An employee forgets to properly log his sick time for when he was out on Monday. Because he’s in a rush on Friday he submits a timesheet that incorrectly says he worked on Monday. His supervisor is busy and signs the time card without checking. The time card information goes to payroll and gets processed. The employee gets a paycheck the next week showing a vacation balance that's 8 hours too high, and 8 hours of regular time he did not work.
Companies Lose Money, Time and Productivity
Employee timesheet errors are rampant in some organizations. They can happen when employees take time off but code it as jury rather than vacation. They might receive a pay differential when they work in another cost center but fail to code their hours with the right cost center number. Employees can accidentally under report work hours, or when their supervisors are not paying attention, over-report work time. Once you process these errant hours and pay employees, you now must correct these mistakes and any additional errors they create.
How much does it cost to correct pay data errors? A lot.
First, all of these errors will create the need for FICA corrections, and in some cases you will need to file IRS Form F941x which requires detailed explanations of every correction. If your FICA underpayment is greater than or equal to 2% of your total FICA obligation, you will owe penalties and interest if you do not correct errors and make these adjustment payments with your next quarterly return.
Another area where time card errors uncorrected will hurt is for hourly worker defined contribution amounts. These are calculated based upon hours worked. Any errors not fixed by year end will be even more expensive to correct.
All of these errors cause even more damage to your business, not only rippling through an employee's entire paycheck, but infecting your accounting systems, accounting costs, billable hours and invoices. All of these errors need to fixed.