A £245 million EDS-built salary system has been lambasted by a parliamentary committee after it malfunctioned and shortchanged thousands of soldiers, sailors and airmen, including those serving in Afghanistan.

The “catastrophic” payroll system at the Ministry of Defence left thousands underpaid, and overpaid thousands of others, the Commons Defence Select Committee found. Of those who were underpaid, some said they struggled to pay their living costs, and even defaulted on mortgage payments as a result.

The MoD and EDS were found to have made “truly reprehensible” mistakes in managing the rollout of the Joint Personnel Administration system, which was introduced in 2006 and intended to join the separate payrolls in place for the Army, Navy and Royal Air Force.

The JPA system had incorrect details for one in ten personnel, and underpaid some by as much as £345 every month, the report noted. “Most disgracefully, service personnel themselves have sometimes been blamed for the errors that have made their own lives a misery,” said Nick Harvey, Liberal Democrat defence spokesperson.

The MoD is also struggling to reclaim nearly £30 million in overpayments.

“It is difficult to exaggerate the magnitude of the failure” of the system, said the report, which also stated that the rollout was made more difficult by the MoD cutting 300 human resources posts.

The government’s management of suppliers came under fire again after EDS had paid it only £516,000 in compensation for the failures of the JPA system during 2007 and 2008. But charges took into account where the responsibility for the problems lay, the report noted.

An MoD spokesperson insisted that “significant improvements” had been made to the system over the last 12 months, and apologised for the incorrect payments. EDS was not able to provide immediate comment.