Our most recent survey reveals that an estimated 82 million Americans – more than half of the U.S. workforce – have experienced a problem with their paycheck during their career. These paycheck errors include late payments, non-payments, over-payments, and incorrect payments.
Why do these errors occur? Some of it is technology (or lack thereof). The American Payroll Association’s 2016 Trendline Survey reported that only 40% of its members responding had fully automated payroll systems. Bloomberg BNA’s Payroll Department Benchmarks and Analysis Report 2015-2016 describes the state of payroll automation as follows:”Quite a few payroll professionals might describe their departments’ technological resources with a ‘‘Meh.’’ While only a handful of payroll officers (7 percent) indicated ‘‘low’’ levels of technology and automation in their departments, barely a quarter (26 percent) reported an office at the top of its technological game (‘‘high’’ technology and automation).”
Technology isn’t the only driver, though. In fiscal year 2016, the Wage and Hour Division of the US Department of Labor found more than $266 million in back wages for more than 280,000 workers whose employers failed to comply with federal labor laws; i.e. whose employers either didn’t understand the rules or who understood them and chose to ignore them. Prior research conducted by Kronos and the American Payroll Association yields the insights in the chart above – many of which are related to how data on hours worked is collected in the first place.
Whatever the reason that paycheck errors occur, they can drive a wedge between employees and employers – especially for those employees who are living paycheck to paycheck (58% according to this survey). With the US economy unemployment rate under 5% since January of 2016, employers are paying more attention to strategies to retain their workers. Paying them correctly and ensuring they understand how to read their paystub (42% have an issue here) can help remove paycheck errors as a source of discontent.
Following are the highlights from this research. (Note that throughout the following findings, the estimated numbers of Americans affected are based on the U.S. Bureau of Labor Statistics report from January 2017 that estimates there are 152.08 million employed people in the U.S.)
- 54 percent of Americans have had a paycheck problem, while salaried, hourly, and gig (i.e. freelance / contract) workers each face different challenges.
- More than a quarter (26 percent) of hourly workers have been paid too little, while 15 percent say they’ve been paid late. Just one in 20 – six percent – have been overpaid.
- For the salaried worker, 15 percent say they’ve been shortchanged in their check. Although 16 percent report being paid late, another 23 percent say they’ve been paid early – a nice problem to have! Nine percent have had a paycheck bounce, though, which is more than hourly and gig workers combined.
- While still a small group, gig workers might be the toughest to pay correctly. One in five (20 percent) have been paid late; one in five (20 percent) have been paid too little; and 16 percent say they’ve had their paycheck direct deposited into the wrong account.
- Overall, at least 10.6 million workers (seven percent) have had a paycheck bounce.
- More than 13.6 million American workers report being overpaid – and not everyone scrambles to return it.
- The survey found, on average, Americans workers say they must likely be overpaid a staggering $463 before alerting their employer to the mistake.
- It would take more, on average, for salaried employees ($735) to alert their employer if they were overpaid versus hourly workers ($160).
- Men may be more dishonest than women – over two-times more, in fact – as men, on average, would pocket $623 extra before saying something, compared with $258 for women.
- Employees can’t claim they didn’t notice the error: more than three-quarters (77 percent) of Americans check their paystub every payday to make sure their taxes, withholdings, and overall earnings are correct.
- Living paycheck-to-paycheck makes payroll errors costlier: 56 million American workers have paid a personal bill late because of a payroll error.
- Almost three out of five employed Americans – 58 percent or 87 million workers and their families – live paycheck-to-paycheck, according to the survey, while hourly employees (65 percent) are more likely than salaried employees (52 percent) to report this.
- Payroll errors have forced over one-third (37 percent) of American workers to make a late payment on a bill such as their car loan, credit card, mortgage, or apartment/home rent.
- Salaried employees (45 percent) are more likely than hourly employees (29 percent) to have made a late payment because of a payroll error.
- Almost 64 million Americans say their paystub is hard to read.
- The survey discovered 42 percent of all employees say taxes and deductions on their paycheck are confusing to read and understand.
- Year-end tax forms confuse American workers, too. While half say they’re confident they have never had a problem with documents such as an IRS W-2 Form, 35 percent of employees have had a problem such as a mistake. Another 15 percent admit they do not understand their tax forms enough to even recognize an error.
- Nearly half of American workers (45 percent) say they would feel more engaged with their job if their employer helped them better understand the impact of taxes and deductions on their overall earnings.