6 Payroll Mistakes Managers Frequently Encounter (And How To Fix Them!)

Managing payroll is a complex but crucial process. Managers must carry out the process meticulously so that everything is correct because even one mistake can take a toll on your company’s reputation.

Also, for a company to flourish and maintain a good image in the market, it is crucial that its employees stay happy. So, to ensure they do, you must ensure you’re not making the below-mentioned mistakes.

  1. Incorrect Employee Information

The first step to payroll processing is filling up the employee’s information. It includes their name, bank details, their working hours, etc. Any mistakes in these details can lead to wrong tax deductions, incorrect pay rates or delayed payments.

To fix this mistake and avoid frustration among your employees, you need to maintain organized records and ensure it is regularly updated based on the leaves taken, new policies or any other factors.

Moreover, employees should be asked to update their bank details or addresses if there are any changes. The manager should cross-check the employee data against official records or install software that can automatically do so.

  1. Late or Inaccurate Payments

Being untrained in the process of carrying out the payroll can result in delays or inaccurate payments and this can cause disagreements between the employer and employees.

Employees must be paid on time and accurately so that they don’t face cash flow issues. To ensure it happens, you should choose the correct method to manage payroll.

These days payroll outsourcing has become widely famous for its convenience and effectiveness. Choose the right service providers who are trained to do the process and are aware of the latest laws.

  1. Compliance Issues

Many businesses struggle with keeping up-to-date with changing payroll laws. If you don’t want to face legal issues, it is best to work in compliance with the legal framework.

Your legal team must know all the rules, regulations, laws, requirements and other things that can attract penalties. Make sure to audit the payroll records to identify and correct errors.

  1. Misclassifying Employees

Another common mistake that managers make is that they misclassify the employees. The lack of understanding of classification criteria can end you up with penalties for violating laws.

Not paying your employees for overtime or treating them as independent contractors can lead to taxation issues and legal problems.

It is crucial to educate your HR or hire an expert payroll outsourcing provider who knows the guidelines to classify employees to prevent such mishaps.

Regularly review company policies to ensure the classification is correct or to make updates if changes in their roles and responsibilities are done.

  1. Inadequate Time Tracking

The excitement of receiving a salary can soon turn into frustration if the employee receives an incorrect paycheck. One might forget to calculate the time the employee took to travel between work sites, whether they worked during lunch breaks or stayed for extra hours for some office-related activities.

This miscalculation means a delay in the process and it can make employees think that the employer is untrustworthy or the company is not doing good in terms of progress.

The solution to avoid underpayments, overpayments or legal repercussions due to miscalculating the time an employee has worked is installing software that can easily track the working hours and ideal hours of an employee.

  1. Disorganized Records

Disorganized records not only cause problems between an employee and an employer but can also result in the company receiving fines, penalties and other payroll-related legal issues.

What makes disorganized records? Manually entering the data, managing hundreds of Excel sheets, following a heavy paper trail, relying on one person to manage all the records, etc.

Investing in a reliable record system that is well-structured and easy to use can make organizing the data easier. You can then store tax documents and employee records all in one in an organized manner.


An effective payroll system can tell how well the company is with its system and management. But, if something goes wrong, it can also result in frustration and trust issues between the employees and the employer.

Thus, it is crucial to avoid mistakes and find effective ways to make the payroll management system better.