2024 State of Payroll Report: the hidden costs of payroll mistakes

Find out what's shaping the future of payroll with insights from over 2,500 professionals and 1,300 HR decision-makers across the globe. Get the full report and learn how to make payroll work for you. Here’s what to expect 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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Whether it’s a late payment or an insufficient paycheck, many of us have likely encountered a payroll mistake at some point in our careers. But what impact do payroll errors have on those who experience them?

A payroll issue is often more than a minor inconvenience for an employee — it can have a very real impact on their life, affecting bill payments, family plans, and even their ability to socialize. Beyond from the financial impact, payroll mistakes can have an equally detrimental effect on an employee’s morale and mental health.

As Jonathan Goldsmith, Remote’s VP of Payroll, explains, “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 kind of problem or discrepancy in the payroll process, which might include errors in pay, misclassifications, or discrepancies in subsidies in tax.

At Remote, we see payroll as more than a basic administrative function — it’s an essential arm of HR for all businesses and crucial in fostering trust, preserving morale, and driving motivation. Mistakes and a general lack of transparency around payroll can introduce uncertainty, anxiety, and damage relationships between employers and their workforces.

To understand the state of global payroll and gauge the tangible impact payroll issues can have on employees across the globe, we surveyed more than 2,500 professionals across several demographics and sectors in the UK, US, and Germany, as well as more than 1,300 HR decision-makers in charge of payroll.

How do payroll issues really affect employers and their employees? Let’s dive into the data.

Highlighting the paramount importance of accuracy and transparency, our survey demonstrates the significant impact payroll errors can have on both employees and their employers. Inefficiencies in payroll can not only have a detrimental impact on relationships but can also introduce 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 the employees surveyed had experienced a payroll issue in their career, with 50% experiencing at least one within two years of the date of the survey. 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 just once, but more than 18% had experienced at least three payroll mistakes over a single year — with younger workers (aged 16-24) experiencing the highest number of payroll errors.

While our survey of HR decision-makers found that 7 in 10 organizations (71%) who outsource payroll reported a positive impact on accuracy, employers cannot take the need for utmost precision for granted — indeed, almost half (49%) of HR teams spend five or more hours resolving pay-related issues each month, particularly in larger organizations.

Who is most likely to experience a payroll error?

  • Younger employees are more likely to experience a payroll error. Over 70% of 16-24-year-olds surveyed encountered a payroll error in the past two years, compared to just 30% of those aged 55 and over. While Gen Z workers are less likely to check their paychecks (47% don’t check theirs every month) this higher error rate may be due to less stability — younger workers typically move roles more often, for example.

  • Payroll mistakes are more common in US workplaces. US employees are 26% more likely to experience a payroll error than their UK counterparts, with a quarter of workers in America having encountered a payroll issue in the last three months. A greater frequency of paychecks may be a contributing factor (most Americans are paid every two weeks) along with a notoriously complex US tax system.

  • Remote workers are less likely to encounter payroll issues. Perhaps surprisingly, fewer fully remote employees (17%) have experienced a payroll error in the past three months than those in hybrid or fully in-person roles (both 22%). While fully remote workers check their paychecks less frequently (41% don’t check theirs every month, compared to 31% of in-person workers) it may also be true that fully remote companies may, out of necessity, have more stringent and reliable systems in place.

The survey also found that underpayment is the most common payroll issue. Of those who’d experienced a payroll error, 42% reported that they’d been underpaid, while almost a quarter (24%) had received a late payment. Overpayment was the issue in roughly 1 in 10 cases.

In the case of late payment, the majority of issues are resolved within a week (60% of those who reported receiving a late payment said their wages came through within seven days) but others had to wait longer — around 18% were left waiting for more than two weeks, with almost 7% experiencing a delay of one month or more.

Read the full report and learn how to reduce payroll errors

What are the consequences of payroll mistakes? Download our State of Payroll Report to discover the impact of payroll errors on employees and learn how to minimize your risk.

Stress and anxiety are the biggest impacts 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 reported that the single most common impact of a late payment was “stress and anxiety” (47%). “Family pressure” was the third most common (23%), highlighting the emotional impact of late payments is often equally as significant as the financial one.  

However, financial pressures are also common. Almost two-thirds of respondents reported late paychecks caused them to make late payments for bills and rent or placed them in their overdraft. 

"Payroll affects people, and it’s an emotional thing. It has a significant impact on the morale of the employees in the organization. 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

In contrast, our survey of HR decision-makers discovered that, while 95% of employers acknowledge that payroll discrepancies impact employees, under 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 the perceived impact of payroll issues between employees and HR leaders.

Who is most impacted by payroll mistakes?

  • Women are more likely to experience payroll-related anxiety. The emotional impact of payroll errors is felt more keenly by female employees than their male counterparts, with over half (52%) of women feeling stress and anxiety as a result of a late payment, compared to 42% of men.

  • Younger generations are more prone to stress caused by late payments. Employees aged 55+ experience the least stress when faced with a payroll mistake (just 25% feel emotionally impacted), while more than half (53%) of those in the 35-44 age range feel stressed or anxious — possibly due to having more financial and family-related commitments.

  • Employees in the US are more anxious about payroll mistakes. While American workers are more likely to encounter a payroll issue, they’re also more likely to experience stress or anxiety as a result of a mistake. 56% of US employees reported feeling high levels of stress caused by a late payment, compared to 35% of the UK workforce.

  • Remote workers have higher stress levels around delayed payments. Perhaps because they may feel more isolated when issues occur, two-thirds (66%) of remote employees say delayed payment of wages has caused them to feel stress. This compares to 51% of hybrid workers and 44% of in-house employees. 

Payroll errors can affect employee-employer relations

Another significant impact of payroll mistakes is a potential breakdown in the relationship between the employer and the employee, with a payroll discrepancy often leading to a loss of trust. While more than half of employees say their relationship with their employer stayed the same following a payroll issue, 42% indicated some kind of deterioration.

However, the same can be said about the potential risk of damage to a company’s reputation if a payroll mistake is made. When asked what they’d do if a payroll error resulted in their being underpaid, over a fifth of employees (21%) said they’d either “make a complaint” or “post about it on social media,” which could have wider repercussions 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 here, with almost a quarter (24%) of respondents seeing faster payments as the main function they’d like a payroll solution to provide. A reduction in errors (21%) is considered the sixth-most desired function, indicating that employers are perhaps not fully aware of the full impact payroll mistakes can have compared to other factors.

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 this had either made them more cautious of their employer or that it had decreased their trust in their employer. Just over 1 in 10 would be more reluctant to raise issues in the future.

  • Younger employees are more likely to have a negative opinion of their employer due to a payroll issue. 71% of employees aged 16-24 experienced a negative change in their relationship with their employer following a payroll error. Conversely, almost two-thirds (65%) of those aged 45-54 said there was no change in employee-employer relations.

  • Remote workers are less likely to change their opinion of their employer following a payroll error. 60% of remote workers experienced no change in their relationship with their employer, which could be explained by more confidence in their payroll tools to correct mistakes or simply less exposure to leaders and payroll staff.

  • UK employees are more likely to change their opinion of their employer because of a payroll mistake. Just under 50% of UK-based employees said their relationship with their employer had stayed the same, compared to 53% in the United States and 64% in Germany — where employees are less likely to develop a negative opinion of the business.

Overpayments pose a risk to businesses

While the most common payroll issue is underpayment, in around 10% of instances of pay-related errors, the employee is paid too much. This, of course, can pose a significant financial risk to businesses, particularly if these mistakes regularly go unnoticed and are allowed to happen frequently.

Our survey asked employees what they would do if a payroll mistake resulted in them being overpaid, up to several different amounts. While in all situations most respondents said they’d tell their employer (on average, 61% would do so regardless of the overpayment amount), 5% of employees would spend the money without consideration.

More than 1 in 10 (11%) said they wouldn’t notice an overpayment of $100 or under, with that percentage decreasing the higher the amount. This is impacted by the fact that over a third (34%) of employees don’t check their paychecks every time they receive one. While far from a malicious act on an employee’s behalf, this nonetheless highlights the hidden financial risk to businesses of frequently undiscovered mistakes.

“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, 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, with 23% saying they’d return the money only if requested. Older age groups would be more honest, with 67% of those aged 55+ saying they’d tell their employer.

  • Employees are more likely to keep overpaid wages if they don’t like their employer. 23% would opt to keep money mistakenly paid if they didn’t like the company they worked for, while 13% who were happy with their employer would do the same — highlighting the role company culture plays in payroll and employees’ perception of benefits.

  • Employees are more likely to return money if asked by their employer. In all scenarios, on average, 13% of employees would return an overpayment if requested by their employer, versus an average of 9% who would do so without being asked. This underscores the onus on employers to be vigilant in identifying overpayment issues.

Payroll insights across countries and sectors

Our leading study into the state of global payroll in 2024 considers the views of employees and HR decision-makers in multiple countries and across a range of industries, revealing how those most affected feel about payroll operations in the current landscape.

  • 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 uncovers important insights such as the frequency of payroll mistakes, the impact these errors have on employees, and what employers are doing to mitigate them.

Read the full report and learn how to reduce payroll errors

What are the consequences of payroll mistakes? Download our State of Payroll Report to discover the impact of payroll errors on employees and learn how to minimize your risk.

Employers must treat payroll as more than a back-office function

Our study shines a light on the very real impact of not getting payroll right. The financial repercussions for employees can be significant — with consequences including late rent or bill payments, for example — but employers must realize that the emotional impact of a serious payroll discrepancy can be felt even more keenly.

Of course, the two are often tied together — the prospect of missing a scheduled payment or not being able to afford essential provisions is invariably a cause of stress and anxiety, particularly for younger generations who may have less financial stability and more family commitments. But this doesn’t negate the fact that late payment of wages can have a damaging effect on employees’ mental health.

This is why, as Jonathan Goldsmith outlines, employers must recognize 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’ve highlighted the erosion of trust as a potential consequence of a payroll error (with more than 15% of employees saying a payroll issue had reduced their trust in their employer), but the impact on businesses can be wide-ranging: an ineffective and error-prone payroll operation can decrease employee motivation, damage productivity, and even affect a company’s ability to attract and retain high-caliber 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.”

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 organizations.


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Methodology

Remote commissioned research provider Censuswide to survey workers to generate an employer and employee review of the state of payroll in 2024. For the employer sample, 1,352 HR Decision-Makers (who are responsible for payroll) across the UK, US, Germany, France, and the Netherlands were surveyed between 20.06.2024 and 28.06.2024. For employee data, 2,539 general workers across the UK, US, and Germany were surveyed between 14.06.2024 and 17.06.2024

Note: Survey questions were regionalized for each country where relevant. For example, when questions were presented as a monetary value, they were posed to respondents in their domestic currency (euros, US dollars, or pound sterling).

Data was collected and analyzed in June 2024.