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The Cost of Manual Payroll (Human Error Calculator)

April 11, 2020 - minute read

When it comes to managing an hourly workforce, eliminating unnecessary costs is vital for success. Perhaps that is why many employers believe in managing payroll manually, in-house – as opposed to outsourcing to third-party software. But is it really the ideal solution for achieving compliant and affordable operations?

According to the IRS, more than 40 percent of small and mid-size businesses get fined an average of $845 each year for payroll or taxation issues. In 2014, more than 6.8 million penalties totaling $4.5 billion were brought against employers.

Given the legal and fiscal risks involved, let’s take a closer look at the cost of manual, in-house payroll and investigate why modern payroll software may be the best solution for ensuring the best of both worlds: compliance and affordability.

Why Manual Payroll is a Liability for Your Operation

At first glance, calculating payroll manually appears cheaper and more flexible than using third-party software. After all, a manual process allows adaptability for things like complex labor rules and union requirements. Nevertheless, the American Payroll Association estimates an 8% human error rate when manually processing payroll. Those errors have significant consequences on both state and federal levels.

So, while manual processing does allow for some convenience and flexibility – it’s still more likely to result in manual input errors and their subsequent penalties. Just think of the data and wage rules your business is already responsible for. Things like garnishments, levies, and child support deductions all complicate the efforts of manual payroll management.

In addition, your business must navigate:

  • Correct classification of employees (exempt vs. non-exempt, full-time vs. contractor, etc.)
  • Union rules
  • Federal and state labor rules
  • Minimum wage and blended rates
  • Overtime (particularly for employers managing multiple rates throughout more than one state or municipality)
  • Deadlines for distributing tax forms to employees and filing
  • And more!

With so many guidelines and figures to process, it is only a matter of time before human error strikes.  Don’t let manual input errors trigger further fines and lawsuits.

Human Error Calculator

Curious to know what human error is costing your business each year? It’s important to see the real numbers relevant to your workforce. That’s why we’ve created this human error calculator based on the American Payroll Associations human error factor.

Just plug in the number of hourly employees on your payroll and the average number of hours paid out each week. You will gain immediate insight into the total yearly human error rate in payroll expense for your organization.

Calculator - Manual Payroll

Payroll with EPAY Systems

Payroll and tax management remain a heavy administrative burden for most businesses. That is why EPAY has created a Human Capital Management (HCM) system with seamless payroll management at its core. Multiple FEINs, flexibility for calculating taxes in multiple states, and ease with any type of garnishment—our software has it all.

We even deliver federal, state and local tax updates to you automatically, so you can avoid compliance setbacks and unnecessary fines. There’s no limit to the number of earnings, payroll deductions, pay rates or distributions our system can handle either. With our centralized payroll and tax processing, you will be able to:

  • View gross-to-net pay and make active changes
  • Pay earning premiums for all hours worked
  • Distribute tax forms for new hires based on zip code
  • Calculate adjustments or one-off deductions, additions, refunds, overrides, etc.
  • Void payments instantly
  • Issue off-cycle checks or on-demand checks with automatic updates to earnings, deductions and tax balances
  • Distribute payroll funds via free pay cards
  • Configure pay statements for specific compliance requirements
  • Restrict earnings codes by group for special earnings groups, group, or department
  • Create/print electronic W-2s directly from Employee Self Service portal
  • And much more.

Filed Under: Payroll & Tax