Risky Business: Key Person Dependency in Payroll

Key Person Dependency is a risk you shouldn’t have to take.

Payroll isn’t just admin—it’s one of the most critical functions in any business.

Your team rely on it, your compliance depends on it and getting it wrong can have serious consequences. But many businesses unknowingly place themselves at risk by placing this responsibility in the hands of one person.

While it may seem efficient to delegate it to an individual in your team, key person dependency in payroll comes with a host of hidden risks that could impact your business far beyond a missed pay run. Below we discuss the pitfalls and how engaging a provider, such as Red Office, can mitigate the risks.

1. Business Continuity Risks: What Happens If They’re Not There?

If your payroll person is away unexpectedly—whether it’s sick leave, annual leave or they resign—can anyone else step in at the eleventh hour and ensure your team is paid correctly and on time?
When the process sits with one person, there’s often no back-up plan. Delayed payments can affect staff morale and even damage your reputation as an employer.

See the benefits this New Zealand business found by moving its payroll from a sole charge role to a managed team approach.

2. Knowledge Walks Out the Door

Many payroll processes are managed manually or rely on an individual’s knowledge rather than documented systems. If that person leaves, they often take that knowledge with them.
Training someone new or rebuilding the process from scratch can be a costly, time consuming and stressful exercise.

3. Risk of Human Error and Compliance Gaps

Payroll is governed by complex legislation—minimum wage, Holidays Act, KiwiSaver, PAYE, public holidays, parental leave, and more. Even the most diligent person can make a mistake, and with only one set of eyes on the process, those mistakes may go unnoticed until it’s too late.
Errors or compliance breaches can result in Inland Revenue penalties or legal disputes —costing time, money, and credibility.

4. Data Security and Privacy

Payroll involves some of the most sensitive information in your business—employee bank accounts, tax details, and salaries. If only one person has access to this information, the risk of accidental exposure or a data breach increases significantly. You need systems and processes in place that ensure your data is secure and access is appropriately managed.

5. Internal Controls and Oversight

While it’s important to trust your team, relying on a single person for payroll opens up the possibility of a potential oversight. Segregation of duties is a core financial control, helping to prevent mistakes and, in rare cases, deliberate misuse of funds. Having another set of eyes on the process isn’t about mistrust—it’s about good business practice.

How Red Office Alleviates These Risks

We understand the weight of payroll responsibility—and we also know there’s a better way to manage it.

Our Managed Payroll Service eliminates the risks of key person dependency by offering:

A team of experts, not just one person—so your payroll doesn’t stop when someone’s away. A pool of knowledge and experienced people at your disposal without hiring in-house.
Compliance peace of mind, with certified professionals using gold standard tools, who stay up to date with NZ legislation and upskill regularly.
Secure, cloud-based systems for accurate processing and data protection.
Built-in checks and oversight, with thorough robust systems and processes so nothing slips through the cracks.
Continuity and consistency, no matter who comes or goes in your internal team your payroll remains consistent, compliant and accurate.

Remove Key Person Dependency and Reduce Your Risk

If your business is relying on a single person to run payroll, now is the time to reconsider. Red Office can reduce your risk, ensure accuracy, and give you complete confidence that your team is being paid right—every time.

Ready to mitigate your key person risk?
Your peace of mind is just a click away