Between the paper checks that many employers still use to pay staff, and the controversy over payroll cards and the fees they can incur, the payroll industry may be at the cusp of some much-needed innovation. Reducing friction in accounting and getting rid of paper are certainly key motivators for a business to upgrade its payroll technologies, but new data from Kronos, released last week, found even more evidence that companies should pay attention when it come to payroll.
That could be a scary thought to companies using manual and paper-based processes. Earlier data from Kronos, released in part one of its “Engaging Employees Through Payroll” report, found that 54 percent of the workforce in the U.S. – about 82 million employees – have been affected by some type of payroll problem. The latest data, released as Part Two of this report, finds how those errors jeopardize a company’s ability to retain those workers.
Nearly a quarter of employees said they would begin looking for new jobs after a single payroll mistake. Salaried workers are more likely to become fed-up with errors and look for a job than jourly workers, while parents are especially less willing to let a payroll error slide, as 30 percent of employees who are also parents said they would start looking for a new job after the first payroll mistake.
These payroll errors can come in many forms, from incorrect dollar amounts to paychecks landing in the wrong employee’s bank account. But according to Joyce Maroney, director of The Workforce Institute at Kronos, the most surprising statistic in the survey revealed a massive mistake that may be more common than people think.
”I was surprised by the finding that 7 percent of our respondents had had a paycheck bounce,” Maroney recently told PYMNTS.
The Changing Workforce
As younger generations begin to gain greater prominence in the workforce, there is likely to be less patience and tolerance for these types of mistakes. According to Kronos data, baby boomers are the most forgiving of payroll errors, with 44 percent of workers aged 55 and above saying they would keep their job after a payroll mistake as long as their employer eventually fixed it. But the youngest generation, those 18 to 29, was significantly less forgiving, with just 13 percent saying they would be willing to stick around and wait for a payroll correction.
There are other correlations between age and payroll habits, too. For instance, baby boomers are the most well-versed at understanding taxes and deductions on their paycheck, with just 19 percent reporting that this is difficult to understand. Meanwhile, 45 percent of employees ages 18 to 29 said tax and deduction information is difficult to understand.
Personal cash management issues affect people differently according to age, as well. More younger workers ages 18 to 29, and ages 30 to 39, have been forced to make an important payment – like a credit card, car loan or home loan payment – late because of a payroll error, while just a tenth of baby boomers have done the same.
Aside from generational shifts, the U.S. workforce is shifting as more gig workers enter the economy. Kronos’ survey did not examine this shift, but Maroney told PYMNTS that she suspects some particular challenges for gig economy workers in particular when it comes to getting paid.
“I suspect that there is variability in how gig workers are paid,” she said. ”If a worker is essentially a contractor who is invoicing the organization, then that payment is going to be running through accounts payable. This can be tough for gig workers who’d prefer not to deal with the standard net 30/60 day vendor payment terms.”
On the other side of the equation, when a gig worker is getting paid from the payroll department, that, too, can be a point of friction for the company.
“Gig workers being paid through the payroll process probably pose special challenges for payroll professionals regarding how they are paid,” Maroney said. “If they are paid by the project versus paid by the hour, that could be difficult for payroll to manage via their standard-operating procedures.”
Setting Errors Straight
According to Kronos’ latest data, payroll errors aren’t just a source of lost or misappropriated funds and accounting messes. They can severely affect a company’s ability to keep the workers they need to remain productive.
In a statement announcing the new data, Maroney pointed to the gradual efforts made by employers to strengthen their relationships with staff – and how quickly those efforts can dissipate if a payroll error is made.
”Although organizations are making significant investments in benefits, rewards and recognition, physical workspaces and other areas to help deliver an engaging employee experience, many payroll professionals are still burdened with manual processes and outdated technology,”the executive said. “Just a single payroll error has the potential to encourage top talent to seek new employment, undoing tireless work to build an engaged workforce.”
In speaking with PYMNTS, Maroney offered a straight-forward conclusion about companies’ need to invest in more efficient and reliable payroll technologies.
“Our data indicates that 49 percent of employees will start thinking about leaving their employees after two payroll errors. Twenty-four percent will start looking after one error,” the executive stated. “Employers need to remove obstacles that create employee dissatisfaction with payroll.”