Employees don’t just work to get paid. They work to get paid correctly and on time.
People make what they earn, and that’s that. Easy enough, right? Unfortunately, it’s not that simple. Payroll reflects what an employee does; time, expenses, deductions and bonuses all play a part in the calculation of their wages — each variable representing another opportunity for error.
Despite payroll’s history of 600-plus years, companies everywhere still have trouble getting the traditional process right.
How common and costly are payroll errors?
According to Ernst & Young research, payroll professionals say their companies’ processes are nearly 20% inaccurate. Each payroll mistake costs a business an average of $291. Any one of these issues could require:
- wires
- voids
- reversals
- rushing to cut a paper check
- delaying an employee’s pay
To pass a class or driving exam, 80% accuracy might be good enough, but it’s not a promising figure for most things in life. Would you purchase a dryer that burned clothes every fifth cycle? Or board a bus that tipped over only 20% of the time?
Just as we would seek alternative means, it’s not a stretch to believe an employee who experiences routine payroll errors would look for a more reliable workplace, too.
As reported by Gallup, 1 in 3 people said they’re thriving in their careers. Despite this, almost half of workers said they’re open to a new job, and 39% who are dissatisfied are actively looking, according to a Morning Consult survey commissioned by Paycom.
One thing is clear: We work to afford life. If work can’t help do that, most would seek employment elsewhere.
Consider this the deepest dive into the real cost of common payroll errors. First, we’ll examine financial and emotional consequences of payroll problems for employees. Then, we’ll explore the payroll discrepancies — and their price tags — that plague businesses today. Finally, we’ll see how new technology transforms the process from reactive to proactive and avoids the negative impact of payroll errors.
Chapter 1: Life on the Edge
Let’s face it: Times are tough.
Inflation fueled by supply chain issues continues to impact food, gasoline and housing prices. The average American owes at least $90,000 in consumer debt. The World Bank announced ending extreme poverty by 2030 is no longer realistic.
A consistent and correct check is more important than ever. Yet payroll errors remain prevalent. To understand just how damaging they are, we commissioned a survey from Morning Consult of employees nationwide. The Painful Truth About Payroll Problems
Think about how much we rely on electricity. Despite our need for this resource, it’s easy to take for granted.
It won’t take too long sitting in the dark to see your quality of life compromised. The temperature starts to drop. The last candle burns to the end of the wick. And hundreds of dollars’ worth of groceries rapidly spoil.
What keeps the lights on? Paying the energy bill might. For the nearly 20 million U.S. households behind on utility payments, that’s easier said than done. Imagine how many of these homes are on the verge of having power shut off because of a preventable issue.
Almost every American (86%) would stumble after just one missing or delayed paycheck. Unfortunately, nearly just as many would come face to face with the consequences. In fact, the 80% who were forced to act said they:
- borrowed money from family and friends
- dipped into savings and put off financial goals
- cut back on spending and other investments
- relied on credit cards or payday/short-term loans
While inconvenient, these pivots may serve as best-case scenarios for a missing check. In the same situation, an overwhelming 40% of Americans would be vulnerable to something more severe: poverty.
Payroll errors fan the flames, burning the most vulnerable of us. Poverty transforms the comforts many of us take for granted into luxuries. And it’s becoming more common.