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The cost of doing nothing in payroll

Saturday, November 29, 2014

When a complicated problem begins to show signs of forming, it’s almost always tempting to try and ignore it and hope it goes away on its own accord. But just like ignoring that strange noise coming from the back of your car, refusing to open up that toll reminder, or prolonging a visit to the dentist, the problem will usually come back in greater force if not dealt with and resolved as early as possible.

A business's payroll is no different. Payroll is faced not only with the vital task of making sure staff is paid in a timely manner and with the correct amounts, but they also must constantly organize and file staff data, secure sensitive employee information, work in conjunction with HR, operate under strict budgets, and stay informed and compliant with new payroll regulations.

Within any one of these tasks, things can go wrong. If not handled promptly, they can quickly snowball into much more significant issues that become overwhelming, costly, and potentially hurtful to your company’s reputation. And perhaps worst of all is that many of the issues could have been avoided if the path of initiative were chosen rather than the path of idleness.

Because some businesses may not fully realize just how invaluable and crucial payroll is to every business, this article will focus on the consequences of not having a diligent payroll department that resolves issues as they arise.

The cost of non-compliance in payroll:

Payroll regulations and ordinances are in constant flux, and it’s common for businesses to need to make significant changes to their payroll process every year. All the costs and hours expended towards fulfilling these regulations are known as compliance costs.

Compliance costs can quickly make any business owner groan and resign to neglect them, but the alternative options are far worse, these being the costs of non-compliance.

A business designated as non-compliant can suffer multiple repercussions, such as:

Fines and lawsuits: The money you “save” by avoiding compliance costs will quickly be surpassed by many fines and continued fees until payments have been received and compliance has been met.

In addition, most payroll non-compliance fines are administered per employee or payroll statement, so fees can become daunting within a short time frame.

In the last 20 years, employee lawsuits have increased nearly 400%. This is a heavy encouragement to all business owners to make sure their payroll provides accurate compensation, correct tax withholding, and healthy employee relations by fixing any payroll issues promptly through retro or backpay.

Business disruption: While not as common, it’s possible that non-compliance can result in some or all operations of your business being forced to cease or continue at a heavily limited condition. This can result in inconsistent service to customers and can quickly stifle your company’s reputation. In addition, the loss of income from ceasing operation can make any fines overwhelming and unpayable.

Productivity loss: Non-compliance can worsen your business’s productivity in numerous ways:

  • An employee lawsuit can have your workforce feeling divided and discouraged to trust and follow leadership and administration
  • Employees can resign or enter into sabbaticals that leave you with unfilled positions and desperate for new workers (on top of dealing with in-house payroll issues!)
  • Loss of company budget due to non-compliance fines can result in cutting employee hours. This can lead to stressed workers, dampened efficiency, and loss of profits.
  • Managers, supervisors, and business owners can become so preoccupied with resolving payroll issues that they don’t have the time or energy to focus on inspiring, encouraging, and leading their workforce.

Revenue loss: All the consequences above lead to loss of profit and, ultimately, if allowed to continue unabated, termination of businesses. Hiring or working with payroll experts who make it their livelihood to stay informed and up to date on payroll regulations will become invaluable in keeping your business compliant, thriving, and profitable.

General payroll issues worth acknowledging:

While payroll regulations are constantly renewed, changed, and introduced, certain payroll duties are foundational and present within any staffed business.

Managing overtime: HR, managers, and payroll need to work together to make sure overtime is rightfully implemented, logged, and compensated for. While missed overtime can be remedied through retro or backpay, these should be seen as last resorts to be avoided and not typical options. An overtime payment left unpaid for too long paired with a dissatisfied employee can easily lead to compliance troubles.

Misclassified employees: Management and HR work together to create and fill positions, and the translation of this information to payroll can lead to numerous issues. Payroll may receive the incorrect wage amount, designate employees under the wrong position, or even accidentally compensate one employee for another’s work. The effects of this lead to a confusing web of problems that can lead to your payroll being designated as non-compliant.

Ineffective time records: Keeping track of hours spent across a large workforce can be overwhelming, and mistakes are bound to happen. Automated payroll software can minimize these errors by automating hour entry and providing accurate clock-in/clock-out tools.Payroll experts can also reduce these errors, but much of the brunt work of recording employee hours is up to supervisors and staff, so it’s best to implement streamlined and straightforward software to cut down timekeeping complications.

Multi-state complications: Expanding your business across state lines is an exciting and celebratory accomplishment, but it also comes with new state laws, ordinances, deadlines, and regulations. This is an area of payroll in which teaming with payroll experts is most, as staying compliant across multiple state borders requires in-depth knowledge, world class juggling, and a commitment to excruciating detail.

Adhering to child labor laws and minimum wage requirements: It may sound simple, but companies across America fail to supply their employees with the necessary state or federally mandated wage and neglect child labor laws every year. Simply having a member of payroll or HR be on the lookout and double checking for these infractions can keep these issues from occurring.

Untimely payroll processing: As mentioned earlier, late payments, having to resort to retroactive pay, and working behind schedule can lead to dissatisfied employees and warning flags signaling the department of labor. Payroll software can significantly assist in staying on schedule and keeping compliance officers pleased with your company.


Payroll is a complicated department for many businesses due to constantly changing ordinances, expectations, and large workforces. Even the smallest of errors that may seem trivial can descend into a crushing blow that can devastate and heavily impair your business.

The good news is that many of these issues are easily fixable if caught and confronted as they are discovered. Leaving payroll issues pending almost always leads to worse problems that subsist longer than they originally should have.

Teaming with payroll experts and implementing modern payroll software is not only valuable, but for some businesses finding themselves crossing into neighboring states and accruing substantial workforces, necessary. These services can automate the tedious sides of payroll and free your employees to focus on more complicated tasks. And as always, having payroll experts on your side brings confidence that your business won’t have to worry about the many consequences of payroll non-compliance.

Interested in teaming with our payroll experts?

Heartland is the point of sale, payments and payroll solution of choice for entrepreneurs that need human-centered technology to sell more, keep customers coming back and spend less time in the back office. Nearly 1,000,000 businesses trust us to guide them through market changes and technology challenges, so they can stay competitive and focus on building remarkable businesses instead of managing the daily grind. Learn more at