Payroll Audits: How to Spot Red Flags Before They Become Fines
Payroll is one of the largest expenses for most businesses — and one of the most heavily regulated.
A single mistake in tax deductions, benefits, or reporting can mean costly penalties and unnecessary stress.That’s why regular payroll audits aren’t just “nice to have” — they’re essential.
Think of a payroll audit as a health check for your employee payments. Done right, it catches problems before they grow into compliance nightmares.
Why Payroll Audits Matter
Even with payroll systems like PaySpace, QuickBooks Payroll, or Zoho People, human oversight is still crucial.Payroll audits help you:
Stay compliant – Make sure taxes, NSSF, NHIF, and other deductions are correct.
Prevent fraud – Spot ghost employees or duplicate payments.
Control costs – Identify overpayments and overtime miscalculations.
Boost trust – Show employees you take accuracy seriously.
Common Red Flags to Watch For
If you spot any of these in your payroll, it’s time to investigate:
Employees you don’t recognise – Possible “ghost workers” collecting salaries.
Duplicate bank accounts – More than one employee being paid into the same account.
Large jumps in overtime – Could indicate timesheet errors or policy abuse.
Mismatched start/end dates – Paying staff outside their contract period.
Unusual deductions – Incorrect tax codes or benefit contributions.
How to Run a Simple Payroll Audit
You don’t need a full team of auditors — just a structured approach.
Compare payroll to HR recordsMake sure every paid employee matches an active contract.
Review statutory deductionsCheck that PAYE, NSSF, NHIF, and any other contributions are correct for each staff member.
Look at overtime and allowancesConfirm they match approved timesheets or expense claims.
Check for duplicate dataSearch for repeated bank account numbers, ID numbers, or tax numbers.
Test payroll reportsRun random spot checks — compare payslips to payroll entries and bank transfers.
Make It Easier with Your Payroll System
Modern payroll software can automate parts of your audit process:
Red Flag Risk | How Payroll Software Helps |
Ghost employees | Employee lists sync directly from HR — no manual entry gaps |
Duplicate payments | Alerts when bank or tax numbers repeat |
Overtime abuse | Reports flag unusual spikes month-to-month |
Wrong deductions | Tax tables and rules update automatically |
Poor documentation | Secure digital storage of payslips, contracts, and approvals |
Payroll fines aren’t just expensive — they damage your credibility with both staff and regulators.A quarterly payroll audit can save you from headaches, penalties, and unnecessary costs.
Need help setting up audit-ready payroll processes?Remotix Kenya can configure PaySpace, QuickBooks Payroll, and Zoho People to make compliance automatic. info@remotixregional.com
