How long does a company have to fix a payroll error?
As imperfect as humans are, there will also be imperfections when it come to the execution of duties.
So mistakes are bound to happen and having this mistake even in payroll isn’t an exception.
It is then necessary to look out for these errors especially when it comes to the issue of payroll to make the necessary correction.
Having the error of overpayment to an employee will make the business lose money from overpaying a worker.
Again, underpaying an employee will make the employee feels cheated upon and can file a suit against the employer if things get out of hand.
So the bottom line is that when once an error is spotted even when the check has been signed, the payroll needs to be fixed so that there will be no rancor.
The law is even clear on this and there is a set time to have this fixed before any action can be taken against this. This post is to enlighten you on the time frame allowed by law for any company to fix a payroll error. So keep reading.
Why mistaken or error happens
The company miscalculation:
This is the commonest form of mistake that happens with payroll. With deductions, overtime, PTO, commission, and more, the company might find it difficult to keep track of them correctly for all the employees.
This becomes worst when the company has poor time tracking capabilities and the calculations are done manually and no reliable way to track employees’ paid time off or actual hours of work.
Glitches in payroll software:
Investing in payroll software is one of the best ways of keeping payroll mistakes away, this is because the software will manage and update the information for each employee better.
But the software will have glitches from time to time which hinder it from updating this information effectively and this will bring mistakes
Switching from one payroll system to another:
When it comes to payroll records, one can’t just be too thorough. Switching from a payroll system to another will come with its challenge.
It might be about missing data, records, or just some mix-up that needs to be manually rectified. But before this will be sorted out the mistakes would have been done already.
So when once one is switching from a system to another without complete updated records, then there will be the risk of misclassifying employees, same with miscalculating the pay. So mistakes are bound to occur here.
The company is caught in a rush:
When it comes to a payroll process timing is very important but with the many processes, missing the deadline becomes very easy and everything will be done in a rush.
The company wants to deliver its payment regularly and on time. So with this rush, the company will end up with figures that might not be the true state of things.
So it will either be underpaying some people or overpaying some due to the rush in a bid to meet the deadline.
How long does a company have to fix a payroll error?:
When it comes to the duration of time, the time frames differ depending on the location. But the maximum time stated by the law is 2 years.
But the fact is that errors should be fixed promptly. The payment of any mistake on the payroll especially if it concerns underpayment will help the company avoid any suit or penalties from the law.
The labor law anywhere in the world requires employers to make full payment of work done to their employees.
So the company will need to add the missing pay to the next paycheck or give a different paycheck for the period of such a mistake
Summary
Having mistakes in the payroll of any company isn’t a crime, because the mistakes can be due to any of the listed mistakes.
But it becomes an issue when the company refuses to fix the mistakes. The company might just be risking a suit or a heavy penalty for such.
Enough time is granted at least up to 2 years before the employee involved can take any action.