Few groups are as precise and detailed oriented as Payroll. That’s what makes them perfect for the job, right? But they’re not infallible.
Mistakes do happen. And when those mistakes involve overpayments, they bring an avalanche of headaches with them.
After all, people’s paychecks are as sensitive a subject as you get. And telling employees your company paid them too much and now have to correct that will never be well received.
Fortunately, many of the mistakes that result in overpayments can be prevented (or at least minimized).
Take a look at the three most common scenarios that result in a Payroll overpayment, according to research by The Hackett Group and the American Payroll Association, as well as your best defenses:
Reason No. 1: Payroll receives termination paperwork too late
This is by far the biggest issue plaguing your peers – 58% of companies say this results in problems for them. A supervisor decides it’s time to part ways with a particular staffer, but that information doesn’t get to Finance before payroll runs its next cycle.
Reason No. 2: Payroll isn’t told about leaves of absence
More than one in four (26%) companies says this causes them to make an overpayment through Payroll. Whether someone’s taking leave under the Family and Medical Leave Act (FMLA) or is placed on furlough, if Finance doesn’t get told in time, your company will cut a check it shouldn’t.
Reason No. 3: The incorrect pay rate is used
This problem may be somewhat less common (18% of companies cite it as an issue), but it’s no less expensive a mistake when it happens. In the past few years, as many companies have tightened up, pay cuts have become more commonplace. Except that your company isn’t going to realize the savings if Payroll keeps paying folks at the old rate.
What do all three of these problems have in common? Payroll gets caught short because of a lack of communication with other departments within the organization.
Yes, you can continue to hound department heads to give you that info, but it may not change much.
There are a few other options, depending on how elaborate you want to get:
- Consider having Payroll send an email just before processing payroll for the period, asking whether there were any changes that impact the checks. And be specific: List all of the types of events that could lead to an overpayment, starting with the three above.
- Lean on more self service options. By having an automated system where supervisors can input themselves when these type of occurrences take place, your chance of an overpayment drops dramatically.
Either way, Finance won’t be the last to know.
Do you have any other strategies for keeping Payroll in the loop to prevent overpayments? Share them here.