U.S. organizations spend an estimated $339 correcting each payroll error, nearly 20% more than the inflation-adjusted cost reported in 2022, according to a commissioned analysis by EY for Paycom. The research found that payroll errors occur in approximately one out of every five payrolls, with time, attendance and expense issues among the most frequent sources of costly rework. The findings highlight the operational burden facing HR and payroll teams and the growing role of automation in preventing mistakes before they affect employee paychecks.
Payroll Errors Cost Employers $339 Each as Administrative Work Grows
Payroll mistakes are creating a growing financial and administrative burden for U.S. employers, with organizations spending an estimated $339 to correct each error, according to a commissioned EY analysis released by human capital management software provider Paycom.
The 2026 figure represents an inflation-adjusted update of survey data collected in 2022, when Paycom first commissioned the research. EY’s analysis found that payroll errors occur in approximately one out of every five payrolls, suggesting that even relatively routine mistakes can generate significant cumulative costs for organizations.
The findings are particularly relevant to businesses managing large workforces, where errors involving time records, expenses, benefits and tax information can require coordination across employees, managers, payroll specialists and HR teams. Beyond the direct cost of correction, repeated administrative work can divert staff from workforce planning and other operational priorities.
Time and attendance issues lead payroll errors
Time, attendance and expense issues were the most frequent category in the analysis, occurring an estimated 1,139 times annually per 1,000 employees. EY estimated that these errors cost employers $289,722 per 1,000 employees each year.
Other common sources included vacation, paid time off and sick leave requests, with 721 errors annually per 1,000 employees and an estimated annual cost of $255,252. Benefits-related errors accounted for 503 incidents and $162,213 in annual costs per 1,000 employees.
Errors involving scheduled earnings and deductions, tax withholding information and direct deposit also contributed to the burden.
| Payroll error category | Errors per 1,000 employees annually | Estimated annual cost per 1,000 employees |
|---|---|---|
| Time, attendance and expense | 1,139 | $289,722 |
| Vacation, PTO and sick time | 721 | $255,252 |
| Benefits | 503 | $162,213 |
| Scheduled earnings and deductions | 410 | $157,540 |
| W-4 and tax allocation changes | 229 | $157,214 |
| Direct deposit | 159 | $51,948 |
The categories illustrate how payroll accuracy depends on data and decisions originating throughout the employee lifecycle. A missing time punch, for example, may require a manager to verify hours before payroll staff can correct a record. Incorrect benefit or deduction information can involve additional checks before a pay statement can be finalized.
The cost estimates cover payroll error correction and do not include potential compliance costs or other financial consequences, according to the announcement. The wider impact of a mistake can therefore extend beyond the figures reported in the analysis.
Manual corrections consume hundreds of hours
The study also examined the time required to resolve common payroll mistakes. Missing or incorrect time punches were identified as the most costly individual error, generating an estimated $93,600 in combined direct and labor costs per 1,000 employees each year.
Resolving those errors takes approximately 440 hours annually per 1,000 employees, according to the analysis. The five most time-consuming error types collectively consume nearly 29 workweeks of staff time per 1,000 employees each year.
Payroll and HR teams also receive an average of 30 employee questions per pay period, adding another layer of recurring work. Questions about pay discrepancies can require teams to retrieve records, verify calculations and explain how earnings or deductions were determined.
For organizations with complex schedules, variable hours or multiple compensation rules, the findings point to a potential benefit from addressing data quality before payroll is submitted rather than relying primarily on after-the-fact corrections.
Payroll automation shifts error prevention upstream
Paycom is positioning automation as a way to reduce the need for manual payroll corrections. Its Beti platform is designed to identify discrepancies and guide employees through resolving them before payroll submission.
Paycom cited a separate commissioned Total Economic Impact study conducted by Forrester Consulting in June 2023, which found that a composite organization representative of interviewed Paycom customers reduced the time spent correcting payroll errors by 85% after using Beti’s automated payroll experience. The result applies to that modeled organization and should not be interpreted as a guaranteed outcome for all employers.
Paycom also offers Time-Off Requests featuring GONE, which uses employer-defined rules to automate time-off decisions and pass approved requests into payroll. The company says this can reduce manual intervention and help prevent downstream errors.
These tools reflect a broader approach to HR technology: connect workforce data, approval workflows and payroll processing so that information can be validated closer to where it originates. Automation can reduce repetitive tasks, but its effectiveness depends on accurate underlying data, appropriately configured rules and clear exception-handling processes.
Implications for HR and payroll teams
The EY analysis surveyed more than 500 respondents with payroll responsibilities at U.S. companies employing between 250 and 10,000 people. Respondents held supervisor or manager positions or more senior roles.
For employers, the findings offer a case for evaluating payroll errors as both a technology issue and a process-management problem. Investing in automation may help reduce rework, but organizations also need to review how time records are captured, how benefits and tax changes are approved, and how employees report discrepancies.
The financial case will vary by workforce size, payroll complexity and the frequency of errors. Employers should also distinguish between modeled research results and their own measurable outcomes when assessing software investments.
As payroll platforms add more workflow automation and decisioning logic, the competitive question is increasingly whether systems can prevent avoidable mistakes rather than simply process payments. The research suggests that getting payroll right the first time could free HR and finance teams to focus on work beyond correcting employee paychecks.
Market Landscape
Payroll and human capital management platforms are increasingly incorporating automation to connect timekeeping, benefits administration, employee requests and payroll processing. The goal is to identify inconsistencies earlier and reduce manual reconciliation after payroll has been submitted.
Paycom’s commissioned EY analysis highlights the scale of payroll correction work among mid-sized and larger U.S. employers. While the reported costs strengthen the case for process improvements, actual savings will depend on workforce structure, existing systems, implementation quality and the accuracy of automated workflows.
Top Insights
- Correction costs are rising: EY’s inflation-adjusted analysis estimates that each payroll error costs employers $339 to correct, nearly 20% above the 2022 findings.
- Timekeeping creates significant rework: Time, attendance and expense issues occur an estimated 1,139 times annually per 1,000 employees, costing $289,722.
- Errors consume substantial staff time: The five most time-consuming payroll errors collectively take nearly 29 workweeks per 1,000 employees annually to resolve.
- Automation targets prevention: Paycom’s Beti is designed to flag discrepancies before payroll submission, while its time-off workflow connects approved requests to payroll.
- Reported benefits require context: The cited 85% reduction in correction time comes from a 2023 Forrester Consulting study of a composite organization, not a universal result.
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