Payroll is a retention crisis in disguise. And the clock is ticking.

By Callum Pennington, CEO at HBHR

New research of 2,000 UK workers reveals that payroll errors are pushing employees into debt, fuelling job searches, and eroding trust. This is happening at the exact moment HMRC is introducing its most significant payroll changes in years. For HR leaders, the window to act is now.

Payroll has long been treated as a back-office function: unglamorous, invisible when it works, and noticed only when it goes wrong. But a growing body of evidence suggests it is time for HR professionals to move payroll firmly onto the strategic agenda. Not because of compliance risk, not because of audit requirements, but because of people.

New research commissioned by HBHR, drawing on a survey of 2,000 UK employees conducted in February 2026, paints a stark picture of the human cost when payroll fails, and of the significant business risk that follows.

One late paycheque away from crisis

For many workers, especially younger ones, payroll accuracy is not an administrative nicety. It is a financial lifeline. The research found that nearly a quarter of employees (24%) said pay errors have made it harder to afford rent or mortgage payments, food, or energy bills. One in five (20%) said a wrong or late payslip has caused them to miss a bill or regular payment entirely.

In London, the figures are even sharper. Over a third of London-based workers (34%) have been unable to cover a bill due to a payroll error, and 31% have had to turn to credit cards, overdrafts, or loans from friends and family to fill the gap.

Gen Z employees are bearing a disproportionate burden. Nearly two in five (37%) said they have fallen into arrears because of pay mistakes, and 31% have had to borrow money as a result. They are also less likely to have a financial safety net: 38% say they couldn't cope if their pay was wrong or late even once, compared to 32% of all workers.

"Payroll has always been treated as a back-office function, but these numbers make it brutally clear that it now sits on the front line of the cost-of-living crisis." Callum Pennington, CEO & Co-Founder, HBHR

Payroll errors are a flight risk. HR leaders need to take that seriously

Beyond the immediate financial stress, the research reveals a direct link between payroll problems and employee retention. The data should give any people leader pause.

If payroll errors were to continue over a six-month period, 61% of employees say they would be likely to look for a new job. Among younger generations, the figure climbs sharply: 76% of Gen Z workers and 72% of millennials say sustained payroll issues would prompt them to start searching.

At a time when talent retention remains one of HR's most pressing challenges, this is a significant finding. The research suggests that payroll is not just an operational issue. It is an employee experience issue. And increasingly, it is a talent issue.

What makes this particularly concerning is that errors appear to be widespread. Almost one in four workers (23%) said they had spotted a mistake in their payslip in the last twelve months alone. Yet despite this, nearly half of all employees (49%) say they only skim-read their payslip or barely look at it at all, meaning many errors are likely going undetected.

Younger workers are checking more carefully. But it is because they trust payroll less.

One of the more striking findings in the research is that younger workers are more likely to scrutinise their payslips than older colleagues. Some 40% of Gen Z and 42% of millennials say they scan their payslip carefully, compared to just 27% of boomers.

But this vigilance appears to stem from distrust rather than diligence. Just 29% of Gen Z and millennials say they feel genuinely confident and do not worry about payroll mistakes, compared to 43% of boomers. When asked specifically about confidence in payroll systems keeping pace with tax and National Insurance changes, the generational gap widens further: 57% of boomers express confidence, compared to only 37% of millennials.

Younger workers are not checking their payslips more carefully because they are detail-oriented. They are doing it because they do not fully trust that the numbers will be right.

For HR and payroll teams, this matters. A workforce that routinely questions the accuracy of its pay is a workforce in which trust is already eroding. Rebuilding that trust requires more than fixing individual errors. It requires systematic improvement.

The communication gap: a problem compounding an already urgent one

The research also exposes a significant gap between employers and employees when it comes to pay communication. It is a gap that is about to become a serious liability.

From 6 April 2026, HMRC is introducing major changes to payroll and tax rules, increasing the complexity of what employees will see on their payslips. Yet fewer than four in ten workers (36%) say their employer has informed them about these upcoming changes. Nearly a third (30%) say they have received no communication at all.

Day-to-day payslip communication is also not seen as a priority. Fewer than half of workers (41%) say their HR or payroll system clearly flags changes to their pay, tax, or deductions from one month to the next. One in five (20%) actively disagree, reporting that they are left to spot differences themselves.

This isn't just a communications failure; it's a trust failure. When employees can't understand their payslip, or aren't told why their take-home pay has changed, confusion turns to anxiety, and anxiety turns to disengagement.

What employees actually want, and what technology can deliver

The message from employees on technology is unambiguous: 85% say employers should use up-to-date payroll technology to minimise errors. Some 72% say that modern technology underpins their confidence that pay will be accurate and on time.

Beyond technology, employees highlight two practical priorities: advance communication about any changes to their pay (cited by 33%) and having a named person or team they can contact with payroll questions (29%). These are not complex asks, but meeting them requires the right processes and the right platforms.

Modern payroll platforms can deliver on all of these expectations simultaneously: automated accuracy checks, real-time payslip notifications, clear change summaries, and accessible support channels. But this only happens when organisations make the decision to invest and to treat payroll as a people function, not just a finance one.

The window to act is now

April 2026 is a deadline, but it is also an opportunity. The HMRC changes will require every business to review its payroll processes and communications in any case. HR leaders who use this moment to upgrade their systems, close their communication gaps, and actively rebuild trust with employees will emerge in a meaningfully better position than those who simply scramble to comply.

The data is unambiguous: payroll errors are hurting people financially, eroding trust in younger generations, and creating measurable attrition risk. In a labour market where talent is hard to find and harder to keep, allowing avoidable payroll failures to continue is a cost no organisation can afford to ignore.

The businesses that treat April 2026 as a prompt to modernise, rather than just a compliance hurdle to clear, will be better positioned to retain talent, rebuild trust, and manage the workforce complexity that lies ahead.

Payroll has earned its back-office reputation over decades. It is time to change that, for the sake of the people it serves.