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2024 State of Payroll Report: the hidden costs of payroll mistakes
Discover the forces shaping payroll’s future, drawn from the views of over 2,500 professionals and 1,300 HR decision-makers worldwide. Obtain the full report to learn how to make payroll work for your organisation. Here’s what you’ll find inside:
- The most common mistakes and how to avoid these risks
- How payroll errors impact productivity, morale, and even staff retention
- Guidance on transitioning payroll into a strategic business function
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From late wages to an insufficient paycheque, many people will have experienced a payroll error at some stage in their careers. But what consequences do payroll mistakes have for those affected?
A payroll problem is often more than a simple inconvenience for an employee — it can have tangible consequences for day-to-day life, disrupting bill payments, family plans and even social activities. Aside from the monetary impact, mistakes in payroll can also undermine morale and affect mental wellbeing.
As Jonathan Goldsmith, Remote’s VP of Payroll, explains, “Pay is not about work, it’s about life. Receiving incorrect pay can prevent you from being able to provide for your family and yourself. It might affect your holiday plans, or mean you’re unable to save for future things such as school fees or even a new home.”
Payroll issues cover any kind of problem or inconsistency within the payroll process, which may include errors in pay, employee misclassification, or discrepancies in tax subsidies.
At Remote, we see payroll as far more than routine administration — it is a key extension of HR that helps to build trust, sustain morale and boost motivation. Errors or a lack of clarity around pay can create uncertainty, provoke anxiety and harm relationships between employers and their teams.
To assess the state of payroll worldwide and measure the tangible effects of payroll problems on employees, we surveyed more than 2,500 professionals across various demographics and sectors in the UK, US and Germany, as well as over 1,300 HR decision-makers responsible for payroll.
How do payroll issues genuinely affect employers and their employees? Let us examine the data.
Underscoring the critical need for accuracy and transparency, our survey shows the considerable effect payroll errors can have on both staff and employers. Inefficient payroll processes can damage relationships and create major operational bottlenecks.
"Payroll is a core HR function that should be viewed as inherently people-centric. This is crucial in avoiding an erosion of trust and helping businesses maintain a strong reputation and standing among employees." - Jonathan Goldsmith, VP of Payroll at Remote
Over half of employees have faced payroll problems
Fifty-three per cent of employees we surveyed had experienced a payroll issue at some point in their career, with 50% reporting at least one incident within the two years preceding the survey. Forty per cent encountered an error in the past year, while almost 11% had been affected within the last month alone.
Among respondents who reported a payroll error in the past year, 43% experienced it just once, while over 18% encountered at least three payroll mistakes within that same year — the youngest workers (aged 16–24) reported the highest frequency of errors.
Although our poll of HR decision-makers found that seven in 10 organisations (71%) who outsource payroll saw an improvement in accuracy, employers should not assume faultlessness — nearly half (49%) of HR teams spend five or more hours resolving pay-related issues each month, particularly in larger firms.
Who is most at risk of a payroll error?
Younger employees are more often affected by payroll errors. Over 70% of 16–24-year-olds surveyed reported a payroll error in the past two years, compared with only 30% of those aged 55 and over. While Gen Z workers are less likely to check their paycheques (47% don’t check theirs every month), the higher error rate may stem from less employment stability — younger staff typically change roles more frequently, for example.
Payroll mistakes occur more often in US workplaces. US employees are 26% more likely to have a payroll error than their UK peers, with a quarter of American workers having experienced an issue in the past three months. A higher frequency of pay periods (most Americans are paid every two weeks) may be a contributing factor, along with a notoriously complex US tax system.
Remote workers are less likely to encounter payroll issues. Perhaps surprisingly, a smaller share of fully remote employees (17%) experienced a payroll error in the past three months compared with those in hybrid or fully on-site roles (both 22%). Although fully remote staff check their paycheques less frequently (41% don’t check theirs every month, versus 31% of in-person workers), remote organisations may have, out of necessity, more rigorous and dependable systems in place.
The survey also found that underpayment is the most common payroll issue. Of those who had experienced a payroll error, 42% said they had been underpaid, while almost a quarter (24%) had received a late payment. Overpayment accounted for roughly one in ten cases.
In instances of late payment, the majority of problems are resolved within a week (60% of those who reported a late payment said their wages arrived within seven days), though others waited longer — about 18% waited more than two weeks, and nearly 7% experienced delays of a month or more.
Stress and anxiety are the primary effects of payroll mistakes
Among the 53% of employees who had experienced at least one payroll error, nearly a quarter (24%) identified a delay in payment as one of the problems they faced.
Respondents identified “stress and anxiety” as the most common consequence of a late payment (47%). “Family pressure” was the third most reported effect (23%), underlining that the emotional toll of late pay is often as significant as the financial one.
Financial strain is also common. Almost two-thirds of respondents said late pay resulted in missed bill or rent payments or forced them into their overdraft.
"Payroll affects people, and it’s an emotional thing. It has a significant impact on the morale of the employees in the organisation. After all, if an employee doesn’t get paid correctly, or they don’t get the pay they expect, this could result in them missing a medical payment or something equally as vital.” - Jonathan Goldsmith, VP of Payroll at Remote
By contrast, our survey of HR decision-makers found that while 95% of employers acknowledge that payroll discrepancies affect employees, fewer than a quarter (24%) believe they have a significant impact. A larger proportion (30%) feel they have only a small impact or none at all — indicating a possible disconnect between employees’ experiences and HR leaders’ perceptions.
Who is most affected by payroll mistakes?
Women are more likely to experience payroll-related anxiety. The emotional toll of payroll errors is felt more acutely by female employees than male colleagues, with over half (52%) of women reporting stress and anxiety following a late payment, compared with 42% of men.
Younger generations are more susceptible to stress from late payments. Employees aged 55 and over report the least emotional impact from payroll mistakes (only 25% feel affected), whereas more than half (53%) of those aged 35–44 experience stress or anxiety — likely due to greater financial and family commitments.
Employees in the US report higher anxiety about payroll mistakes. While American workers are more likely to experience a payroll issue, they are also likelier to feel stress as a result. Fifty-six per cent of US employees reported high stress from a late payment, compared with 35% of the UK workforce.
Remote workers report greater stress over delayed payments. Perhaps because they can feel more isolated when problems arise, two-thirds (66%) of remote employees say delayed wages have caused them stress, compared with 51% of hybrid workers and 44% of those who work solely on-site.
Payroll errors can strain employee–employer relations
A further major consequence of payroll mistakes is a potential weakening of trust between employer and employee. While more than half of staff said their relationship with their employer remained unchanged after a payroll issue, 42% reported some deterioration.
There is also a reputational risk for employers when payroll mistakes occur. When asked what they would do if a payroll error left them underpaid, over a fifth of employees (21%) said they would either “make a complaint” or “post about it on social media,” which could have broader consequences for the business.
“There are functions within a company like payroll that work for the employee, and they need to remember that and own the impact. The after-effects of poorly running payroll to a business are factors like retention, sentiment, and motivation — those are really big things.” - Jonathan Goldsmith, VP of Payroll at Remote
Our survey of HR decision-makers highlights a possible disconnect: almost a quarter (24%) identified faster payments as the primary function they would like a payroll solution to provide. A reduction in errors (21%) was ranked sixth, suggesting employers may underestimate how damaging payroll mistakes can be compared with other priorities.
How are relations between employees and employers affected by payroll issues?
Increased caution and reduced trust are the most common negative outcomes. Almost a third (32%) of employees who experienced a payroll mistake said it made them more cautious of their employer or reduced their trust in them. Just over one in ten would be more reluctant to raise concerns in the future.
Younger employees are more likely to form a negative view of their employer after a payroll issue. Seventy-one per cent of employees aged 16–24 reported a deterioration in their relationship with their employer after a payroll error. By contrast, almost two-thirds (65%) of those aged 45–54 said there was no change in relations.
Remote workers are less likely to alter their view of their employer after a payroll error. Sixty per cent of remote workers reported no change in their relationship with their employer, which may reflect greater confidence in payroll tools to fix mistakes or simply less direct contact with managers and payroll staff.
UK employees are more likely to change their view of their employer because of a payroll mistake. Just under half of UK-based employees said their relationship with their employer remained the same, compared with 53% in the United States and 64% in Germany — where staff are less likely to form a negative opinion of their employer.
Overpayments present a risk to businesses
Although underpayment is the most frequent payroll issue, in around 10% of pay-related mistakes the employee receives too much. This can create a material financial risk for employers, especially if such errors go unnoticed and recur regularly.
Our survey asked employees what they would do if a payroll error resulted in an overpayment at varying amounts. In every scenario most respondents said they would inform their employer (on average, 61% would do so regardless of the overpayment), while 5% said they would spend the money without giving it much thought.
More than one in ten (11%) said they would not notice an overpayment of $100 or less, with that share falling as the amount increased. This is influenced by the fact that over a third (34%) of employees do not check their paycheques every time they receive one. While not generally malicious, this highlights the hidden financial risk to employers from frequently undiscovered errors.
“There can be a misconception among employees that an overpayment in your pay packet amounts to “free” money”, says Jonathan Goldsmith. “But employers have a legal right to reclaim any wages that have been overpaid. Businesses must be quick to identify and rectify these mistakes, meaning payroll vigilance and accuracy are key.”
What would employees do if they were overpaid?
Women are more likely to tell their employer about an overpayment than men. Fifty-eight per cent of women said they would notify their employer if a payroll error resulted in an overpayment of up to $100, compared with 55% of men. However, a higher share of women than men (13% versus 9%) also said they would not notice if they had been overpaid.
Younger people are least likely to inform their employer they’ve been overpaid. Just over a third (35%) of 16–24-year-olds would notify their employer about an overpayment of up to $100, with 23% saying they would return the money only if asked. Older groups are more inclined to be honest: 67% of those aged 55 and over said they would tell their employer.
Employees are more likely to keep overpaid wages if they dislike their employer. Twenty-three per cent would choose to keep money accidentally paid if they did not like the company they worked for, while 13% of those satisfied with their employer would do the same — emphasising the influence of company culture on how payroll mistakes are handled.
Employees are more likely to return overpaid funds if asked by their employer. Across the scenarios, an average of 13% of employees said they would return an overpayment if requested by their employer, compared with an average of 9% who would do so without prompting. This underlines the responsibility on employers to detect overpayments promptly.
Payroll insights by country and sector
Our comprehensive study on the state of global payroll in 2024 captures the perspectives of employees and HR decision-makers across multiple countries and industries, revealing how those most affected view payroll operations today.
We surveyed 2,539 working professionals in the United Kingdom, Germany and the United States.
We also collected responses from 1,352 HR decision-makers responsible for payroll in the United Kingdom, Germany, France, the Netherlands and the United States.
The survey reveals key findings such as how often payroll mistakes occur, the impact on employees, and the measures employers are taking to reduce them.
Employers must regard payroll as more than a back-office task
Our research highlights the real consequences of failing to get payroll right. The financial fallout for employees can be significant — for example, missed rent or bill payments — but employers should recognise that the emotional impact of a major payroll discrepancy can be even more acute.
The two effects are frequently linked — the prospect of missing a scheduled payment or being unable to afford essentials inevitably causes stress and anxiety, especially for younger people who may have less financial stability and greater family responsibilities. Yet this does not lessen the fact that late wage payments can harm employees’ mental health.
This is why, as Jonathan Goldsmith outlines, employers must recognise that payroll is more than just an administrative function:
“Payroll is a highly strategic asset. If you’re treating payroll as a back office function, you’re already behind the times. Payroll is a mechanism to help recruit employees and give them a good experience. If you don’t provide them insight into what they’re getting paid, how they’re getting paid, and why they're getting paid that way, you’re doing a disservice to your employees.”
We highlighted erosion of trust as a likely consequence of payroll errors (with more than 15% of employees saying a payroll mistake reduced their trust in their employer), but the impact on businesses can be broader: an ineffective, error-prone payroll operation can sap motivation, damage productivity and even hinder a company’s ability to attract and retain top talent.
“A lot of companies say, ‘We pay our employees well’,” but that is meaningless if staff are not paid correctly at the end of the day. That point is easily overlooked.”
Want to find out more about what employees and HR decision-makers think about the importance of payroll? Download the full State of Payroll Report for extensive insights into the common causes of payroll issues, their effects on employees and operations, and the advantages of outsourcing payroll for organisations.
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