Table of Contents
Table of Contents
Payroll is an incredibly complex area of HR—getting it wrong can have serious financial costs and impact a company’s credibility greatly. This article brings together important payroll statistics from a variety of sources that illustrate everything from the impact of payroll errors to how payroll procedures are changing.
Read on to discover what our research can tell you about payroll trends and worker expectations, as well as important statistics to consider if you are thinking about changing your payroll practices.
While some small businesses are using outdated payroll systems, many are turning to payroll technology
Employees care about the accuracy and timeliness of their paycheck
Paychecks are, of course, the primary concern for most employees; the need to earn money is what drives them to work. If a paycheck is late or inaccurate, it can impact workers immensely, to the point that they might not be able to pay their household bills.
Employees, then, have little tolerance for payroll errors, and more than one error can cause many to consider leaving a company.
50% of employees will seek a new job after only two payroll errors
44% of employees over 55 would stay at their job after a payroll mistake, compared to only 13% of employees ages 18 to 29, 17% of ages 30 to 39, and 27% of ages 40 to 54
56 million American workers have paid a bill late because of a payroll error
70% of employees would struggle to meet their financial obligations if their paychecks were delayed a week
78% of employees live paycheck to paycheck
76% of employees stressed about finances say they would be attracted to a new employer who cares more about their financial well-being
45% of American workers say they would feel more engaged with their job if their employer helped them understand taxes and deductions better
Well-performing organizations take two to four days to resolve a payroll error, while the worst performing need five to ten days
85% of companies have internal payroll accuracy and efficiency metrics
Paycheck errors are more common than you’d think
While many companies would like to think that payroll errors are few and far between, errors are a lot more common than people realize. Errors can vary in their cause and impact, but they often result in late payments or underpayments.
Payroll corrections are common, and they can take up a significant amount of time for HR departments or business owners.
69% of companies have payroll data issues
82 million Americans have experienced a problem with their paycheck during their career
26% of hourly paid workers have been paid too little, and 15% have been paid late
15% of salaried workers have been paid too little, 16% paid late, and 23% have been paid early
Payroll staff spend 14% of their time answering employee and other inquiries
The average company makes 15 payroll corrections per period
93% of employees say their paychecks are always on time
6.3% of employees say their paycheck is occasionally late
Companies have an average of 80.15% payroll accuracy
Competent payroll teams have an accuracy rate of 97%
Payroll mistakes can be costly
Payroll errors don’t just cost employee and business time to resolve or damage a business’s credibility and reputation. Even small payroll errors can have significant monetary costs, and frequent or larger errors cost even more still, potentially resulting in expensive litigation or tax penalties.
With an error rate of 1.2% each pay period and 100 employees making an average of $900 a week, a company can lose $56,647 each year on payroll mistakes
33% of employers make payroll errors, costing billions in total annually
40% of small to mid-sized businesses incur IRS penalties for incorrect payroll filings, with an average penalty amount of $845
A single data input error can waste 20% of an employee’s time
A payroll error can cost $291 on average to remedy (directly and indirectly)
One in six companies (14%) say they have encountered litigation issues related to payroll errors in a one-year period, and each error can cost an average of $3,200 and 29 hours to resolve
Running payroll is one of the most time-consuming tasks for small businesses
Processing payroll is complex. Accurately recording worker hours can be time-consuming, and all calculations must be thoroughly checked in order to avoid costly payroll mistakes.
Small business owners often underestimate the time involved in payroll, and larger businesses can see their HR departments swamped with questions about pay.
85% of companies have problems with their payroll technologies
For every 1,000 employees, there are an average of thirty questions to HR/payroll
63% of small business owners underestimate the time it takes to process payroll
Timecards take an average of 7 minutes per card to process
One-third of small businesses spend more than six hours per month handling payroll
35% of the average HR department’s time is spent on payroll
18% of companies still use manual and paper-based activities in payroll processing
Business owners spend nearly five hours every pay period calculating, filing, and paying payroll taxes; this adds up to 21 days a year
While some small businesses are using outdated payroll systems, many are turning to payroll technology
The variation seen in payroll practices is very broad and growing as technology progresses. Some companies still use outdated or manual payroll processes. Even those companies that adopted payroll technologies early on can find that their technology has quickly become outdated.
There is payroll technology available to suit every size of business, and many companies are planning to modernize their payroll processes or adopt cloud technologies.
88% of companies have a payroll strategy or plan to develop one
91% of companies have a payroll system, and 9% have more than one
80% of companies have a time and attendance system, and 20% have more than one
74% of companies are using or are implementing a cloud-based payroll technology
54% of companies use cloud technology to process payroll
82% of employees can access a self-service portal with pay and benefits information
40% of companies still use payroll spreadsheets
40% of companies say they will modernize their payroll systems by 2023
46% of businesses are using HR SaaS platforms, up 20% from two years ago
57% of companies expect to be using a SaaS or hybrid technology solution by 2023
Many small businesses outsource their payroll processes
Outsourcing payroll has its own cost, but it can be one way to ensure payroll is performed by an expert and that there are fewer payroll mistakes. Outsourcing can remove the headache of learning payroll practices and regulations and free up time for small business owners to concentrate on other aspects of running their business.
80% of companies have one insourced payroll technology, and 20% have more than one
65% of employers say they would rather outsource payroll
34% of companies say they are not willing to pay for outsourcing or willing to trust another company
Over half of small businesses pay an outside company to prepare payroll
61% of companies outsource their payroll operations
15% of organizations with less than 2,500 employees fully outsource payroll
Having help with payroll decreases the risk of mistakes
Outsourcing to a payroll company or payroll expert, or even using the latest technology, can make payroll easier and reduce the number of payroll mistakes.
Payroll mistakes are often caused by manual or data input errors or inaccuracies in checking and verifying payroll information. An expert eye or the help of technology can frequently help spot mistakes before they become a paycheck problem.
There is an error rate of 1-8% of total payroll for companies that use traditional timecards
32% of small business owners have made a payroll mistake at least once
45% of business owners are familiar with payroll regulations that don’t exist
47% of employers say the payroll process is complicated, and 44% say it is confusing
There are almost 300,000 payroll and bookkeeping services in the US
50% of organizations outsource payroll to mitigate risks
Proper data accuracy training can reduce human data errors by 50-60%
The developing gig economy and rise of remote work are changing the way we do payroll
Business operations no longer look the way they did 30 years ago—or even 10 years ago. Employees can not only be on-site anywhere in the world, but they can also be working from their own homes, anywhere. The most agile businesses may have remote and gig workers in every corner of the globe, and they need to have the functionality to pay both periodically and by the project.
Payroll practices, functions, and technologies have all changed and will continue to change as the world of work progresses and transforms digitally.
20% of gig workers have been paid too late, and 20% have been paid too little
62% of employees worked from home during the Covid-19 pandemic
The use of agile cloud technologies has risen from 34.8% in 2019 to 62%
58% of employees have the opportunity to work at home at least once a week, and 35% have the opportunity to work at home all week
When people have the chance to work flexibly, 87% will accept
Only 10% of gig workers are doing gig work because they can’t find a permanent job
In 2020 there were 24.6 million part-time gig workers in the US
90% of employees say they would seriously consider freelancing
40% of gig workers are independent contractors and consultants earning $100,000 or more each year
How to Get Payroll Right
The statistics make it clear: payroll is an essential part of running a business, large or small, but it can also be time-consuming and costly. If you’re just getting started with payroll, here are a few things you can do to streamline the process and avoid expensive errors. Click the links to learn more!
- Understand payroll deductions. Payroll deductions are withheld from your workers’ gross pay, and they take home what’s left over. Involuntary deductions are required by law—one example is income tax. Voluntary deductions, such as 401(k) contributions, are up to the employee.
- Classify workers correctly. When hiring full-time or part-time employees, you must classify them as FLSA exempt (not entitled to overtime pay) or FLSA non-exempt (entitled to overtime pay). Misclassifying an employee can lead to serious consequences, including fines.
- Know the difference between contractors and employees. Recently, the IRS has created more guidelines around how independent contractors are defined. In this growing gig economy, you’ll face hefty penalties if you wrongly classify employees as contractors.
- Be aware of common payroll mistakes. It’s easier to avoid making payroll mistakes if you know what the most common ones are.
Ditch manual payroll processes. Eddy provides a better payroll solution for small businesses. With integrated time and PTO tracking, automated tax filings, and more, Eddy makes payroll simple. We do the heavy lifting so you don’t have to. Find out if Eddy Payroll is right for your business.

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