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Payroll Processing: What is the Cost of Human Error?


“56 million American workers have paid a bill late because of a payroll error” – The Workforce Institute. 

Human errors in payroll processing can have severe financial repercussions for a business. These errors  can result in substantial fines, lead to employee dissatisfaction or even lawsuits if employee compensation payments are consistently inaccurate. Therefore, to ensure payroll processing is correct, it is essential to understand the costs of human error and how a business can minimize risk through the use of an effective time tracking system. This blog discusses payroll errors’ effects on businesses and employees and offers practical tips and solutions to help eliminate costly mistakes and save managerial time.

Why is the Payroll Accuracy Important to Employees & Organizations?

Accurate and Timely Payments

Payroll accuracy  ensures employees are paid correctly and on time, fostering confidence, trust and maintaining positive employer-employee relations. In addition, prompt payment boosts employee morale and reduces the risk of disputes. 

Compliance with Legal Obligations

Payroll is essential to meet tax and labor law requirements. Adhering to these obligations avoids penalties, maintains financial stability, and upholds the organization’s reputation as a reliable and responsible employer. 

Contribution to Positive Company Culture

Payroll plays a significant role in recognizing employee contributions and providing compensation, benefits, and rewards. Also, efficient payroll operations enhance employee trust, job satisfaction, and company culture. 

Resource Optimization

The payroll process involves numerous manual tasks that can be time-consuming. Outsourcing payroll operations to reliable service providers allows businesses to allocate resources effectively and focus on core operations, improving productivity and efficiency. 

Avoiding Costly Mistakes

Payroll errors can result in financial losses, strained employee-employer relationships, fines, penalties, and audits. Outsourcing payroll processing to experts reduces the risk of mistakes, ensuring accuracy and compliance, as well as avoiding potential financial liabilities.

In sum, a well-executed payroll process is essential for organizations to maintain employee satisfaction, comply with legal requirements, foster positive company culture, optimize resources, and avoid costly errors. 

What does research data tell us about payroll errors? 

Impact on Companies

  • 69% of companies have payroll data issues (Ceridian)
  • 14% of companies have encountered litigation issues related to payroll errors (Eyquest)
  • One payroll error can cost an average of $3,200 and 29 hours to resolve(Eyquest) 

Impact on Employees

  • 54 % of Americans have experienced paycheck issues (overpayment, underpayment, errors, etc.) (The Workforce Institute)
  • 33% of employers make payroll errors, costing billions in total annually (IRS)
  • 50% of employees will seek a new job after only two payroll errors (HRO Today) 

Payroll Processing

What are the main challenges human error causes businesses and employees?

Top 3 Challenges for Employees

  1. Incorrect Payments: Mistakes in payroll calculations can lead to overpayment or underpayment of employees, causing financial difficulties and frustration.
  2. Time and Effort Wasted: Dealing with payroll errors requires employees to spend valuable time and effort resolving the issues, diverting their focus from their actual work responsibilities.
  3. Trust and Confidence Issues: Payroll errors can erode employees’ trust and confidence in the organization’s ability to manage their compensation accurately and efficiently.

Top 3 Challenges for a Businesses

  1. Compliance Risks: Payroll mistakes can result in non-compliance with labor laws and regulations, exposing the business to penalties, fines, and legal issues.
  2. Administrative Challenges: Dealing with payroll errors necessitates additional administrative work, such as investigating and rectifying mistakes, which can be time-consuming and resource-intensive.
  3. Negative Impact on Employee Morale: Frequent payroll errors can lower employee morale and satisfaction, decreasing productivity and potential employee turnover. 

TimeWellScheduled Eliminates Human Error

Payroll Simplification

TimeWellScheduled streamlines and simplifies the payroll process while also eliminating human errors. With a simple click and download, the system effortlessly transfers your data from TimeWellScheduled to your payroll system, eliminating the need to enter time cards manually. This saves managerial time and significantly reduces the risk of errors associated with manual data input. Furthermore, the platform offers a convenient “Click, Print, and Export” feature, enabling you to easily access and download all the necessary payroll information in just a few clicks. You can review and analyze the data in Excel and then seamlessly export it to your payroll system, ensuring a quick and error-free data transfer. 

Can TimeWellScheduled integrate with your payroll partner?

Absolutely! Integration is another critical feature of TimeWellScheduled. By simply clicking a button, you can integrate your scheduling system with your payroll system, creating a seamless connection between the two. This integration ensures accurate and consistent data synchronization, streamlining payroll processes and minimizing discrepancies. With TimeWellScheduled, businesses can simplify payroll processing, reduce administrative burdens, and eliminate human errors, resulting in a more reliable and accurate payroll management system.

“Since implementing TimeWellScheduled, payroll has improved dramatically. Once the Store Managers approve the bi-weekly time cards, they are easily exported into the payroll software. By noon, we can complete four payrolls and be confident the hours are correct.”- Jamie Edstrom, Controller Lina’s Italian Market.

Human errors in payroll processing pose significant risks to businesses, ranging from financial consequences to employee dissatisfaction and legal implications. However, by recognizing the impact of these errors and implementing TimeWellScheduled time and attendance solutions, companies can safeguard their financial stability and maintain employee satisfaction. With a proactive approach to payroll management combined with TimeWellScheduled, businesses can ensure accurate and reliable operations, promoting a positive work environment and driving business success.

About TimeWellScheduled

Thank you for reading our article!

TimeWellScheduled is a secure online time and attendance software 100% tailored to meet your scheduling needs! In addition, TimeWellScheduled facilitates employee attendance tracking & payroll tasks and enhances staff management capabilities. Plus, our service is free for up to 10 employees!

Click: here to download our (Excel) employee scheduling template: it’s free!

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