Payroll miscalculations aren’t just a nuisance — they can damage employee trust, create legal risks, and trigger costly fines. Whether you have a handful of employees or manage a large team, accurate and compliant payroll is non-negotiable.
From overtime miscalculations to delayed checks and benefit deduction mistakes, small oversights can add up quickly. This guide walks through the most common payroll missteps and shows how to prevent them with the right processes, tools, and support.
A frequent source of payroll issues is overtime miscalculations. Under the Fair Labor Standards Act (FLSA), nonexempt employees must receive time and a half their regular pay rate for all hours worked beyond 40 in a workweek. Employers sometimes get this wrong by:
Averaging hours across multiple weeks. For example, a 60-hour first week and a 20-hour second week still require 20 hours of overtime for week one.
Not using the employee’s full regular rate. Bonuses, shift differentials, and commissions may need to be included when calculating overtime pay.
To avoid compliance issues, use a time and labor tracking system that integrates directly with your payroll platform and calculates overtime automatically.
If an employee was underpaid in a previous pay period, retroactive pay is required. The process for correcting pay may vary by state and depends on your payroll provider's capabilities. Regardless, prompt correction is key.
Employees should not have to wait more than one pay cycle for the correction. Automating pay adjustments through a robust payroll platform can help reduce manual fixes and keep your records clean.
When a new employee starts after the payroll cycle begins, it may be tempting to delay their first paycheck until the next cycle. While that can be permissible depending on state law and timing, you cannot withhold owed wages indefinitely.
Best practices include:
Communicating expected pay dates during onboarding
Logging hours worked from day one
Including those hours in the next regularly scheduled pay run
Incorrect deductions for benefits, especially when employees make mid-year changes, are a common source of payroll inconsistencies. These miscalculations can leave employees shortchanged or trigger compliance issues under ACA and state laws.
To avoid this:
Review benefit elections and changes regularly
Communicate changes clearly and confirm updates are reflected in the payroll system
If you’ve overpaid an employee, you are generally allowed to recover those funds. However, deductions from future wages cannot reduce the employee’s pay below the federal minimum wage, even temporarily.
Employers should:
Spread repayments over several pay periods if needed
Get written acknowledgment from the employee
Document all communications
HR Compliance Services can help you navigate sensitive wage recovery issues with clarity and confidence.
Employers are not legally required under the FLSA to reimburse work-related expenses, unless failing to do so pushes the employee’s pay below the minimum wage. That means failing to reimburse mileage, supplies, or tools may result in wage violations, depending on the pay structure.
Avoid these pitfalls by:
Establishing a clear reimbursement policy
Tracking business expenses through your payroll system
Including reimbursements in the appropriate pay period
Pay during protected medical leave must comply with federal laws like the Family and Medical Leave Act (FMLA) and the Americans with Disabilities Act (ADA). Miscalculating pay during these periods can open you to legal risk.
Additionally, deferred pay agreements are sometimes used in industries like:
Education, where some 10-month employees choose to spread pay over 12 months
Construction, where payments are tied to project completion
Entertainment or creative fields, where compensation may align with production schedules
If your business offers deferred pay arrangements:
Ensure the agreement is clearly documented in writing
Confirm the structure complies with federal and state-specific wage laws
Avoid informal agreements that may conflict with pay frequency requirements
Consistently miscalculating pay, delaying payments, or issuing checks that bounce may be considered wage theft under state law. This includes:
Failing to pay earned wages
Withholding vacation payouts (in states where vacation is considered earned compensation)
Not issuing final paychecks within the required time frame
Employers found guilty of wage theft can face lawsuits, penalties, and reputational damage.
Payroll miscalculations can erode employee trust and leave your business open to fines and lawsuits. But the solution isn’t more spreadsheets, it’s smarter systems and expert support.
Excelforce provides the tools and compliance guidance to help you pay employees accurately, every time. From recruiting to scheduling to payroll, we help simplify the complex so you can focus on running your business.