Compensation, Compensation Administration

Payroll Problems Affect 82 Million American Workers, Says Survey

As Americans file their Form 1040 U.S. Internal Revenue Service (IRS) income taxes ahead of the April 18 deadline, a new survey from The Workforce Institute at Kronos Incorporated reveals an estimated 82 million Americans—more than half of the U.S. workforce—have experienced a problem with their paycheck during their career. The survey also finds payroll errors cost both employees and employers more than just dollars and cents.

Payroll

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The “Engaging Employees through Payroll” survey examines the hidden costs of payroll errors and explores the vital role payroll professionals serve in building an engaged workforce while directly impacting the 152 million workers who make up the American workforce.

Paid Too Little, Too Late, Or Not at All

According to the survey, 54% of Americans have had a paycheck problem, while salaried, hourly, and gig (i.e. freelance / contract) workers each face different challenges. More than a quarter (26%) of hourly workers have been paid too little, while 15% say they’ve been paid late. Furthermore, just one in 20 (6%) report having been overpaid.

For the salaried worker, 15% say they’ve been shortchanged in their check. Although 16% report being paid late, another 23% say they’ve been paid early—a nice problem to have! However, 9% report having had a paycheck bounce, which is more than hourly and gig workers combined. Overall, at least 10.6 million workers (7%) have had a paycheck bounce.

While still a small group, gig workers might be the toughest to pay correctly. One in five (20%) have been paid late; the same amount report having been paid too little; and 16% say they’ve had their paycheck direct deposited into the wrong account.

How Much ‘Extra’ Cash Would You Pocket?

More than 13.6 million American workers report being overpaid—and not everyone scrambles to return it.

The survey found, on average, American workers say they must likely be overpaid a staggering $463 before alerting their employer to the mistake.  It would take more, on average, for salaried employees ($735) to alert their employer if they were overpaid versus hourly workers ($160).

Men may be more dishonest than women—over two-times more, in fact—as men, on average, would pocket $623 extra before saying something, compared with $258 for women.

Employees can’t claim they didn’t notice the error: more than three-quarters (77%) of Americans check their paystub every payday to make sure their taxes, withholdings, and overall earnings are correct.

Living Paycheck-To-Paycheck Makes Payroll Errors Costlier

The “Engaging Employees through Payroll” survey also claims that 56 million American workers have paid a personal bill late because of a payroll error. Almost three out of five employed Americans—58% or 87 million workers and their families—live paycheck-to-paycheck, while hourly employees (65 %) are more likely than salaried employees (52%) to report this.

Payroll errors have forced over one-third (37%) of American workers to make a late payment on a bill such as their car loan, credit card, mortgage, or apartment/home rent. Furthermore, salaried employees (45%) are more likely than hourly employees (29%) to have made a late payment because of a payroll error.

Perplexed by Paychecks

Almost 64 million Americans say their paystub is hard to read. The survey discovered 42% of all employees say taxes and deductions on their paycheck are confusing to read and understand.

Year-end tax forms confuse American workers, too. While half say they’re confident they have never had a problem with documents such as an IRS W-2 Form, 35% of employees have had a problem such as a mistake. Another 15% admit they do not understand their tax forms enough to even recognize an error.

Nearly half of American workers (45%) say they would feel more engaged with their job if their employer helped them better understand the impact of taxes and deductions on their overall earnings.

“Payroll professionals support more than 152 million American workers every payday—and their efforts often go underappreciated. For organizations seeking to gain an edge in their employee engagement initiatives, the payroll department is a valuable resource capable of making a vital and instant impact,” said Joyce Maroney, director of The Workforce Institute at Kronos, in a press release of the findings.

Maroney added, “To unlock payroll’s true potential, it must be relieved of the burden created by outdated, manual, and often spreadsheet-based processes. Providing modern tools and technology will not only reduce the number of costly and potentially engagement-ending errors, but it will allow payroll experts to excel as true knowledge workers capable of taking on a more strategic and proactive role in supporting organizational transformations.”

Survey Methodology

The “Engaging Employees through Payroll” survey by Regina Corso Consulting on behalf of The Workforce Institute at Kronos between February 23 and February 28, 2017 among 1,013 employed U.S. adults, aged 18 and older. Figures for age, gender, education, income, and region were weighted to bring them into line with their actual proportions in the U.S. population. Because the sample is based on those who agreed to participate, no estimates of sampling error can be calculated.