Costly Payroll Overpayment Mistakes

10 February 2020
 Categories: , Blog


When an employee works hard, they deserve to be fairly compensated based on the terms of their employment agreement. However, they shouldn't be overpaid. Unfortunately, there are plenty of mistakes that can be made that allow for overpayments during payroll. Anytime you pay someone more than they are due — your business loses money. It's important to eliminate these mistakes.

Unverified Time Reports

In small businesses, employees tend to work the same schedule from week to week. However, there are those instances when an employee might have been running late or something else happens that caused an adjustment. During payroll, if you compensate employees based on the schedule, they typically work rather than by verifying the time report each period, it's easy to pay an employee for more hours than they have worked. 

Leave Buyback

If your company allows employees to use unearned leave days and then repay them in the future, you have to be especially careful when you calculate these days. A mistake in this area could mean than an employee would earn one or more days of paid vacation. To avoid this error, the employees' record would need to be checked to ensure the earned leave time is deducted from the previous balance each pay period until the balance is paid back. 

Inaccurate Wages

Similar to the time reports, each employees' wages must be checked for accuracy each time the payroll process is performed. This step is so important is because not every individual within the same department or role earns the same wage. When you overpay an employee, you pay them more than the agreed-upon term. However, you can also cause hardship for the employee, as the increase in wages could affect their taxes or eligibility for other benefits.


A lack of financial expertise is a large reason why these mistakes are common in many businesses. Particularly when it comes to small businesses, business owners have so many other things on their plate that they sometimes rush through the payroll process. Not only does this practice result in mistakes, but it also leaves little time to review the record to pinpoint and correct these mistakes. In these instances, a payroll consulting firm is especially beneficial. These organizations handle the entire payroll process for you and use their experience to eliminate costly mistakes. If you want to lessen your load and save your company money, contact a payroll consulting firm to learn more about what they offer.