll reviews are essential

Payroll is one of the most significant and sensitive financial functions in any business. Errors can lead to underpaid staff, HMRC penalties, or inaccurate accounts. By reviewing payroll reports each month, businesses can check that wages, deductions, and contributions have been handled correctly and that all submissions to HMRC are complete.

Regular payroll reviews also ensure PAYE, National Insurance, and pension contributions match both payroll records and accounting entries. This protects your business from compliance issues and helps identify unusual patterns, such as overtime spikes, bonus anomalies, or missing payments.

The main payroll reports every business should check

Each month, employers should review a core set of payroll reports before approving final payments and submissions. The following reports provide a complete picture of staff costs and payroll compliance.

1. Payroll summary report

The payroll summary report is the foundation of every payroll review. It lists all employees, their gross pay, tax, National Insurance, pension deductions, and net pay. It should reconcile with the total cost in your accounting system.

By checking this report, you can confirm that each employee’s pay matches their contract and hours worked. Any bonuses, commissions, or statutory payments (such as sick pay or maternity pay) should also appear here. Comparing this report month to month helps identify inconsistencies or errors before they become costly to correct.

2. PAYE and National Insurance report

This report breaks down the total PAYE income tax and National Insurance due to HMRC. It is vital for confirming the accuracy of the Employer Payment Summary (EPS) and Full Payment Submission (FPS) sent through payroll software each month.

Comparing these figures with your HMRC Business Tax Account helps ensure that payments are correctly credited and that no underpayments or overpayments have occurred. Any variances should be investigated quickly to avoid fines or interest charges.

3. Pension contributions report

Employers with workplace pension schemes must monitor pension contributions carefully. The pension report should list both employee and employer contributions, as well as any opt-ins or opt-outs during the month.

It is important to confirm that all contributions have been paid to the pension provider by the statutory deadline. Delayed or missing payments can lead to penalties from The Pensions Regulator. Keeping this report on file also ensures you can prove compliance with auto-enrolment duties if ever audited.

4. Statutory payments report

This report details payments for statutory sick pay (SSP), maternity pay (SMP), paternity pay, and adoption pay. Reviewing it ensures the correct statutory rates have been used and that any recoverable amounts have been claimed via the EPS submission.

For smaller employers eligible for the Small Employers’ Relief on SMP, this report is particularly useful for confirming that all reimbursements have been correctly applied.

5. Overtime and variable pay report

For businesses where pay fluctuates, a variable pay report summarising overtime, commissions, or bonuses is essential. It helps track payroll costs and ensures that additional earnings are taxed and processed correctly.

This report can also highlight trends that may affect business performance. For example, repeated high overtime costs could indicate understaffing or operational inefficiencies that need to be addressed.

6. Payroll liability report

The payroll liability report lists all payments due to third parties, such as HMRC, pension providers, and courts (for attachment of earnings orders). It shows what must be paid and when.

Cross-checking this report with your payment schedule ensures nothing is missed. It also supports cash flow forecasting by helping you set aside funds for PAYE, NICs, and other deductions before the payment deadlines.

7. Holiday and absence report

Holiday entitlements and absences have a direct impact on payroll costs and business productivity. The holiday and absence report tracks annual leave taken, remaining balances, and any unpaid or unauthorised absences.

Regularly reviewing this data helps ensure compliance with employment law and prevents issues such as excessive carry-over or underpayment of holiday pay. It also helps identify patterns that may need management attention, such as repeated short absences.

8. Payroll journal report

The payroll journal report shows how payroll entries are posted into your accounting system. It includes gross pay, deductions, employer contributions, and taxes. Ensuring that the payroll journal matches your general ledger is crucial for accurate accounts.

Any discrepancies between the payroll journal and your accounting software may signal posting errors or missing data. Reviewing this report each month keeps your books clean and simplifies end-of-year accounts preparation.

9. Employer cost summary

This report totals the full cost of employment, including gross pay, employer’s National Insurance, and pension contributions. It helps business owners understand the true cost of their workforce and budget accordingly.

Comparing employer costs month to month can reveal the financial effect of new hires, pay rises, or reductions in staff hours. It also supports management decision-making when planning recruitment or restructuring.

10. RTI submission report

Every time payroll is processed, employers must send a Full Payment Submission (FPS) to HMRC under Real Time Information (RTI) rules. Reviewing the RTI submission report confirms that all data sent matches payroll records and that submissions were made on time.

Late or incorrect submissions can trigger HMRC penalties. Keeping a record of all RTI submissions also helps during audits or reconciliations.

How to review payroll reports effectively

Having the right reports is one thing, but interpreting them correctly is equally important. Here are a few practical steps to make your monthly payroll review more effective.

Cross-check totals

Always compare total gross pay, deductions, and net pay between different reports and your accounting system. The figures should balance. If not, trace the discrepancy before approving the payroll.

Match with HMRC records

Log in to your HMRC Business Tax Account each month to check that PAYE and NIC liabilities match your payroll reports. Early detection of mismatches can prevent unexpected bills or compliance issues.

Check for missing employees

If an employee has unexpectedly dropped off a report, it may mean their record is inactive or that they have been incorrectly marked as a leaver. Always investigate missing entries to ensure payroll is complete.

Review changes and anomalies

Pay changes, bonus spikes, or high overtime figures should always be checked. Comparing current and prior-month data helps identify errors or trends requiring management action.

Confirm payment accuracy

Ensure net pay totals match bank payment files. Payroll software errors, manual edits, or incorrect rounding can lead to under or overpayments.

Legal and compliance considerations

UK employers must comply with several payroll-related obligations each month. Reviewing reports helps confirm that all requirements have been met.

Real Time Information (RTI)

All PAYE employers must report payments to HMRC on or before payday through RTI. Reports confirm these submissions have been made correctly and within deadlines.

Auto-enrolment compliance

Employers must automatically enrol eligible employees into a pension scheme and contribute at the minimum required rates. Regular pension reports help demonstrate ongoing compliance with The Pensions Regulator’s rules.

Record keeping

Employers must keep payroll records for at least three years (five in some cases). Reports form part of this record and are essential for audits or HMRC reviews.

GDPR and confidentiality

Payroll data includes sensitive personal information. Reports should be stored securely and only accessible to authorised staff. Regular reviews of data handling and access permissions help maintain compliance with GDPR.

How software helps simplify payroll reporting

Modern payroll software automates much of the reporting process. Platforms such as Xero, QuickBooks, and Sage generate all the standard reports at the click of a button.

Using integrated payroll software allows automatic posting to accounting systems, real-time reconciliation, and easy access to historical data. This reduces manual errors and ensures reports are always up to date.

Many systems also let you set automated reminders to review reports or flag unusual entries, saving time and improving accuracy.

Common mistakes to avoid

Even with good systems, mistakes happen. Some of the most common payroll review errors include:

Not reconciling payroll to bank payments or accounting entries

Missing pension payments or failing to enrol new employees

Ignoring discrepancies between HMRC and payroll records

Forgetting to check leaver dates and final pay

Overlooking statutory payment rates when they change each April

Avoiding these errors keeps your payroll compliant and builds trust with staff and HMRC alike.

Practical advice for small businesses

For smaller businesses without dedicated payroll teams, monthly reviews may feel overwhelming. However, even basic checks can prevent major problems.

Start by focusing on the payroll summary, PAYE and NIC totals, and pension contributions. Once confident, expand to include reports like RTI submissions and journals.

If you outsource payroll to an accountant or bureau, ask for a standard monthly report pack and make sure you understand what each document means. You remain legally responsible for accuracy, even if the work is outsourced.

The financial value of consistent payroll reviews

Payroll represents one of the largest expenses for most businesses. Regularly reviewing reports helps you:

Keep payroll costs predictable and transparent

Spot fraud, errors, or duplicate payments early

Maintain HMRC and pension compliance

Improve budgeting and cash flow planning

Build trust with employees by paying correctly and on time

By treating payroll reports as part of monthly financial management rather than a simple admin task, businesses gain stronger control and fewer compliance worries.

Final thoughts

Monthly payroll report reviews are not just about compliance. They are a vital tool for financial control and business insight. Each report offers a different perspective, from ensuring payments are correct to analysing the real cost of employment.

Whether you manage payroll in-house or through an accountant, taking the time to understand and review your reports builds accuracy, accountability, and confidence in your business finances.