Learn the 5 Common Payroll Errors That Companies Make and How to Avoid Them


  • Companies are prone to a variety of payroll mistakes, from timekeeping errors to missing deadlines for tax deposits.
  • Outsourcing payroll can be a smart alternative to keep your business compliant and stay protected from potential fines and penalties.
  • At Resource Management, we provide comprehensive payroll and HR services to keep you fully compliant while you focus on what you do best: growing your business.

Payroll errors can be a major headache for your employees — and your business. Beyond the time spent correcting mistakes, they can lead to hefty fines, legal trouble, and frustrated workers.

The good news? When you understand common payroll mistakes, you can implement preventive measures and ensure a smooth and stress-free payday for you and your team.  Let’s explore the top payroll errors and how to avoid them.

Let’s dive in!

Investing in Reliable Payroll Software with Built-in Automation Features Can Help You Avoid Errors

5 Frequent Payroll Errors

A recent Alight study shows that 53% of surveyed companies have received a penalty in the last 5 years for payroll-related compliance issues.

Let’s explore the most common payroll errors:


Payroll miscalculations encompass a variety of mistakes, from errors in overtime pay to deductions for benefits being off. These small discrepancies can quickly snowball into significant financial burdens for your company and employees. Inaccurate calculations can lead to underpayment or overpayment of wages, which could have legal ramifications.

Expert tip to avoid this: Invest in reliable payroll software with built-in automation features. Payroll software streamlines calculations, minimizes human error, and ensures you consistently apply tax rules and overtime regulations.

Timekeeping Errors

Inaccurate timekeeping data is a recipe for payroll errors. This could be a result of manual timesheets filled out incorrectly, forgotten time clock punches, or discrepancies in tracking breaks. As a consequence, you could end up underpaying for employees who worked extra hours or overpaying for those who didn’t.

Expert tip to avoid this: Implement an efficient timekeeping system. Cloud-based solutions and mobile apps allow employees to clock in and out remotely, reducing the risk of missed punches. You should also define clear timekeeping policies, including break schedules and rounding rules, and communicate them to your team.

Non-Compliance with Regulations

Keeping up with ever-changing payroll regulations can be complex. However, failing to comply with federal, state, and local tax withholding and reporting requirements can result in hefty fines and penalties, as well as delays in processing employee tax returns.

Expert tip to avoid this: Stay up to date on the latest payroll regulations. Consider outsourcing payroll to a dedicated HR partner. These professionals have the expertise and resources to ensure your company remains compliant with all applicable regulations.

Missing Deadlines

Timely payroll processing is crucial. When employees don’t get their paychecks on time, they can feel frustrated, decreasing productivity and hurting your company’s reputation. Missing deadlines for tax deposits, on the other hand, can expose your business to harsh penalties.

Expert tip to avoid this: Set up a clear and organized payroll calendar that outlines all deadlines well in advance. Again, outsourcing payroll to a reliable provider can guarantee on-time processing and ensure you never miss a critical deadline.

Employee Classification Errors

Misclassifying employees as exempt from overtime (when they should be non-exempt) can lead to many issues. Basically, it means they wouldn’t receive the overtime pay they’ve rightfully earned. The consequences? Disgruntled employees, potential lawsuits, and back-pay owed to the employee.

Expert tip to avoid this: Familiarize yourself with the Fair Labor Standards Act guidelines for employee classification and regularly review your classifications. Consider partnering with a payroll specialist to ask all your questions and ensure you’re classifying employees correctly.

Outsourcing Payroll Can Be a Strategic Solution to Ensure a Smooth, Compliant Payroll Process

Keep Your Business Payroll Compliant with a Trusted HR Partner

Payroll errors can be a significant source of stress and financial burden for your business and employees. But it doesn’t have to be that way.

Outsourcing your payroll to a reliable HR partner can be a strategic solution to avoid these headaches and ensure a smooth, compliant payroll process. When you partner with an HR expert, you get access to their experience navigating complex tax regulations, as well as resources to automate payroll calculations and make sure every paycheck arrives on time.

At Resource Management, we offer comprehensive payroll services designed to give you peace of mind. You can have a dedicated payroll manager by your side, helping you handle everything from tax calculations and filings to direct deposits and garnishments. Also, you get access to efficient systems and several reporting options.

Let the experts handle your payroll. Contact us today and learn how we can keep you compliant.

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