What Is a Payroll Mistake?

A payroll mistake happens when an employer overpays or underpays an employee for a given pay period. 

This can happen for reasons like:

• Deducting the wrong amount for tax withholding or employee benefits
• Accidentally sending a retroactive payment to the wrong person
• Paying the wrong amount to employees who used paid time off (PTO) or took unpaid time off
• Paying an old pay rate after an employee gets a raise
• Paying hourly employees for the wrong number of hours or the wrong hourly rate 
• Missing a new hire’s first paycheck
• Not cutting the final paycheck in a timely manner after an employee quits 
• Not meeting minimum wage standards as stipulated by the Fair Labor Standards Act (FLSA) or by your state government (whichever is higher)

Most employers aren’t messing with employees’ pay maliciously or on purpose. But humans make mistakes, and these types of errors often happen due to incorrect data entry or administrative oversight. 

How Soon Should Employers Fix a Payroll Mistake?

Employers should fix any payroll errors right away. For most employers, that means by the next paycheck.

That said, you might not find the error or the employee might not report it quickly. In that case, it’s important to know about payroll processing laws and employee pay rights when the error is uncovered. 

There are currently no federal laws on how quickly you need to fix a paycheck. That doesn’t mean you can take your time—particularly if you underpaid an employee. Every state has its own laws on how long you have to pay back an employee you underpaid (which is also known as giving them back pay). 

Employers generally try to fix payroll discrepancies as soon as errors are discovered. If you stop errors before checks and direct deposits are processed, it is even better since the mistakes never reach the employees. While federal law dictates how long employees have to claim a payroll error, each state sets rules for how fast employers have to fix payroll mistakes once they know about them.  

Your state’s department of labor website should have the most up-to-date information on the regulations for the payment of wages. Quick corrections help keep your payroll records accurate and prevent your employees from getting too angry. Source