The Manager’s Guide To Payroll Accuracy

As a manager, your goal is to achieve payroll accuracy and ensure that you compensate your team members fairly for their hard work. These can be daunting tasks, though, as you’ve already got a lot on your plate.

Additionally, even a seemingly small mistake with payroll can cause friction with your talented staff. Payroll errors can frustrate workers, lead to fines, and even damage your company’s reputation.

But here’s the good news—getting payroll right doesn’t have to be stressful. You can ensure payroll accuracy by investing in the right tools. Platforms like When I Work even let you run payroll in a single click. Try it free to see how simple it can be to get payroll right every time. 

Key takeaways:

Here’s what you need to know about payroll accuracy:

• Common payroll errors like inaccurate withholdings can frustrate employees
• Accuracy matters for your business and its employees
• Manual payroll processes open you up to errors
• Automating payroll through software is the best way to optimize accuracy
• Full-service payroll platforms also include tools for scheduling, time-off management, and more

Table of contents: 

• Reasons your payroll may be inaccurate
• Why you need to have accurate payroll
• How to improve and maintain payroll accuracy
• Measuring payroll accuracy

Reasons your payroll may be inaccurate 

Payroll mishaps are more common than you might think. Even small mistakes can lead to big problems. Some common errors include inaccurate tax forms, pay miscalculations, and unreliable time tracking. Here’s a closer look at these mishaps. 

Tax form errors

One of the most common errors involves inaccurate tax forms. Employees may accidentally submit incorrect information on their W-4 forms. Alternatively, your HR staff could accidentally enter the wrong tax rate into the payroll system. Either way, the employee will end up having too much or too little tax withheld.

Tax form errors can lead to underpayment or overpayment. Over the course of the year, these issues could leave your employees owing the IRS thousands of dollars. Your business could get fined, too. 

Miscalculating pay and taxes

Another error involves miscalculating pay and taxes. This can happen if you accidentally input the wrong pay rate or don’t log someone’s overtime hours appropriately. For instance, say an employee works 45 hours, but you only pay them for 40. They are going to be pretty upset, and rightfully so. 

Miscalculating pay and taxes can also impact your company’s financial health. You’ve got to keep a close eye on hours worked and tax regulations to maintain payroll accuracy. 

Inaccurate time tracking

Inaccurate time tracking is another issue that can throw off your payroll. Here are a few reasons why your time tracking may be off:

• Employees forget to clock in or out
• Your timekeeping system doesn’t share data with your payroll software
• You track hours manually and don’t have a system to account for shift swaps or overtime

If an employee worked a shift that didn’t get recorded correctly, they will get underpaid or overpaid. Either one is bad for business. Inaccurate time tracking can lead to compliance issues, too. You might get fined for violating minimum wage laws and overtime regulations. 

Why you need to have accurate payroll

Pay-related mistakes can crush company morale and hurt your bottom line. Getting payroll right allows you to:

Properly compensate your employees

Everyone wants to be paid fairly for the work they put in. Employees plan their entire lives around getting paid accurately and on time. Any error your business makes can put them in a bind.

Let’s say one of your team members worked 20 hours of overtime in the past two weeks. They picked up the extra shifts to save for an upcoming vacation. However, their last check right before they leave for their trip is missing the 20 overtime hours. 

Obviously, your accounting team will fix the problem. However, they probably won’t be able to address the issue until the next pay period. The individual who worked all of those extra hours may have to alter their vacation plans as a result. Plus, now you have a morale issue on your hands.

Avoid penalties and fees

Accurate payroll helps you avoid expensive penalties and fees. The IRS may fine you if you don’t pay enough taxes. Incorrectly classifying employees can lead to even stiffer fines. You might also find yourself getting audited. This can tie up valuable resources and cost you thousands in fees.

You can’t afford to cut corners when dealing with the IRS or the Department of Labor. Do things by the book, especially when it comes to employee compensation. 

Maintain your reputation

Frequent payroll errors will lead people to believe your company is disorganized. Even worse, some may think that you simply don’t care about your employees’ financial health.

Word spreads quickly. Your company might suffer external reputation damage that makes it harder to attract top talent. On the flip side, a strong reputation will help you hire and keep great team members. 

Reduce labor costs

Payroll accuracy can help you reduce labor costs. If you’ve got a reliable accounting of wage expenses, you can analyze payroll trends and ensure you aren’t overpaying anyone. This can be especially important if you frequently hire contractors or seasonal workers.

Accurate payroll data can also help you explore ways to save money. For example, suppose that your payroll for the last three months shows that the weekend shift is logging a lot of overtime. After some digging, you realize it’s an understaffing issue. Correcting this problem could save the company thousands in overtime pay. 

Support employee satisfaction

Payroll errors can be incredibly frustrating to your team members. Roughly half of U.S. workers will consider looking for a new job after noticing just two mistakes on their paychecks. 

On the other hand, a smooth payroll process can boost morale and encourage productivity. You want to create and maintain a positive work environment. Paying your team on time does just that. 

How to improve and maintain payroll accuracy

Even if you aren’t experiencing frequent payroll errors, you should consider ways to get better and more efficient at paying your team. Here are some best practices to help you achieve that goal:

Keep track of your records and documents

You need to get organized. Keep accurate and up-to-date employee information, tax documents, and time-tracking data. If everything is well-documented, it’s easier to spot and prevent errors. 

You can quickly verify information and make sure you’re staying compliant with labor laws. This increases your chance of catching mistakes before they happen. 

Properly classify your employees

You must ensure each type of worker is classified appropriately. Part-time, contract, and full-time employees are subject to different payroll and benefits requirements. Know state and federal laws so you can withhold enough taxes for each worker group and pay them appropriately. 

Measuring payroll accuracy

So how do you know if your payroll processes are accurate? You won’t unless you are measuring your accuracy. Here are a few metrics to keep an eye on:

• Error rate: How often do payroll errors occur? 
• Employee satisfaction: Are employees reporting payroll issues? If so, how often, and what are their complaints? 
• Audit compliance: Are you regularly passing internal and external audits? 

Measuring payroll accuracy can be daunting. Fixing problems once you find them can be even harder. That’s why you need a platform like When I Work in your corner. 

When I Work is a one-stop shop for scheduling, time tracking, and payroll. It allows you to ensure your payroll processes are accurate and proactively prevent errors through automation. 

How full-service payroll software prevents payroll errors 

Full-service payroll software reduces your reliance on manual processes, thereby reducing the risk of errors. Full-service payroll softwares work together to accurately record employee hours and let you run payroll with just one click.