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2024 state of payroll report: the hidden costs of payroll mistakes
Discover the forces reshaping payroll, informed by over 2,500 professionals and 1,300 HR decision-makers worldwide. Get the full report and learn how to make payroll work for you. Expect the following inside:
- The most frequent errors and how to mitigate them
- How payroll errors affect productivity, morale and staff retention
- Guidance for transitioning payroll into a strategic business function
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Whether caused by a late payment or an underpaid payslip, many of us will have encountered a payroll fault at some stage in our careers. So, what effect do payroll errors have on the people who experience them?
For an employee, a payroll problem is often more than a mere inconvenience — it can disrupt banknote payments, family plans and even one’s social life. Beyond the financial consequences, payroll mistakes can also harm an employee’s morale and mental wellbeing.
As Jonathan Goldsmith, Remote’s VP of Payroll, points out, “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 refer to any problem or discrepancy within the payroll process, including incorrect pay, worker misclassification, or inconsistencies in tax subsidies.
At Remote, we view payroll as more than a basic administrative function — it is a central HR capability for organisations of all sizes and plays a key role in building trust, maintaining morale, and encouraging engagement. Errors and opaque payroll practices create uncertainty and stress, and can harm relationships between employers and their workforces.
To assess global payroll and quantify how payroll issues affect staff internationally, we surveyed more than 2,500 professionals across various demographics and sectors in the UK, US and Germany, plus over 1,300 HR decision-makers responsible for payroll.
How do payroll issues truly impact employers and their employees? Let’s examine the data.
Our survey underlines the critical need for accuracy and openness, demonstrating the substantial harm payroll mistakes can inflict on both staff and employers. Inefficient payroll not only damages relationships but can also 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
More than half of employees have faced payroll issues
53% of the employees surveyed had experienced a payroll issue in their career, with 50% experiencing at least one within two years of the survey date. 40% had encountered a payroll error in the past year, while almost 11% had suffered a payroll mistake in the last month alone.
Of the respondents who had experienced a payroll error within the past year, 43% had encountered an issue only once, but more than 18% reported at least three payroll mistakes over a single year — with the highest incidence among workers aged 16–24.
Our survey of HR decision-makers showed seven in 10 organisations (71%) that outsource payroll reported a positive effect on accuracy; nevertheless, employers should not assume precision is guaranteed — almost half (49%) of HR teams spend five or more hours resolving pay-related issues each month, particularly in larger organisations.
Which groups are most likely to experience a payroll error?
Younger employees face a higher likelihood of payroll errors. Over 70% of 16–24-year-olds surveyed reported a payroll error in the last two years, compared with just 30% of those aged 55 and over. Although Gen Z employees check pay less often (47% do not review their payslip every month), the higher error rate may reflect greater job mobility and less stability among younger workers.
Payroll mistakes occur more frequently in US workplaces. US employees are 26% more likely to experience a payroll error than their UK counterparts, and around a quarter of American workers reported a payroll problem within the past three months. A more frequent pay cycle (many Americans are paid every two weeks) combined with a notoriously complex US tax system.
Fully remote employees are less likely to face payroll errors. Perhaps surprisingly, only 17% of fully remote employees reported a payroll error in the past three months, compared with 22% of hybrid and fully in-person workers. While fully remote staff check payslips less frequently (41% do not check monthly, versus 31% of in-person employees), remote-first companies may have, out of necessity, more robust and reliable payroll systems.
The survey also showed that underpayment is the most frequent payroll issue. Of those who had experienced a payroll error, 42% reported they had been underpaid, while almost a quarter (24%) received a late payment. Overpayment accounted for roughly one in 10 cases.
When payment is late, most issues are resolved within a week (60% of those who reported receiving a late payment said their wages came through within seven days), but some had to wait longer — around 18% waited for more than two weeks, with almost 7% experiencing a delay of one 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%) reported a delay in payment as one of the issues they experienced.
Respondents said the single most common impact of a late payment was “stress and anxiety” (47%). “Family pressure” was the third most common (23%), underscoring that the emotional impact of late payments is often as significant as the financial one.
Financial strain is also common. Nearly two-thirds of respondents reported that late paychecks led to missed bill or rent payments or forced them into their overdraft.
“Payroll touches people’s lives and carries an emotional weight. It can considerably affect employee morale within the organisation. If someone is paid incorrectly, or receives less than expected, they may miss a medical payment or another essential cost.” - 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, fewer than a quarter (24%) believe they have a significant impact. A greater number (30%) feel they have either a small impact or no impact at all — highlighting a potential disconnect in how employees and HR leaders perceive the severity of payroll issues.
Who is most affected by payroll mistakes?
Women are more likely to suffer payroll-related anxiety. The emotional impact of payroll errors affects women more than men: over half (52%) of women reported stress and anxiety following a late payment, compared with 42% of men.
Younger generations show higher stress from late payments. Employees aged 55+ report the least stress when faced with a payroll mistake (only 25% feel emotionally impacted), while more than half (53%) of those aged 35–44 feel stressed or anxious — likely due to greater financial and family responsibilities.
Employees in the US report higher anxiety about payroll mistakes. While US workers are more likely to encounter payroll issues, they also report greater stress: 56% of US employees said a late payment caused high levels of stress, compared with 35% of workers in the UK.
Remote workers report higher stress levels from delayed payments. Possibly because they can feel more isolated when problems arise, two-thirds (66%) of remote employees say delayed wages caused them stress, compared with 51% of hybrid workers and 44% of in-house employees.
Payroll errors can damage employee–employer relations
Another major consequence of payroll mistakes is a potential breakdown in trust between employer and employee. While over half of employees said their relationship with their employer stayed the same after a payroll issue, 42% reported some deterioration.
There is also reputational risk for companies. When asked how they would react 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 implications 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 potential disconnect, with almost a quarter (24%) naming faster payments as the principal function they would like a payroll solution to deliver. A reduction in errors (21%) ranks sixth, suggesting employers may undervalue the broader consequences of payroll mistakes.
How do payroll issues affect employee–employer relations?
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 of their employer or reduced their trust. Just over one in 10 would be less inclined to raise issues in future.
Younger employees are more likely to form a negative view of their employer after a payroll issue. Seventy-one percent of employees aged 16–24 experienced a negative change in their relationship with their employer following a payroll error. By contrast, almost two-thirds (65%) of those aged 45–54 reported no change.
Remote workers are less likely to change their opinion of their employer after 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 correct mistakes or simply less direct contact with leaders and payroll staff.
UK employees are more likely to change their view of their employer because of a payroll mistake. Just under 50% 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 opinion of the business.
Overpayments present a risk to businesses
Although underpayment is the most common issue, roughly 10% of pay-related errors result in the employee being overpaid. Repeated or unnoticed overpayments can pose a material financial risk to employers.
Our survey asked employees what they would do if a payroll mistake led to an overpayment at various amounts. In all scenarios most respondents said they would tell their employer (on average, 61% would do so regardless of the overpayment amount), while 5% said they would spend the money without consideration.
More than one in 10 (11%) said they would not notice an overpayment of $100 or less, with that share falling as amounts increased. This is affected by the fact that over a third (34%) of employees do not check their paychecks every time they receive one. While not necessarily malicious, this highlights the hidden financial exposure for businesses from 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. Fifty-eight percent of women would inform their employer if an overpayment up to $100 occurred, compared with 55% of men. However, more women than men (13% vs 9%) also said they would not notice such an overpayment.
Young people are the least likely to inform their employer they’ve been overpaid. Just over a third (35%) of 16–24-year-olds said they would notify their employer about an overpayment up to $100, while 23% said they would only return the money if asked. Older groups were more likely to report it, with 67% of those aged 55+ saying they would tell their employer.
Employees are more likely to keep overpaid wages if they don’t like their employer. Twenty-three percent said they would keep money accidentally paid if they disliked their employer, while 13% of those satisfied with their employer would do the same — highlighting how company culture influences behaviour around payroll mistakes.
Employees are more likely to return money if asked by their employer. Across scenarios, an average of 13% of employees would return an overpayment if requested by their employer, versus 9% who would do so without prompting. This emphasises the employer’s role in spotting and resolving overpayments.
Payroll insights by country and sector
Our flagship study into the state of global payroll in 2024 gathers views from employees and HR decision-makers across multiple countries and industries, revealing how those most affected perceive current payroll operations.
We surveyed 2,539 working professionals in the United Kingdom, Germany, and the United States.
We also gathered the views of 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 take to reduce them.
Employers must regard payroll as more than a back-office function
Our study highlights the tangible consequences of incorrect payroll. The financial fallout for employees can be severe — for example, missed rent or late bill payments — but employers must realise that the emotional impact of a serious payroll discrepancy can be felt even more keenly.
These effects are often intertwined — the risk of missing a scheduled payment or not being able to afford essentials is invariably a source of stress and anxiety, particularly for younger generations with less financial stability and more family responsibilities. That said, late payment of wages can also cause serious harm to 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 strategic asset. If you treat payroll as a back office task, you are already behind the curve. Payroll helps attract staff and shapes their experience. If you do not give employees clear information about what they are paid, how they are paid and why payments are structured that way, you are doing them a disservice.”
We highlighted loss of trust as a likely outcome of payroll errors (more than 15% of employees said an issue had reduced their trust in their employer), but the business impact can be broader: an error-prone payroll operation can undermine motivation, lower productivity and hinder an organisation’s ability to attract and retain top talent.
“A lot of companies say, ‘We pay our employees well’,” but this doesn’t matter if they’re not paying them correctly at the end of the day. That’s an important thing to remember, and I think it gets forgotten a lot.”
Would you like to learn more about employees’ and HR decision-makers’ views on 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.
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