The Negative Impact Of Payroll Errors

In discussions around payroll accuracy, the focus is frequently on people, process and technology, and not on one of the less considered sources of error – payroll inputs. Ensuring that your people are well trained, your processes are right, and your technology is configured correctly are all very important steps to take; however, if the best system in the world is given the wrong input, it will produce an incorrect output.

Paying more attention to the data input stage of the payroll process can help to reduce the negative impact of errors. If an error happens once or twice, it may not cause too much trouble; but should it persist, the total amount in incorrect pay could be huge and the penalties significant.

Errors can occur in several ways, in particular arising from manual data entry, e.g., just one wrongly pressed key. A system user might also record hours as double time, instead of time and a half, or overlook one entry from a list. Errors can also be made by the employee, such as accidentally providing the wrong information while completing a timesheet. Depending on the source of the incorrect data, the size of error could be small or very large. Errors can also arise when payroll is not aware of exceptional conditions, such as not being advised of a leaver prior to running a process, or where an employee called in sick, but no leave form was submitted.

When it comes to the consequences of an input error, there are two possibilities. Overpayment is potentially the better of the two; whilst underpayment can have a much more detrimental effect. Payroll errors can impact staff morale, staff retention and the organisation’s overall image and reputation within the community. No process is perfect, and mistakes can happen. The chances are that almost every payroll team will have experienced an error at some point. Whilst payroll strives to ensure that data inputs are correct every time, there are steps you can take to avoid ongoing, long-term errors. Key to this is simply making sure that your staff have a high level of knowledge and awareness around the entitlements of each employee. Ideally, line managers should be conversant with their team’s entitlements and should check all the hours received before approving them. Injecting some rigour into the process of ensuring data is correct could help protect against over/underpayment scenarios.

The Negative Impact Of Payroll Errors

Ensuring that your payroll system is configured correctly is also crucial, as this will help increase accuracy and ensure compliance. Most organisations now have a solid, reliable payroll solution in place – something that certainly helps ensure accurate and timely payment. However, the payroll team cannot entirely rely on technology to avoid mistakes. If a system is not configured correctly or given the right information, you will still be vulnerable to errors. The best approach is a collaboration between your technology and your people.

Experienced payroll software supplier, Frontier Software, suggests that if the payroll team is conversant with what must happen and the payroll technology is configured to enact those rules, then there is also a need for people to be careful about providing correct data and for others to double-check it. There is most definitely a co-dependency between the two.

A good payroll system should have an automated approval process and provide visibility of outstanding approval workflows. Plus, standard reports that compare this pay to a benchmark pay for every employee are recommended. Frontier Software’s ichris payroll solution applies a verification step, which sends the payroll calculations to nominated reviewers for approval. By combining technology with knowledgeable, diligent staff, the potential for errors and their negative impact can be significantly reduced. When using payroll verification any errors, be they systemic or just down to incorrect inputs, can be identified and corrected before the payroll is finalised and funds dispersed.

More Information:

Contact Frontier Software on 01276 456902, email or visit our website at

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