Who is responsible for payroll errors

We use cookies to give you the best online experience. By using our site you agree to the use of cookies. I accept If you do not wish to continue using cookies, please click here to find out how to remove them. The federal Department of Labor DOL is very clear: Employees have two years to recover any wages lost through underpayment. That's two years from the date when the underpayment took place; if they don't learn about it until five years later, they're out of luck.

There's nothing to stop you from making up the shortfall, but it's optional — you're not required to. The DOL does make an exception for deliberate underpayment. In that case, the statute of limitations stretches to three years. If you overpaid your employee, the statute of limitations depends on which state's laws apply. In New York State, the clock starts ticking as soon as you tell your employee there's a problem. You can collect overpayments up to eight weeks prior to notification and you have a maximum six years to do so.

You can ask the employee to cut you a check or deduct it from her wages. In Michigan, if you deduct it from later paychecks, you only have six months from the date of the overpayment to collect.

Almost half of employees across Europe have been paid late, according to an SD Worx survey, and even more have been paid incorrectly; while cashflow issues are part of the picture, old-fashioned mistakes are a problem too. Over the years, more and more have been added, from pay rates to overtime hours and ad-hoc allowances.

As systems have evolved, this has meant that payroll workers often do not fully understand why they perform certain tasks in certain ways. There are a lot of things going on that employers have to know about. This has opened the door to new pay attachments being linked to payroll. Payroll mistakes are especially common in fast-growing businesses, says Kate Upcraft, an independent payroll consultant and lecturer.

You have to underpin growth with robust processes. Otherwise, things can quickly escalate. Once people have got away with procedures that are a bit sloppy that can become the normal practice, which gets dangerous. Keeping up to speed with changing legislation is another problem, she says.

Despite the amount of expertise required to keep up to date with payroll, not everyone dealing with it is necessarily an expert. Especially in smaller companies, the person responsible for paying staff is often performing other roles, such as HR or administrative work. Part of the solution is a straightforward investment in payroll. The stakes are high. So if there is anything wrong with it, immediately the business is exposed.

An investment in payroll resources would also help professionals keep up with the myriad new requirements expected of them, adds Mann. This [complexity] is tripping up well-qualified professionals. Continuing professional development CPD could take several forms, says Upcraft, but the most important thing is a high-level commitment to regular training.

It is vital that you are adapting best practice — so you know how your software works, how the industry works and what compliance looks like. A shift in organisational mindset would also help, says Cotton.