New Study: Payroll Mistakes Create Turnover Risk for 53% of Workers

As finance and HR leaders develop 2026 salary budgets, errors in payroll execution can quickly undermine the impact of planned pay raises. Employees rely on their pay to cover rising costs and navigate an uncertain economy – and payroll mistakes frustrate them.

In fact, 64% of employees said they’ve experienced financial stress due to paycheck errors or delays – and more than half (53%) said they’d consider leaving if payroll problems continued.

That’s the gist of a recent survey from HiBob. In Beyond the Paystub: Why Payroll Accuracy Is the Bedrock of Employee Experience, HiBob surveyed 2,000 US employees, including 541 HR and Finance professionals, to get an idea of their experiences on payday. 

“At HiBob, we see payroll as a vital part of the employee experience, not just an administrative duty,” said Ronni Zehavi, CEO of HiBob. “In today’s economic climate, transparency and accuracy in payroll are key to building confidence and empowering employees to feel secure and respected at work.”  

Here’s what the survey uncovered: 

5 Most Common Payroll Mistakes

Employees may feel confident their paychecks are accurate – in fact, 69% of respondents initially said they were. But as they answered additional questions in the survey, a different picture emerged.  

Nearly 44% of employees reported discovering a payroll mistake at some point – and of those, 42% said these errors happened frequently, meaning monthly or every pay cycle. Even small errors can compound across hundreds of employees, creating significant unplanned expenses for the organization.

The most common payroll mistakes include:

• Missing or incorrect overtime pay (42%)
• Wrong number of days or hours worked (28%)
• Incorrect salary or hourly rate (26%)
• Unpaid or miscalculated bonuses or commissions (24%)
• Incorrect tax deductions (21%)

Payroll mistakes create real business risk. For HR, missed overtime, incorrect hours, or unpaid bonuses raise FLSA compliance concerns. These mistakes can violate labor laws, trigger audits, and result in fines or employee complaints, making timely and accurate payroll critical to avoiding legal and financial penalties.

For finance, payroll errors misalign budgets and reporting, complicating cash flow and creating direct costs such as overpayments or missed tax deadlines, as well as indirect costs like higher turnover and lost productivity. These risks underscore the value of investing in automation and modern payroll systems to reduce errors and maintain financial stability.

Payroll Errors Damage Employee Trust

The consequences of payroll mistakes can quietly build tension across the organization, leaving employees anxious about their pay while HR and finance struggle to maintain control. Twenty-one percent of employees said payroll issues caused them to lose trust in their employer, and 53% would consider leaving if money mistakes continued.

How mistakes are handled often makes the problem worse. Nearly a quarter of employees reported delays, poor communication, partial resolutions, or issues that weren’t resolved at all.

Payroll errors also have tangible effects on performance. Forty-five percent of employees said financial stress affects their job performance, with 13% reporting a significant impact. 

The current economic climate amplifies this strain: 28% said a delayed paycheck would create serious financial stress, and 64% said payroll mistakes have already forced them to adjust how they manage expenses. This includes:

• Postponing bill payments (20%)
• Feeling ongoing stress even without delaying payments (16%)
• Delaying rent or mortgage payments (14%)
• Needing to borrow money or use credit (9%)

The survey shows that nearly half of employees have dealt with payroll mistakes, and these errors undermine confidence and trust. HR can help rebuild trust by addressing issues quickly and communicating clearly, while finance works to manage disrupted budgets and reporting to maintain smooth operations.

Who Owns Payroll Mistakes?

Payroll straddles the line between HR and finance. That means employees aren’t exactly sure who to turn to when a payroll mistake occurs — and the survey reflects their uncertainty. 

About a third said they’d report errors to HR, roughly the same number to the payroll team, while another 27% would go to their manager. Only 5% would contact finance, and a small fraction plainly said they didn’t know who they’d contact about payroll mistakes.

This split shows that unclear ownership creates confusion and leaves mistakes unresolved longer than necessary, putting extra pressure on HR and finance teams. 

Defining a clear reporting process and communicating it to employees ensures that payroll mistakes are directed to the right team and promptly addressed so that trust and operations aren’t compromised.

What Frustrates Payroll Teams

The survey makes it clear that payroll teams have a lot on their plates. More than half (55%) said fixing recurring errors is their biggest headache, and nearly half are slowed down by manual data entry (48%) or outdated software (46%). Slow processing, disconnected systems, compliance requirements, and poor integration with HR or time-tracking tools only add to the strain. When payroll data is scattered across multiple systems or manually combined, errors happen more frequently, which delays corrections and frustrates employees.

Payroll teams spend significant time just keeping payroll running:

• 60% dedicate five to 20 hours each month to processing
• 41% spend an extra four to 10 hours per cycle fixing errors, and 
• 15% spend over seven hours per cycle answering payroll questions. 

All of this slows issue resolution and adds stress for employees.

When payroll teams are stretched thin, HR and finance can make a real difference by stepping in with targeted support. HR can help ease the pressure by handling employee questions, making sure everyone’s data is accurate and up-to-date, and acting as a bridge if any issues pop up. 

A real-world example illustrates this approach: A finance assistant director in South Carolina implemented regular biweekly HR–Payroll check-ins during pay cycles, which improved communication and allowed both teams to reduce errors and resolve most issues.

Meanwhile, finance can lighten the load by investing in a payroll software upgrade. By sharing responsibilities and working together, both departments help payroll teams stay focused on what matters most: accurately and reliably getting everyone paid.

Payroll System Automation Priorities

Payroll teams have clear ideas about what they want their payroll systems to automate. Nearly half (47%) want automated calculation of tax withholdings and benefits, and 46% would like seamless syncing with time tracking and PTO to reduce errors and save time. Detecting and flagging errors before processing is a priority for 39%, while 38% want the ability to run payroll with a single click.

About a third (31%) want employees to have self-service access to pay, and 22% value real-time analytics and reporting. Just 13% said they want every feature automated, showing that most payroll staff focus on the tools that will solve their biggest pain points first.

HR and finance can help payroll teams get the most out of automation. HR can guide employees on using self-service tools, ensure data is accurate, and proactively train managers to reduce errors and improve compliance. Finance can prioritize investments in payroll systems that automate calculations, time tracking, and reporting, reducing the risk of misaligned budgets and costly errors.

By focusing on these actions, HR and finance help make payroll runs go more smoothly while strengthening employee confidence, reducing compliance risk, and improving retention.

Next Steps to Reduce Payroll Risk

HR:

• Define payroll reporting procedures and clearly communicate them to employees
• Proactively support payroll teams and use recurring errors to guide training and process improvements

Finance:

• Upgrade payroll systems to automate calculations, reduce manual errors, and integrate with HR and time-tracking tools
• Track budgets and cash flow closely to prevent and mitigate the impact of payroll mistakes

Joint Actions:

• Hold regular cross-department check-ins to align priorities
• Leverage automation to catch errors before they affect employees