Payroll errors. They can be the bane of existence for any HR department that deals with them regularly. Payroll figures make for unhappy employees, take time and effort to resolve, and can lead to problems with taxing authorities if not caught and rectified quickly. So here is a question: how long does it take your company to resolve payroll errors?
An APQC report published in April (2017) showed that companies respond to payroll errors at different rates. Their survey, taken among 870 employers of varied sizes, showed that the best performing companies can address and resolve payroll issues within 2 to 4 days. The worst performing companies took 5 to 10 days. In some cases, they took even longer.
The kinds of errors discussed in the report cover the entire spectrum from time tracking to increasing 401(k) contributions. The problem with payroll errors is that the integration of payroll and benefits in the modern era makes fixing mistakes a lot harder than making them. Multiple systems have to be dealt with in order to make sure any fixes are applied comprehensively.
Dangers of Taking Too Long
The complexity of modern payroll processing and benefits administration can be a company’s worst enemy when it comes to fixing payroll errors. Indeed, we have created such a complex system through integrating payroll and benefits that it legitimately does take time to resolve errors. But taking too much time creates new problems of its own.
Payroll errors make for unhappy employees regardless of what those errors are. However, some errors cause bigger problems than others. Let’s assume a worker whose time is tracked incorrectly to the extent that overtime pay was not included in the last paycheck. Not only will the employee be unhappy about being shortchanged but the money may also be immediately needed by the employee to pay bills. Taking 10 days to resolve the issue could put the employee in financial distress.
The longer it takes to resolve a payroll error the greater the chances that the error in question will in some way raise questions from the government. At that point, the HR department finds itself having to clean up the mess and defend itself against inquiries from various government agencies. What was a minor error could quickly snowball into a full audit.
Reducing Errors through Outsourcing
It is obvious that payroll errors and the time it takes to resolve them are big problems for business. The solution may be outsourcing payroll entirely. BenefitMall, a Dallas-based payroll solutions provider, says that outsourcing is one way to keep payroll errors to a minimum. When errors do occur, the payroll vendor already has systems in place to quickly identify the source of the mistake and immediately correct it.
BenefitMall points out that many of the payroll errors companies deal with are a direct result of not applying federal and state rules appropriately. For example, a common mistake among employers is incorrectly applying overtime rules. Overtime pay must be calculated on a weekly basis even if a company pays biweekly or monthly. Calculating overtime based on pay cycle is not only illegal but it also leads to costly mistakes and creates unhappy employees and suspicious government auditors.
A payroll service provider makes a point of staying ahead of all federal and state regulations so as to ensure compliance for clients. This makes them better at avoiding mistakes, identifying them when they do occur, and getting things settled quickly and discreetly. That’s just what employers need to prevent small payroll mistakes from becoming big problems.