The Real Cost of Payroll Errors

Payroll is all about money. That's why business owners and payroll admins can't afford to encounter payroll errors. Payroll mistakes don't just affect your company's finances, payroll errors also affect your people.

The Financial Costs of Payroll Errors

Payroll errors cost a company money, directly or indirectly. Usually, the cost is at least two-fold, because the error itself has a financial penalty independent of the time and money required to fix it. General payroll errors and their associated costs include:

Mis-logged hours that have to be added or adjusted after the fact, costing time and disrupting budget accuracy.
Misplaced timesheets and time cards lost in the paper shuffle.
Postponed approvals from managers and late payroll due to unfinished paperwork or missed communications.
Miscalculations in overtime, which can lead to compliance problems or, at worst, legal implications. Learn how to calculate overtime to prevent it happen
Overdue or unpaid payroll taxes that result in penalties and extra hours worked.
“Buddy punching” and other circumstances when employees enter hours incorrectly to receive payment for being absent.
Employee misclassification, when an employee is being paid more or less than their real wages due to an error in data entry or communication.

How Payroll Errors Hurt Your Employees

From a bigger-picture perspective, the more dramatic impact of payroll errors is one that is not as easily calculated.

A missed or miscalculated paycheck can often be a financial crisis for the affected employee. A single missed payment appearing on your credit report can affect your ability to buy a car or rent an apartment. Missed payments and money issues can even affect an employee’s ability to make it to work on time, or at all.

The payroll experience is one of the most important touch points between an employer and an employee. One single mistake can erode the trust employees have in their employer. When pay issues get out and show up in reviews of a company, the impact on employer brand can be devastating.

Preventing Payroll Errors

Protecting your payroll process to guarantee it works flawlessly is critical to any company from both a revenue perspective and an employee-experience perspective. And the best way to assure accuracy and remove bottlenecks is to fill the gaps in the method where human error can sneak in.

Automation and integration are the payroll administrator’s best friends. By using digital time tracking and compatible or integrated payroll software, HR and payroll can help ensure nothing gets lost, from the daily hours being tracked to the eventual approval and handoff that initiates the payroll process.

A cloud-based payroll service can stay updated with regulations, calculate and submit tax payments and info, and store records backed up for review.

By automating the transactional part of payroll, companies can protect their revenue stream and the trust they’ve earned with their employees. The Human Resources department also gains valuable time that they can then spend on improving the employee experience.

For example, creating a financial management program to help employees get past the debt cycle and start saving for retirement.

Moving from the old version of time tracking and payroll methods you’re used to may seem like a huge barrier for you and your employees to succeed, but when all it takes is one or two payroll errors to do serious harm to your employees and your company, it’s clearly worth the trouble.

Source: BambooHR