The 7 Most Common Payroll Errors And How to Avoid Them

Check your state payroll frequency laws to ensure your pay frequency is allowed by your state. You may have separate pay frequencies, depending on the work your employees do. If you do, remember to separate the employees and pay them according to schedule.

Overtime calculations can be particularly tricky when dealing with different pay rates, shift differentials, or non-discretionary bonuses. The priority should, of course, be rectifying the error and making the employee financially whole. But how you communicate and handle the mistake can have a long-lasting impact on their happiness what is accrued payroll definition and example and engagement with your company. If you react positively, it can even potentially turn a negative situation into a positive.

Steps to Avoid Common Year-End Payroll Mistakes

Incorporating these elements into your payroll process can help you catch errors before they happen, making payroll faster, easier, and more accurate. According to 2022 research by Ernst & Young, companies make an average of 15 payroll mistakes per payroll period—and each mistake costs an average of $291. Regular communication with employees about their PTO balances can help prevent end-of-year rushes to use time off and ensure smoother workforce planning. As we’ve mentioned, payroll errors are not just simple miscalculations on your back end; they could be the difference between your employee making a mortgage payment or not. Implement a uniform timekeeping system that accurately captures all what is reorder point calculate the reorder point formula your employee’s hours.

Also, having a manual system for managing payroll increases your reliance on one person to manage all payroll actions. Without an organized and automated payroll system, it’s harder for someone to fill in when the payroll manager is out of the office or leaves the company. It can also set you up for problems in the event of an audit or process review. An industry-leading platform like When I Work keeps your schedule, timesheets, and payroll all in one system to automate your calculations and even help ensure compliance. The thought of making a critical payroll error can be anxiety-inducing.

How to Save Time And Money With Automatic Scheduling For Employees

Through 30 years of user feedback and product innovations, we’ve made payroll simple, so you can get in, make edits, run payroll and get out. Discover why nearly 30,000 organization are partnered with Paycor by talking with a representative today. Save time and money by outsourcing your payroll processing and tax filing. To steer clear of forgetting to send out tax forms at year-end, you can set reminders, mark your calendar, or use a payroll service that does it for you.

Avoid payroll errors with Remote

Provide training so that everyone involved in payroll processing understands the new policy. Alternatively, you can work with an EOR provider (like Remote) that manages your team members’ benefits for you — wherever they are based. We ensure that the correct benefits deductions are made and that this is reflected in payroll. Regularly review all your team members’ roles and responsibilities, and look closely at your working relationships with any independent contractors you work with. Errors in calculating wages, overtime, or deductions can have a negative impact on employee satisfaction and your company’s financial integrity. While you want to avoid any payroll error, the least you can do is write an employee payroll error letter to let them know what happened and what you’re doing to resolve the issue.

1. For example, in California, final wages are due immediately upon involuntary termination, while employees who resign must be paid within 72 hours.
2. This procrastination can result in missed deadlines for tax remittances, incorrect calculations due to rushed work, and failure to account for year-end adjustments or bonuses.
3. Missing a tax deadline can cost your company a considerable amount with late fees, penalties, or even legal trouble.
4. While the fact that most companies achieve more than 80% accuracy in payroll can seem encouraging, small payroll mistakes can add up over time.
5. Year-end payroll involves preparing various tax forms, which can be daunting.

Year-end is hectic as heck for many business owners (including myself). And with all of the hecticness, it can be easy to get caught up in other tasks and forget to send out tax forms (e.g., Form W-2) to your team. I hate to break it to you if you didn’t already know, but some tax rates can change from year to year. And if they change and you don’t realize it, that’s where a payroll blunder can come into play. No worries—I know how difficult it can be, especially when you have a million other things on your plate. Our guide on the difference between independent contractors and employees goes over the distinction how to make a balance sheet using a simple balance sheet equation in detail, provides resources, and more.

Maintain Payroll Compliance

For example, in some countries — and even in individual US states — employees must be paid a minimum of twice per month, while in others, the requirement is once per month. One of your hourly employees works 45 hours during a particular week. However, due to a manual entry error, they are only paid for 40 hours. This error results in them not receiving overtime pay for the extra 5 hours. Inaccurate employee data — such as a misspelled name, wrong address, or incorrect tax number — can lead to severe administrative headaches and legal complications.