.png?width=3840&quality=90&auto=webp&disable=upscale)
2024 state of payroll report: the hidden costs of payroll mistakes
Discover the forces shaping payroll’s future, drawing on responses from more than 2,500 professionals and 1,300 HR decision-makers worldwide. Get the full report and learn how to make payroll work for you. Here’s what to expect inside:
- Frequent payroll mistakes and steps to reduce the risk
- How payroll errors affect productivity, morale and even staff retention
- Advice on shifting payroll into a strategic business function
Download now – research/impact-of-payroll-mistakes
Download now
Most of us will at some stage have faced a payroll slip-up, from late pay to an underpayment. But what are the consequences for the people who go through these errors?
For an employee, a payroll problem is often more than a nuisance — it can disrupt banknote payments, family plans and even social life. Beyond the immediate financial effect, pay errors can seriously dent morale and harm mental wellbeing.
As Jonathan Goldsmith, Remote’s VP of Payroll, says, “Pay is not about work, it’s about life. Getting paid incorrectly can stop you from being able to take care of 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 problems or inconsistencies in the payroll process, including incorrect pay, misclassification of workers, or discrepancies around tax and subsidies.
At Remote, we view payroll as more than routine administration — it’s a core HR capability that helps to build trust, maintain morale and keep people motivated. Errors and a lack of transparency around pay create uncertainty, anxiety and can damage relationships between employers and their people.
To assess the state of global payroll and measure how payroll problems affect workers, we surveyed more than 2,500 professionals across different sectors and demographics in the UK, US and Germany, plus over 1,300 HR decision-makers responsible for payroll.
How do payroll issues actually influence employers and their staff? Here’s what the data shows.
Our survey underscores the critical need for accuracy and openness: payroll mistakes have measurable consequences for both employees and employers. Inefficient payroll can strain relationships and create significant 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
More than half of employees have experienced payroll issues
53% of employees surveyed had encountered a payroll issue at some point in their career, with 50% having had at least one within two years of the survey. 40% reported a payroll error in the past year, and almost 11% experienced a payroll mistake in the last month.
Among respondents who had a payroll error in the past year, 43% had only one incident, while over 18% suffered three or more mistakes in a single year — with the highest incidence seen in younger workers (aged 16–24).
Our survey of HR decision-makers showed 7 in 10 organisations (71%) that outsource payroll saw a positive impact on accuracy. That said, accuracy cannot be taken for granted — almost half (49%) of HR teams spend five or more hours a month resolving pay-related issues, especially in larger organisations.
Who is most likely to experience a payroll error?
Younger employees are more likely to experience a payroll error. More than 70% of workers aged 16–24 reported a payroll error in the past two years, compared with just 30% of those aged 55 and over. Gen Z employees are less likely to check their payslips monthly (47% don’t), and the higher error rate may reflect less job stability, as younger people tend to move roles more often.
Payroll mistakes are more common in US workplaces. US employees are 26% more likely to encounter a payroll error than their UK counterparts, with a quarter of American workers having reported a payroll issue in the last three months. More frequent pay cycles (many Americans are paid every two weeks) and a notoriously complex US tax system may be contributing factors.
Remote workers are less likely to encounter payroll issues. Surprisingly, fewer fully remote employees (17%) reported a payroll error in the past three months than those in hybrid or fully in-person roles (both 22%). Although remote staff check payslips less often (41% don’t check monthly, versus 31% of in-person workers), it may be that fully remote companies have more robust payroll systems in place out of necessity.
The survey also found that underpayment is the most common payroll issue. Among those who’d experienced an error, 42% said they had been underpaid, almost a quarter (24%) had received a late payment, and overpayment accounted for about 1 in 10 cases.
When payments are late, most issues are sorted within a week (60% of those who reported a late payment said their wages arrived within seven days), but some waited longer — roughly 18% waited more than two weeks, and nearly 7% experienced delays of a month or more.
Stress and anxiety are the most significant effects of payroll mistakes
Of the 53% of employees who had encountered at least one payroll error, almost a quarter (24%) said a delayed payment was among the issues they faced.
Respondents said the single most common effect of a late payment was “stress and anxiety” (47%). “Family pressure” ranked third (23%), showing the emotional toll of late pay can be as severe as the financial one.
Financial strain is also common. Nearly two-thirds of respondents said late pay caused them to miss 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 payroll discrepancies affect employees, under a quarter (24%) believe the impact is significant . A larger share (30%) think payroll has only a small impact or none at all — pointing to a 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 fallout from payroll mistakes is felt more by female employees than male ones, with 52% of women reporting stress and anxiety after a late payment, compared with 42% of men.
Younger generations are more prone to stress from late payments. Employees aged 55 and over report the least stress from payroll mistakes (only 25% feel emotionally affected), while those aged 35–44 are the most likely (53%) to report stress or anxiety, perhaps because they often have greater financial and family commitments.
Employees in the US are more anxious about payroll mistakes. Because US workers are more likely to encounter payroll errors, they also report higher levels of stress — 56% of US employees said a late payment caused them high stress, versus 35% of UK employees.
Remote workers have higher stress levels around delayed payments. Perhaps because they can feel more isolated when problems occur, two-thirds (66%) of remote employees say delayed wages caused them stress, compared with 51% of hybrid staff and 44% of in-house employees.
Payroll errors can affect employee-employer relations
Another major consequence of payroll mistakes is that they can harm the employer–employee relationship, often eroding trust. While over half of employees said their relationship with their employer stayed the same after a payroll issue, 42% reported some deterioration.
There’s also reputational risk for businesses. When asked what they might do if a payroll error left them underpaid, more than a fifth of employees (21%) said they would either “make a complaint” or “post about it on social media,” which could have wider consequences for the employer.
“Functions like payroll exist to serve employees, and organisations must acknowledge and take responsibility for that impact. Poorly run payroll affects retention, sentiment and motivation — and those are major issues for any business.” - Jonathan Goldsmith, VP of Payroll at Remote
Our HR decision-maker survey highlights a disconnect: almost a quarter (24%) name faster payments as the top feature they want from a payroll solution, while a reduction in errors (21%) ranks only sixth. This suggests employers may underestimate how damaging payroll mistakes are compared with other priorities.
How are employee-employer relations impacted by payroll issues?
Increased caution and reduced trust are the most likely negative outcomes. Almost a third (32%) of employees who experienced a payroll mistake said it made them more cautious about their employer or reduced their trust. Just over 1 in 10 said they would be more reluctant to raise issues in future.
Younger employees are more likely to have a negative opinion of their employer due to a payroll issue. Seventy-one percent of 16–24-year-olds reported a negative shift 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.
Remote workers are less likely to change their opinion of their employer following a payroll error. Sixty percent of remote workers reported no change in their relationship with their employer, which may reflect greater confidence in payroll tools to fix mistakes or less direct contact with leaders and payroll teams.
UK employees are more likely to change their opinion of their employer because of a payroll mistake. Just under half of UK-based employees said their relationship with their employer stayed the same, compared with 53% in the United States and 64% in Germany, where employees are least likely to form a negative view of the business.
Overpayments pose a risk to businesses
Although underpayment is the most frequent payroll issue, in about 10% of pay-related errors the employee is overpaid. Repeated or unnoticed overpayments can create a material financial risk for businesses if they are not identified and corrected promptly.
We asked employees what they would do if an overpayment occurred at different amounts. While most said they’d report it to their employer (on average 61% across amounts), about 5% admitted they would spend the money without thinking.
More than one in ten (11%) said they wouldn’t notice an overpayment of $100 or less, with that share dropping as the amounts rose. This is partly because over a third (34%) of employees don’t check payslips every time — which emphasises the hidden financial risk of unnoticed 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 when overpaid?
Women are more likely to tell their employer about an overpayment than men. 58% of women would inform their employer if a payroll error resulted in them being overpaid up to $100 USD, compared to 55% of men. However, more women than men (13% vs 9%) also said they wouldn’t notice if they’d been overpaid.
Young people are the 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 up to $100 USD, with 23% saying they’d return the money only if asked. Older groups were more likely to be upfront, with 67% of those aged 55+ saying they would inform their employer.
Employees are more likely to keep overpaid wages if they don’t like their employer. Twenty-three percent would keep money paid in error if they disliked the company, whereas 13% of those who were satisfied with their employer said they would do the same — underlining how company culture affects behaviour around payroll mistakes.
Employees are more likely to return money if asked by their employer. On average, 13% of employees would return an overpayment if their employer asked, compared with 9% who would do so without prompting, emphasising the need for employers to spot and address overpayments quickly.
Payroll insights across countries and sectors
Our major study of global payroll in 2024 captures the views of employees and HR decision-makers across several countries and industries, showing how those most affected perceive 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 effects on employees, and the steps employers are taking to reduce them.
Employers must treat payroll as more than a back-office function
Our study highlights the tangible consequences of not getting payroll right. The financial impact on employees can be severe — for example, causing late rent or bill payments — but employers must realise the emotional impact of a serious payroll discrepancy can be even more acute.
Often the financial and emotional effects are linked — the prospect of missing a scheduled payment or not being able to buy essentials is a major source of stress, particularly for younger people with less financial stability and greater family commitments. But even without financial strain, late wages can damage mental health.
This is why, as Jonathan Goldsmith explains, employers should recognise that payroll is more than just an administrative function:
“Payroll is a strategic asset. If you treat payroll as a back-office function, you’re already out of step. Payroll plays a role in recruiting staff and creating a positive experience. If you don’t give employees clarity about what they are paid, how they are paid and why, you’re doing them a disservice.”
We have pointed to trust erosion as a possible outcome of payroll errors (with more than 15% of employees saying a payroll issue reduced their trust in their employer), but the business impacts go further: flawed payroll operations can reduce motivation, harm productivity, and make it harder to attract and retain top talent.
“Many companies claim, ‘We pay our employees well’, but that doesn’t mean much if pay isn’t processed correctly. It’s a simple point that often gets 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 reasons for payroll issues, the impact on employees and business operations, and the benefits of outsourcing payroll for organisations.
-1.png?width=3840&quality=90&auto=webp&disable=upscale)
