Even with a solid payroll process in place, payroll errors still happen. Miscommunication between HR and payroll systems, record-keeping mistakes, or a single missed deadline can result in overpayments, underpayments, or incorrect payroll deductions.
Though the best solution is to avoid payroll errors altogether, you should still have a plan in place for what you will do when errors occasionally occur. Having the appropriate communication and follow-up with employees not only shows your commitment to making the necessary corrections, but it can also give employees peace of mind in knowing that they won’t be left to sort out the error alone.
Follow these tips for communicating payroll processing errors to employees.
How to Write a Payroll Processing Error Letter
One of the most important metrics for measuring the effectiveness of your payroll process is accuracy. According to the 2020 Deloitte Payroll Benchmarking Survey, respondents named the payroll error rate as the number one key performance indicator for payroll operations.
To write a payroll processing error letter, follow these steps below:
- Define the error
- Explain what led to the error and what you’re doing to correct it
- Follow up with a formal letter that documents your communication and process for handling the error
Step 1: Define the error.
Shed light on payroll errors by letting employees know what occurred. For example, maybe they were underpaid for overtime or had the wrong amount deducted for benefits.
Verbally explaining to employees what went wrong provides for better understanding. It is also good to demonstrate empathy, particularly if the error resulted in a reduction in their regular pay. Although you’ll want to follow up in writing later, it’s a good idea to explain payroll errors by phone or video call, so you can have a conversation about what happened, apologize, and give employees a chance to ask questions.
Step 2: Explain what led to the error and what you’re doing to correct it.
After experiencing an error in pay, an employee will naturally want to know how it happened and what can be done to make sure the error doesn’t happen again. Without getting overly technical or going too deep into your internal payroll processes, provide a clear explanation of what led to the error. For example, perhaps a communication misstep caused the incorrect entry of their benefits elections, or maybe the withholding on their W-4 was misread.
You should also explain the payroll process improvements you’ve implemented. If you’ve switched to an integrated payroll system or created a new calendar and checklist to guide future payroll activities, mention the change and how it will help you avoid future errors. Explaining the process and systems improvements you’ve made also demonstrates your commitment to improving their overall employee experience.
Step 3: Follow up with a payroll processing error letter.
To reassure an employee of the steps taken to correct a payroll error, you should confirm in writing the items you’ve discussed with the employee. The payroll processing error letter should restate your apology, describe the error and its cause, and explain the correction.
Examples of Payroll Processing Error Letters
Here are two examples you can use as a template the next time you need to address a payroll processing error:
Please accept my apology for the recent error in your paycheck dated January 15, 2021, in which an incorrect amount was deducted for your 2021 benefits premium. As we discussed earlier, your new benefits elections for 2021 were submitted to payroll after the biweekly payroll deadline. As a result, your new deduction of $325 was not reflected in your paycheck.
Your January 31, 2021 paycheck will reflect the correct deduction of $325, plus the $45 catch-up deduction from the January 15 paycheck. We’ve adjusted our payroll calendar for the following year to avoid such errors occurring in the future.
Please contact me with any additional questions.
As a follow-up to our recent conversation, I apologize for the error in your most recent paycheck of July 31, 2021, in which you did not receive pay reflecting your return to work from unpaid leave. You returned to work on July 27, but your pay reflects a return-to-work date of July 30.
There was a lag between our payroll system and the system we use to manage employee leaves, resulting in missed pay for July 27, 28, and 29. Your August 15, 2021 paycheck will reflect the payment for those three days, in addition to your regular biweekly pay.
I’m happy to inform you that we have integrated our payroll and leave management systems to avoid such errors in the future.
Please let me know if there is anything else I can do to assist you.
Experience Fewer Errors with Integrated Payroll Management
No process is perfect, and sometimes errors occur. However, by implementing an integrated payroll system, you can do even more to keep payroll errors at a minimum. Instead of dealing with the errors that come from using multiple disconnected payroll and HR systems, you can pull all of your workforce management activities into one integrated platform.
An integrated system keeps your payroll activities aligned with time tracking, scheduling, leave management, and employee benefits elections, so you can automate manual processes and have one source of truth for all of your workforce data. To learn more, read our e-book, The Guide to Saving Time on Payroll.