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Understanding and Tackling Payroll Errors

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The primary goal and function of any payroll department is to make sure employees are paid accurately and on time. However, as much as we would all like to believe that our payroll teams are perfect, the reality is that mistakes happen. Whether it’s due to a data entry error or typo, system configuration issue, or just plain carelessness, the important thing is to get the error resolved in a timely manner and make the employee and/or company whole.

Payroll errors can result in a number of scenarios, including over- or underpaid employees, incorrect tax withholding and reporting, or paychecks generated in error or missed completely. If the error negatively impacts the employee, the best course of action is generally to address the issue as soon as possible. This can be especially important if the error is due to missing part or all of a pay period. States can have very specific requirements on the timing of pay for any work performed in a period. Some states also have specific guidelines for handling payroll corrections for underpayment that can vary based on the severity of the error.

Depending on the error, the fix can be as simple as including an adjustment on a future payroll. Complex errors or a recently discovered issue that might have been going on for several months (or even years!) could mean much more difficult and time-consuming corrections, which might include having to amend tax filings and getting hit with various penalties and interest charges from the affected jurisdictions. It will always be in a company’s best interest to address errors in a timely manner whenever they are discovered.

Although it is important to fix issues to make employees whole by issuing any missed pay or, in the case of errors related to retirement plans, making up for missed contributions and associated earnings and interest, it is arguably more important to identify and address the root cause(s) of the issue. Not addressing the true cause can mean your team is constantly finding and fixing the same errors, over and over. Here are a few tips to help identify and reduce errors in your payroll: 

Train your payroll team. Errors can’t be identified if the team doesn’t know what they’re looking for in the first place. Your team should have a good understanding of basic payroll concepts and know-how to spot any anomalies or inconsistencies in the payroll data. 

Implement standardized procedures and perform periodic audits of the payroll process and data. This is especially important  for larger departments where multiple people might be responsible for processing the payroll. Everyone should be able to produce the same result by following a defined process that is easy to follow and understand. Periodic audits can be helpful for the early detection of errors and making sure there is consistency in processing.

Review and update system configurations on a regular basis. Regulations are constantly changing and your payroll software should be updated to keep up with the latest developments. Working with a vendor or service provider can be extremely helpful here, since you’ll be able to rely on them to keep up with the new laws and make sure everything is configured properly. 

The payroll experts at Valor Payroll Solutions can help identify and fix any payroll messes, and our dedicated specialists will help eliminate future errors in your payroll. Contact us today! 

Christina Hageny

Christina Hageny

President - Valor Payroll Solutions

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