Payroll Mistakes to Avoid: Common Pitfalls and How to Prevent Them

Processing payroll accurately and efficiently has to be one of the most important responsibilities for any business. Payroll mistakes very often lead to compliance issues, damaged employee relations, and financial penalties. Unfortunately, both minor errors and major miscalculations occur all too often in payroll execution. The harm that can be caused by payroll errors means that diligence and care are crucial. Thankfully though, you can avoid common payroll pitfalls by implementing key prevention practices.

Capturing Time Incorrectly

Imprecisely captured time and attendance data undermines the entire payroll process from the very outset. Time tracking errors because of manual processes, lack of validation, and poor communication are common. Missing punches, incorrect pay codes, unauthorized OT, and delayed submissions of hours are just a few of the issues that can occur.

Robust timekeeping systems with built-in validations dramatically improve accuracy while biometric technologies like mobile punch apps and fingerprint scanners reduce manipulation of hours. Pay code repositories in an HRIS payroll system prevent coding mistakes. Automated alerts flag missing punches for immediate follow-up. The good folk over at VertiSource HR tell us that it is important to establish proper approvals for OT and prep time to prevent submission issues.

Misclassifying Employees

Misclassifying workers as exempt versus non-exempt or employees versus independent contractors opens enormous legal and financial risks. Unfortunately, limited understanding of labor classifications leads employers to misapply FLSA and IRS standards frequently. Workers then do not receive proper pay, overtime, benefits, protections, and tax withholdings.

Correctly assessing and designating employee classifications is absolutely necessary. If you are unsure of an appropriate status, speak to a qualified employment law counsel for guidance. Classifications should be evaluated regularly as roles change over time. An HRIS payroll system should flag classification mismatches upon entry for correction prior to payroll posting.

Mishandling Garnishments

When garnishment orders are mishandled, employees can face severe financial stresses from improper deductions and creditor notifications. However, garnishment administration is often disconnected from core payroll, creating confusion on timing, amounts, exceptions, and terminations of orders. Lack of integration enables mis-execution despite best intentions.

Embedding garnishment management within the payroll system streamlines coordination across pay cycles. This automates proper deduction handling per order specifications. Garnishment modules in HRIS payroll systems centralize obligations for seamless administration. Specialist support should be utilized to ensure procedural and legal compliance.

Miscalculating Benefits Deductions

Benefits deductions take considerable expertise to calculate properly across myriad plan types and tiers. However, deduction errors are common due to outdated subsidy data, coverage modifications, eligibility misalignments, and complex retroactive adjustments required. Just minor deductions mistakes significantly impact employee satisfaction and trust.

Robust configuration of benefits management software minimizes incorrect deductions by capturing changes in real-time. Two-way data sync with payroll prevents subsidy calculation errors. Eligibility tracking ensures proper coverage tiers. Retroactive adjustments integrate directly to rectify outstanding under/over-deductions via subsequent paychecks. Ongoing audits identify deduction anomalies.

Failing Tax and Regulatory Updates

Payroll compliance breakdowns occur when required tax table and regulatory updates are overlooked. This leads to under-withholding, incorrect filings, and other problems. Unfortunately, organizations often lack processes to systematically identify and implement tax and compliance changes. Instead they rely on one-off reminders.

Integrating an update tracking and alert system into payroll operations avoids missed changes. Configure notifications to notify of pending updates across jurisdictions. Automate downloads, testing, and update tasks upon alert for hands-free change control. An HRIS payroll system should monitor and flag pending updates to prevent non-compliance.


Common payroll mistakes harm stakeholders but are avoidable. Time tracking technology, proper staff classification, centralized garnishments, automated benefits deductions, and vigilant change monitoring prevent most errors. Leveraging an HRIS payroll system compounds these benefits through workflow automation and inter-connected data. Payroll precision protects company finances and employee goodwill.

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