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Payroll Errors That Cost Your Money and How to Remedy Them

If it’s any consolation, you’re not alone. 33% of employers make payroll errors costing billions of dollars annually, according to the IRS. The American Payroll Association shows an error rate of between 1-8% of total payroll in companies that use traditional timecards, and roughly 40% of small businesses incur an average of $845 a year in IRS penalties as a result of mismanaged payroll processes.

Still using pen and paper for employee time record keeping, or relying on shift schedules for payroll calculations? Your company might be leaking money, and you are leaving yourself open to lawsuits and IRS penalties.


What Payroll Errors?!


As a small business owner, you do everything in your power to manage payroll efficiently and without mistakes. Well, maybe not EVERYTHING. After all, you have a business to run, and there’s only so much time you or your HR team can invest in checking and re-checking employee timesheets.


Here are just a few of the issues plaguing businesses still depending on outdated timekeeping practices:


  • Payroll Document Mess (or “Who moved my timesheet?”)


Paper timesheets and punchcards are fragile and perishable media and as such, can be a liability. They can be swapped, altered manually with no record of the changes made, destroyed or simply misplaced.


  • Absence Kerfuffle (Working on Vacation)


Consider an employee on vacation suddenly having to work to take care of an urgent matter. Your records might then have an employee on paid leave clocking in work hours. Sorting this whole mess out can be a small headache when you have a team of a dozen. But as your workforce grows, these sort of overlaps can turn into full-blown payroll migraines.


  • Sleepy Payroll Staff (Making Errors in Data Entry)


We all make typos, and anyone can accidentally enter 20 hours instead of 2. That’s 18 billable hours birthed by a typo.


  • Buddies of the Buddy Punching System (and Other Time Thieves)


Statistics have shown that 19 percent of employees (1 out of 5) have participated in some form of time theft, something that the American Payroll Association estimates can cost companies up to 7 percent of their gross annual payroll.


  • Law & Order (Compliance, State Laws and You)


You might think that regulations that demand you keep precise records of employee work hours are a bureaucratic drag, but they’re actually there to protect you. As are state laws regulating payroll processes.


Sure, you can still comply with regulations while using traditional solutions, or just your good old pen and paper. But it’s simply easier with an app.


Going Digital - Easier Than Ever


Switching to digital attendance and payroll management is not as expensive or complicated as you might think, or as at might have been when you last checked. You (probably) don’t need to purchase complex biometric attendance systems, or even computerized punch clocks. In fact, you need not look further than the mobile phone in your hand.


Cloud-based mobile app solutions, like Connecteam and Kronos, offer geo-tagged time-clocks, shift scheduling and a lot more. In addition to the major reduction in payroll errors, these platforms also offer a host of features, like real-time information on employee attendance, that can help make your payroll process faster, more effective, and fully compliant with regulation.


What’s Next?


People don’t change, so technology does. People will always find a way to err or cheat in attendance reporting. However, by switching to a mobile time clock, you can greatly reduce the frequency of errors, save money and increase efficiency in your business.


All you need to do now is choose the right solution for your businessFree Web Content, starting here: “8 Money Saving Tips for Choosing a Free Online Time Clock”.



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Eyal Katz

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