B2B Payments

American Employee Paychecks Are Confusing And Often Wrong

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With the tax deadline fast approaching in the U.S., businesses have found themselves in a tight spot: A new report from Kronos think tank The Workforce Institute finds that the majority of employees have experienced some type of issue with their paychecks.

The report, released today (March 27), found that 54 percent of Americans have experienced a paycheck problem. More than a quarter said they have been paid too little, and 15 percent said their paycheck was late. And depending on whether an employee is a salaried, hourly or gig worker, these issues can be even more common.

The number of Americans that have been hit with some type of payroll issue surprised Joyce Maroney, Director of The Workforce Institute at Kronos, she recently told PYMNTS.

“We thought that was a pretty high proportion,” she said of the statistic. “Also, almost 60 percent of people said they live paycheck to paycheck, so payroll errors can lead to people actually unable to pay a bill. I think it really underscores how critical the lifeblood is of payroll that that goes out on time without errors and making sure these people are getting their pay in the time frame that’s expected.”

The research surfaces not only in the context of tax season, but as the payroll industry continues exploring the role of new technologies and automated solutions. Automation, Maroney said, can be effective at ensuring payroll compliance. Falling out of compliance, she warned, can be just as costly to a business as a late paycheck is to employees.

But the latest report from the Global Payroll Association, released last month, found that only about a fifth of companies surveyed said they have a fully automated payroll solution in place today — which can lead to some serious issues of noncompliance.

“Employers end up in court because they didn’t pay people accurately, and sometimes it’s due to negative intent,” Maroney explained. “But it can also be due to not having a food process, not applying rules consistently. It can cause them a lot of money in lawsuits or penalties.”

There are knock-on effects of this noncompliance, too, she said. Aside from legal and regulatory issues, noncompliance could make it more difficult to retain employees.

“One of the things that organizations are talking about a lot right now in the U.S. is employee engagement. Our economy has improved,” she said. “People aren’t so desperate to stay with employers when they face issues that get in the way of them being paid accurately. It may not be the major reason they leave an employer, but it’s certainly something that goes in the liability side of the balance sheet when an employee is determining whether or not their place is a great place to work.”

But even if a paycheck is accurate, it is often confusing, the survey found. Nearly 64 million Americans told researchers that their pay stub is difficult to read and understand, and the data shows a gap in employers’ efforts to help employees understand things like taxes and deductions ultimately displayed on paychecks.

The Workforce Institute at Kronos’ analysis is also released at a time when some employers are growing concerned that payroll is becoming more difficult due to the rise in on-demand and gig workers. Indeed, the survey found that gig employees just may be the most difficult when it comes to payroll accuracy — a fifth of gig workers told The Workforce Institute that they have been paid late, and the same amount said they have been paid too little. Even 16 percent of gig workers said their paychecks were deposited into the wrong account.

Automated solutions can help with these case-by-case bases, ensuring compliance regardless of category of worker. But exactly which payroll solutions to deploy can be a tricky debate. Take, for instance, the payroll card. Maroney noted that these tools can certainly be helpful to getting unbanked and underbanked employees paid on time. But legislative efforts in some parts of the U.S. have given rise to concerns about the fees associated with some of these cards.

According to Maroney, what’s important is keeping the employee’s best interests in mind, while still remaining compliant.

“[Kronos] customers definitely have to come up with some different strategies to pay people, especially people who may be unbankable,” she said. “I would applaud any moves that employers make that are legal and are intended to help their employees and get the paycheck into the employee’s hands as quickly as possible. It will build goodwill and loyalty between employer and employee.”

What it comes down to, she added, is “to provide solutions for employees that work for them the way they work for you.”

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