Payroll Horror Stories: Don’t Let These Happen to You!

Do you need a new scary story to tell the next time you gather around a campfire? These horror stories might not have ghosts, masked intruders, or scream queens, but they do have something that’s probably even scarier to HR professionals: huge fines, angry employees, and [insert dun dun duuuuun sound effect] payroll errors! These aren’t just any horror stories. They’re payroll horror stories. Turn off the lights, fire up a spooky soundtrack, and dive in for some chills.

Payroll Horror Stories

Nightmare Payout

A 2.75 million dollar settlement would send chills down any company’s spine. That’s what PNC Bank had to pay after a lawsuit filed by former customer service reps claimed the company failed to accurately track their hours. The service reps claimed they were regularly working up to three off-the-clock hours each week. But it wasn’t necessarily a payroll error. In addition to working unaccounted overtime hours, the employees claimed they were told to not clock in until they had done tasks like boot up their computer and read their emails.

The Fair Labor Standards Act (FLSA) requires employers to pay their non-exempt employees for all hours worked. So when it comes to paying your non-exempt employees, make sure all of their hours are tracked and overtime is compensated correctly, and set policies that are fair and that follow all regulations. Doing it right the first time is a lot cheaper than getting sued or fixing payroll mistakes down the line.

New System, New Problems

Upgrading to a new payroll system is generally a good thing. (Especially if you’re switching to software with a solid implementation process like BambooHR Payroll.) But sometimes the transition can stir up trouble.

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After 30 years of using a mishmash of systems, it was time for Philadelphia to upgrade the software they used to pay city employees. They created a new system called OnePhilly, but the move wasn’t exactly seamless. According to the city mayor’s chief of staff, over the first four pay cycles, about 8.5 percent of paychecks had a payroll error. That’s more than 7,000 paychecks! To fix the problem, the city set up a helpline where employees can report problems with their checks.

Philadelphia chose to create its own new payroll system, which isn’t common among small and medium-sized businesses. If your company decides to make a payroll switch, be sure you research its implementation process so you can ensure you will have a seamless transition.

Facebook Commenters v. Payroll

During part of the COVID-19 pandemic, the national grocery chain, Kroger, offered employees “Emergency Leave of Absence Pay” if they had to stay home because they tested positive for COVID-19. But due to a payroll error, some of those employees were overpaid $461.60.

To fix their payroll errors, Kroger sent a letter explaining to the employees that they were overpaid and would need to return the overpaid amount in one, three, or five installments. Employers do have a legal right to recoup wages or bonuses they can prove were overpaid. But that letter made its way to Facebook, and if you’ve ever wandered into a Facebook comments section, you can imagine what happened. Following online backlash and pressure, Kroger said the incident was an “unfortunate payroll error” and agreed to not seek repayment.

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If you accidentally overpay an employee, it is within your legal right to garnish an employee’s wages to repay that sum. But this is something you should handle delicately. Discuss the repayment with the employee directly and work together to find a reasonable plan for repaying the sum. The more caution you take managing a situation like this, the less likely you are to become the next target of keyboard rage.

How to Avoid Your Own Payroll Horror Story

Payroll mistakes happen. According to the Workforce Institute at Kronos, 82 million U.S. workers have experienced paycheck errors, and that can be a serious burden for both employers and employees. Over 50 million American workers have reported paying a personal bill late because of a payroll error.

As a small or medium-sized business, your best defense against becoming a payroll horror story yourself is investing in payroll software. Yes, mistakes still can happen with payroll software as we saw in the examples above, but they are significantly less likely than with spreadsheets or paper payroll solutions. Using a digital time tracking method, finding a payroll software that syncs data with your HRIS, and automating your payroll process all cut out many chances for human error and give you an overall smoother payroll experience.


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