7 hidden costs of manual HR & payroll processes in UK local government 

UK local government HR and payroll isn’t exactly a walk in the park. Battling tight budgets, ever-changing regulations, rising expectations from communities – and the sheer complexity of public sector payroll – can feel like being pulled in all directions at once. 

There is only so much you and your team can do with manual and legacy HR and payroll systems from the early noughties. In fact, clunky systems could actually be doing more harm to your organisational culture and balance sheet than you may have anticipated. 

Read on to find out how.

In this blog

1. The hidden costs of manual processes in UK local government HR and payroll
2. Conclusion and key takeaways

1. Data inaccuracy and compliance nightmares

Did you know that one in four UK employees has experienced a payroll mistake recently?  An unsettling statistic, to say the least – especially when you consider how deeply these errors can affect people’s lives and organisational reputational damage.

We will talk about the impact this can have on morale in the next section. But for now, let’s talk about the compliance side. Because, let’s face it, payroll inaccuracies aren’t just administrative hiccups – they often become costly regulatory nightmares.

In fact, if we look at 2023 alone, the HMRC investigations revealed £13.6 million in underpaid wages, with penalties nearly matching that figure. This is all down to manual systems and processes that cannot offer the enhanced accuracy and risk mitigation of compliant payroll software

2. Employee frustration and higher turnover

However, there is so much more to payroll inaccuracies than the monetary penalties that come with noncompliance. Being paid correctly and on time is the minimum that employees expect in return for their work – and it is fundamental to the employer-employee relationship.

Yet, when manual HR and payroll systems fall short, it is employees who are left at the biggest disadvantage, and potentially in financial difficulty.

When payroll errors leave your workforce short on mortgage payments, rent, bills, or essential expenses, that financial stress can have a major ripple effect on how your workforce views your organisation and their loyalty. 

While this frustration hits employees hard, there’s the drain on payroll team to consider – time spent correcting errors and fielding payslip enquiries is time taken away from value-add activities.

Employee experience matters – it’s what keeps people engaged, committed, and willing to go the extra mile. It shows that you value their time, their wellbeing, and their contribution. And let’s be honest, when the basics like pay and admin run like clockwork, it clears the path for your people to focus on the work that truly makes a difference to your community.

3. The productivity black hole

If we zoom in on the productivity loss to repetitive and manual HR and payroll tasks, according to recent studies, around 12.6 hours a week – nearly two whole working days – get lost into a “productivity black hole”.

Additionally, 41% of UK employees have cited manual, repetitive workloads as a primary reason they’re considering leaving their jobs. This goes beyond just your HR and payroll teams. Even for employees having to manually input their timesheets, make sure to email their manager and HR,  and copy everyone else who they feel should be aware of overtime can be taxing on employee morale. But in today’s business environment, where speed, agility, and accuracy matter more than ever, relying on outdated manual processes can sometimes feel like you are trying to run a marathon in flip flops – slow, clunky, and likely to trip you up.

Now, imagine if those tasks were automated. Instead of wrestling with outdated systems, staff could shift focus to the kind of work that actually drives impact. Less admin, more action. Less duplication, more value. Those hours could be better spent focusing on community initiatives, strategic planning, or solving the most pressing local government business challenges. For London Borough of harrow, for example, Zellis solutions helped reduce payroll processing time by 50%.

But when your HR and payroll systems are held together by spreadsheets, emails, and crossed fingers, it’s hard to keep pace.

 

4. Increased vulnerability to fraud and data breaches

Alarmingly, payroll fraud accounts for around 10% of all occupational fraud cases, with the average incident costing close to £300,000. That’s not just a slap on the wrist – especially when it comes to the limited depths of government budgets.

Manual processing opens organisations to increased risk of GDPR and data breaches – for instance, if an exiting employee is not removed as a system admin, or in cases where employee details are held in shared inboxes or spreadsheets without controlled access.

These breaches lead to costly fines, lengthy investigations, and reputational damage that’s hard to come back from. Especially in the public sector, where trust is everything. When employee data isn’t properly secured, it’s not just an IT problem – it’s a leadership problem, a culture problem, and a public accountability problem.

This is why it is so important to invest in HR and payroll systems that dramatically reduce these risks. It’s safer, smarter, and gives everyone peace of mind.

5. Regulatory change overload

Local government HR teams have enough on their plate without having to play whack-a-mole with constant employment law updates. the past six months alone have seen National Living Wage increases, new pension thresholds, IR35 revisions, working time tweaks, and the introduction of the Neonatal Care (Leave and Pay) Act – It’s a never-ending constant of change.

But when you are trying to manage all of that with spreadsheets and siloed systems, every new regulation means diving into files, chasing down updates, cross-checking spreadsheets, and emailing “just to be safe.” Just one missed detail leads to a compliance issue, and possibly a fine to go with it.

Even in calmer times, relying on manually interpretation of complex legislation, updating rows and columns – and hoping it all adds up – is inefficient at best, and the start of irreparable reputational and financial damage at worst.

With automated updates, built-in checks, and one central source of truth there’s no panic, no endless email threads, just proactive, pain-free compliance. And that means less time firefighting, more time getting ahead of the next big policy shift – and putting people, not processes, at the centre of your work.

6. Poor visibility and decision paralysis

You can’t manage what you can’t see – and manual HR and payroll systems lack realtime workforce visibility. Delayed decisions and inconsistent reports can make seemingly simple questions- like ‘How many vacancies have been open for more than 60 days?’ – become major data-chasing missions.

This isn’t just inefficient – it’s extremely risky. Without realtime data on things like absence trends, turnover spikes, or budget forecasts, it’s all too easy to make decisions that feel right in the moment but miss the bigger picture.

Worse still, when leadership can’t access accurate workforce insights, it becomes harder to justify investments, secure funding, or make confident moves in workforce planning.

But, with the right systems in place, reliable, realtime data becomes the norm. Allowing for democratised insights across the board, which empower people managers and leaders to spot issues before they escalate. Making great decisions starts with seeing clearly – and that’s only possible when your HR data is no longer trapped in spreadsheets or fragmented systems that simply don’t speak the same language.

7. Stifled innovation and missed savings

Manual HR and payroll systems might feel like the safer, cheaper option – especially in the current climate where taking risks is no longer an option.

 But in reality it’s holding local governments back from accessing the kind of time savings, cost efficiencies, and innovations that drive business forward.

Manual processes eat into time and energy, leaving nothing left for innovation. Short timelines lead to a cycle of reacting instead of leading, and more time is spent firefighting errors that could have been easily avoided with automation. And, every year that goes by without modernisation, the gap between what’s possible and what’s actually happening keeps getting wider.

The House of Commons Committee on Public Accounts confirms that fragmented, outdated processes are a major barrier to public sector transformation – something we’ve seen first-hand when transforming processes and systems for our customers. Local governments with streamlined digital systems can reinvest time and money into frontline services, training programmes, and see the benefits of giving HR and payroll teams space to focus on value-add activities.

Investing in HR and payroll technology doesn’t just save time – it gives public sector organisations and local governments the space to think big again. And in an industry that’s constantly being asked to do more with less, that space might just be your most valuable resource.

Conclusion: The path to a smarter, more effective future

When you and your HR team entered the local government HR world, you entered wanting to make a difference for your community and those that serve them, not spend your days fixing spreadsheet errors or chasing missing timesheets. But when manual systems run the show, that’s exactly what ends up happening. All the while, your team’s time, energy, and potential slowly drip away.

It doesn’t have to stay that way. Modern HR and payroll platforms aren’t just about efficiency (though, yes, they’ll save you a ton of admin hours). They’re about giving your people the space to do the work that really matters. Work that’s strategic and meaningful. Work that serves the community, not just the process.

By digitising and automating your HR and payroll functions, you reduce expensive and damaging errors, improve compliance, make better decisions, faster, and more importantly, you give your employees a better experience where they feel seen, supported, and empowered to do their best work.

Key Takeaways

• Inaccuracies in payroll can lead to regulatory fines, lost trust, and serious damage to employee morale.
• Staff spend nearly two full days a week on repetitive, low-value tasks – time that could be better spent potentially delivering a better service for the community.
• Poor visibility and fragmented data lead to slow, risky decisions that keep councils stuck in firefighting mode.
• Manual processes expose local governments to payroll fraud and data breaches, with reputational and financial consequences.
• Regulatory changes are hard to manage without real-time updates and built-in compliance tools.
• Perhaps most importantly, clinging to manual ways of working restricts workforce insights and HR’s strategic value.

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Ready to cut the noise and modernise your HR and payroll? 

If manual processes are holding your team back, it’s time to take the next step.
Discover how Zellis helps UK government councils streamline operations, reduce errors, and free up time for the work that really matters.