Payroll errors are often dismissed as routine administrative issues. However, an updated EY analysis shows these mistakes can carry financial, operational and painful costs.
According to EY’s Cost and risks due to payroll errors: Update to the HR Processing Risk and Cost Survey, commissioned by Paycom, businesses spend an average of $339 to correct each payroll error. That represents an increase of nearly 20% from EY’s 2022 findings, underscoring how the cost of payroll rework continues to grow.
The new figures reflect EY’s inflation-adjusted update of survey data collected in 2022. The underlying survey included more than 500 respondents with payroll responsibilities at the supervisor or manager level or higher at U.S.-based companies with 250 to 10,000 employees.
Respondents reported errors occurring in one of every five payrolls.
For organizations with 1,000 employees, resolving the most common payroll errors consumes nearly 29 workweeks annually, incurring costs that extend well beyond payroll.
As organizations face increasing pressure to improve efficiency, payroll accuracy has become more than a payroll function. It is a business imperative that can influence productivity, compliance, workforce confidence and, ultimately, organizational performance.
Why are payroll errors becoming a bigger business concern?
Payroll errors create financial costs, consume valuable labor hours and expose organizations to unnecessary risk.
The direct expense of correcting payroll mistakes is substantial, but the broader impact can be even more significant. Every error requires investigation, validation and resolution, often involving multiple stakeholders across payroll, HR and management.
Time, attendance and expense issues make up the most common category of payroll errors, occurring an estimated 1,139 times annually per 1,000 employees. EY estimated that these errors cost an organization $289,722 per 1,000 employees each year, an increase of more than $40,000 since 2022. These calculations focus specifically on payroll errors and do not include potential compliance costs or other financial consequences, which may add to the broader organizational impact.
For many employers, these recurring costs are not the result of a single error. Rather, they stem from payroll processes that leave too much room for avoidable mistakes.
How do payroll inaccuracies affect the workforce?
Payroll errors can weaken employee confidence and affect the overall employee experience.
Employees expect accurate pay, accurate deductions and accurate time-off balances. When those expectations are not met, even small discrepancies can create frustration and uncertainty.
For today’s employees, believing their check is correct no longer cuts it; they want to know it. In fact, 52% of respondents said the ability to view their payroll and fix errors before payday would improve their job engagement, confidence or satisfaction, according to a September survey of 1,000 full-time professionals, conducted by Paycom.
The impact can be especially significant for employees who depend on timely, accurate pay. According to PayrollOrg’s 2025 “Getting Paid in America” survey, 78% of U.S. workers said they would find it somewhat or very difficult to meet their financial obligations if their paycheck was delayed by one week. For employers, that underscores why payroll accuracy is about more than administrative efficiency. It can have a direct impact on employees’ financial well-being.
Because payroll touches every employee, accuracy plays a critical role in creating a positive workplace experience.
What processes can contribute to payroll errors?
Most payroll mistakes originate from fragmented processes, manual data entry and disconnected sources of workforce data.
The payroll process depends on information flowing accurately from multiple areas of the business, including time tracking, scheduling, paid time off, benefits administration and employee records. When those processes operate separately, the potential for discrepancies increases.
The EY report identified missing or incorrect time punches, missing expenses, incorrect time-off and vacation earnings, shift availability issues and PTO availability discrepancies among the most frequent payroll errors organizations face.
Missing or incorrect time punches are the costliest and most time-consuming individual error identified in the report. EY estimated that they account for $93,600 in combined direct and labor costs and require about 440 hours to resolve annually per 1,000 employees.
These types of mistakes often share a common characteristic: The information is known somewhere within the organization but fails to reach payroll accurately or at the appropriate time.
As organizations grow, maintaining accuracy through manual reviews becomes more difficult. Additional systems, more employees and more workforce complexity can create additional opportunities for payroll information to become outdated or inaccurate before payroll runs.
The result is a cycle of corrections that can consume substantial organizational resources. According to EY, the five most time-consuming payroll errors require organizations to spend more than 29 workweeks annually correcting issues for every 1,000 employees.
How can payroll errors create compliance risks?
Payroll errors can create compliance and legal consequences that extend well beyond the cost of correcting an employee’s pay.
Regulatory or compliance issues tied to payroll errors can require significant time and resources to resolve. The EY analysis also found that when payroll errors resulted in litigation, the effects could spread across the workforce and the broader organization.
Approximately 1 in 6 companies surveyed experienced litigation issues tied to payroll errors, and 44% of those companies reported employee furloughs or terminations. Workforce stability was another concern, with 35% reporting increased employee turnover. And the impact extended to the employee experience, as 30% reported a decline in employee morale.
These findings demonstrate how an inaccurate payroll can become more than a payroll problem. Errors that escalate into compliance or litigation issues can affect an organization’s workforce, operations and overall business performance.
How can businesses prevent payroll errors?
Organizations can significantly reduce payroll errors by preventing them before payroll is submitted rather than correcting them after processing.
This shift from correction to prevention is driving greater interest in payroll technologies that empower employees, automate workflows and eliminate unnecessary manual touchpoints.
Paycom addresses payroll accuracy through full-solution automation, which automates decisions, tasks and processes across the employee life cycle within a single database. Because workforce and payroll information is connected throughout the system, organizations can reduce many of the handoffs and duplicate entry points that contribute to payroll mistakes.
One example is Beti®, Paycom’s automated payroll experience.
Beti automatically self-builds payroll each scheduled pay cycle, identifies discrepancies, then guides employees to review and resolve issues before payroll submission. By proactively involving employees directly in the verification process, payroll teams can address issues before they become costly, time-consuming corrections.
Beti is further enhanced through decisioning logic. Across Paycom’s software, decisioning logic extends automation beyond tasks by applying predefined, client-specific business rules to routine decisions. This helps organizations reduce manual work, improve consistency and prevent errors from moving downstream into HR and payroll processes.
Together, full-solution automation and decisioning logic help organizations move beyond traditional payroll processes that rely heavily on manual review and postpayroll corrections.
Why should leaders view payroll accuracy as a strategic issue?
Payroll accuracy influences compliance, operational efficiency and workforce stability, making it an important business priority rather than simply an HR responsibility.
The latest findings from EY highlight how payroll mistakes can affect organizational outcomes. Beyond correction costs, the report found organizations that experienced regulatory or compliance issues stemming from payroll errors also faced additional challenges, such as workforce planning hurdles and operational disruptions.
Organizations that continue to spend significant time correcting payroll issues may struggle to focus resources on growth initiatives, workforce development and innovation. In contrast, organizations that prioritize prevention can redirect attention toward higher-value activities that support long-term business objectives.
The updated EY report makes clear that payroll mistakes carry consequences far beyond a single paycheck. They affect efficiency, compliance and organizational performance at scale.
Preventing payroll errors requires organizations to address discrepancies before payroll is submitted. By combining an automated payroll experience, automated time-off decisions and decisioning logic across software built on a truly single database, Paycom helps organizations reduce manual intervention and prevent errors from becoming costly corrections.
The future of payroll is getting it right the first time, for employees and the business.