4 Reasons You Can't Afford Payroll Mistakes

It goes without saying that those of us here at BenefitMall believe the best way to handle payroll and benefits administration is to outsource both to a reputable provider like us. Still, we know not every company is comfortable with outsourcing payroll. We get that. Just remember that it is easy to make mistakes that could cause your company plenty of headaches.

It only takes a single miscalculation to get you in trouble with the IRS. It only takes a simple data entry error to put you in violation of the Fair Labor Standards Act (FLSA). Outsourcing payroll to a third-party provider reduces the risks of payroll errors and the headaches they cause.

Still not convinced? Then take a look at these for reasons you cannot afford payroll mistakes:


1. Fixing Mistakes is Labor-Intensive

It's true that fixing some payroll mistakes amounts to little more than recalculating one or two numbers and plugging data back in. But more often than not, finding and fixing is a labor-intensive process that gets in the way of more important things.

Remember that all your payroll records have to be accurate. So finding and fixing mistakes often involves poring over multiple sets of records. Making a change in one record means having to make a change in another. Before long, you have lost hours fixing something that could have been avoided.


2. Payroll Mistakes Can Be Expensive

If a payroll mistake is not caught before your company files tax forms, it could cost you quite a bit by way of penalties. Unfortunately, federal and state taxing authorities are not very forgiving even when it comes to innocent mistakes. They tend to assess penalties whenever given the opportunity.

Taxes aren't the only concern here, either. Let's say your payroll staff miscalculates overtime pay for even a small number of workers. Let us also say those workers file a formal complaint against you. Subsequent litigation could mean that you'll have to pay back wages and penalties in order to settle. If payroll staff had just gotten the calculation correct the first time, there never would have been an issue.


3. Mistakes Makes for Unhappy Employees

Payroll mistakes can be costly in indirect ways as well. For example, make one mistake and you will probably not have a problem with employees. But if mistakes are frequent and common, you are likely to have unhappy employees before too long. Unhappy employees are less productive, and unproductive employees drag down profits.

It is hard to quantify the costs here because it's hard to determine what percentage of lost revenues is attributable to payroll mistakes. But that does not change the underlying point. The fact is that consistent payroll mistakes hurt the bottom line by creating unhappiness among workers.


4. Mistakes Increase Employee Turnover

Another indirect cost relates to high turnover. Look. No one likes to work for a company that cannot get payroll right. If workers are constantly having to go to HR to fix mistakes with their pay, they will get frustrated soon enough. It is human nature.

Frustration leads to turnover, and turnover leads to more money being spent on recruiting and hiring. It's kind of silly to go through all of this when you could spend less money outsourcing your payroll.

Payroll mistakes are not as innocuous as they seem. They cost companies a lot of money both directly and indirectly. Do not let them harm your bottom line. Instead, contact us to learn more about our payroll solutions. We offer general solutions suitable for most industries as well as custom solutions for the restaurant and construction industries.