Ever open your paycheck to find that it was not what you were expecting?
Ever have a debit transaction declined on payday even when you know you got paid?
Ever wake up on payday to find that no direct deposit was made to your account overnight?
Mistakes happen, even with something as important as payroll. Whether it's a missing payment, incorrect deductions, or an error in your hours worked, payroll errors can disrupt your finances and cause unnecessary stress. Here are some tips on how to spot these errors and what steps to take to help you resolve issues quickly and protect your financial well-being.
Common Payroll Errors to Watch For
Incorrect Hours or Pay Rate
One of the most common payroll errors involves misreported hours or an incorrect pay rate. This can lead to being underpaid or overpaid, which can have adverse effects on your income and budgeting. Whether the error is caused by the employer, by the payroll team or by the employee does not change the importance of providing the employee with the earnings due in a timely manner. Always double-check your paystub to ensure your hours and rate are accurate.
Missing or Incorrect Deductions
Payroll deductions for taxes, benefits, and other withholdings can sometimes be calculated incorrectly. Whether it’s too much or too little being taken out, these errors can impact your take-home pay and your tax liability. Review your deductions each pay period to ensure they align with what you expect them to be.
It is also important to be mindful of the payroll processing schedule of your employer. When you have changes to make to your taxes or benefit withholdings, they need to be completed or submitted by the payroll cutoff for the changes to be effective on the desired paycheck.
Overtime Miscalculations
If you work overtime, it’s important to verify that you’re being paid correctly for those extra hours. Overtime pay is typically calculated at a higher rate, so any errors here can significantly affect your paycheck. The calculation itself may even contain an error when there are additional earnings to factor in like commissions, non-discretionary bonuses, or SPIFFs.
Take a close look at the overtime rate when you have these additional earnings on your paycheck to ensure they are being included in your "regular rate of pay" as defined by the FLSA, which includes all forms of compensation [hourly earnings, salaries, commissions, and certain bonuses] divided by the total number of hours worked in the period they are earned.
Benefits Mismanagement
Errors related to health insurance, retirement contributions, or other benefits can also occur. This often includes incorrect premium amounts or missed contributions to your retirement fund. Correcting these types of errors is much easier to do within the same month or year, so keeping an eye on these aspects of your paystub throughout the year is essential for ensuring your benefits are managed and reported correctly.
Incorrect Tax Withholding
Tax withholding errors can lead to unpleasant surprises at tax time. Regularly reviewing your withholdings helps you avoid these issues. If you’re unsure whether your tax withholdings are accurate, the IRS offers a helpful tool to guide you.
The IRS W-4 Online Calculator allows you to estimate the correct amount of federal income tax to withhold from your paycheck. By using this tool, you can make adjustments to your W-4 form with the peace of mind that you neither owe a large sum at tax time nor miss out on money that could be in your paycheck throughout the year.
What to Do If You Spot a Payroll Error
Review Your Paystub:
The first step is always to carefully review your paystub. Compare it with previous paystubs and check for any discrepancies in hours, rates, deductions, or withholdings. If you have moved, make sure the address on your paystub is updated since this is the same address your W-2 Form will be mailed to next January 31.
Report the Error Immediately:
If you notice an error, report it to your payroll department or HR as soon as possible. Provide them with any documentation, like timesheets or correspondence, to support your claim. When you report it, be sure not to place blame or accuse the team of wrongdoing. Remember the Golden Rule, and that there is a human being at the other end of the message, so you should communicate to them with the same respect that you would want to be treated with in return.
Follow Up:
Ensure that the issue is being addressed and corrected. Ask for a timeline on when you can expect the error to be fixed and confirm that any owed amounts will be included in your next paycheck. Ask for confirmation in writing or email for your records. And always review your paystub before following up directly with the HR or Payroll teams.
Keep Records:
It is a best practice to keep copies of your paystubs and any communication regarding payroll errors. You will not always have access to this information through your employer. If there is an online employee self-service portal, regularly download your pay statements to a secure local or flash drive so you can still access them offline. This documentation can be helpful if you need to escalate an issue or seek legal advice.
The Importance of Vigilance
Payroll errors don’t just affect the person receiving the paycheck—they can create headaches for everyone involved, from the employee to the payroll team. While it’s frustrating to find mistakes in your pay, it’s important to remember that payroll professionals are working hard behind the scenes to prevent these issues. The best payrollers are committed to catching and correcting errors before they reach your paycheck, but when something does slip through, they’re just as eager as you are to make it right.
By staying on top of your paystub and communicating with your payroll department, you can help ensure that your paycheck is accurate and that any hiccups are quickly resolved.
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