It’s the perfect time of year to think about ghost and ghouls…but what about payroll tales of horror? Payroll is no laughing matter and when something goes wrong, the consequences can be serious. If the mistakes are large, or egregious enough, they might even end up in the evening news, which is a scary situation for any organization.
The following payroll horror stories remind us how big the stakes are, and how scary payroll mistakes and problems can be, just in time for Halloween.
Big settlement for off the clock work
Not paying employees properly can lead to huge problems, especially if the courts find that company makes off the clock work a requirement. This is what happened to PNC Bank who allegedly required call center workers to handle an array of small tasks before actually logging their time. Additional allegations include failure to pay overtime. A ruling from last June stated that PNC Bank is required to pay $2.75 million to settle the case.
The takeaway here is to make sure that your company doesn’t have any practices that might contribute to off the clock work. When in doubt, err on the side of caution and make sure that every minute worked is logged through a time and attendance system and paid appropriately. You need to follow state and federal laws in order to stay out of trouble. Learn more about off the clock work with resources from the Department of Labor.
National payroll company creates disaster
What happens when a major payroll company shuts down overnight? Last September, Mr.Payroll did just that, leaving thousands of workers unpaid. This started a domino effect impacting workers, small businesses and payroll processing companies across the nation. It also lead to the closure of Cachet Financial Services, which had approximately $26 million in losses to cover unfunded paychecks left behind by Mr.Payroll. The FBI raided the home of Michael Mann, the CEO of Mr.Payroll, stating that Mann was being investigated for diverting over $20 million in payroll funds to his own bank account.
The takeaway here is that it’s important to have a backup plan so that your company is agile and flexible. This will help you pivot when you’re faced with something like an inability to process payroll, move funds electronically. While you can’t prevent something like fraud within another company, having a plan B in place for major business functions, like processing payroll, can help shield you.
Like many other companies that used Cachet Financial Services for ACH processing, we were impacted by the Mr.Payroll situation. Fortunately, we were able to find a solution that ensured that ALL of our clients’ employees received their paycheck on time. Read the story to see how we dealt with this unprecedented situation.
Social backlash stings Kroger during COVID crisis
Many companies paid some form of hazard pay during the COVID-19 crisis. Just as many made their efforts public, taking advantage of the good press. Kroger, a national grocery retail chain, followed suit and issued emergency pay to eligible workers in March of this year. Unfortunately, due to an “unfortunate payroll accounting error,” some workers were overpaid $461.60. Kroger then sent letters attempting to reclaim the money, including a threat of collection action if they fail to sign a letter to acknowledge the overpayment. This famously hit social media and caused a backlash that forced Kroger to back down.
The takeaway here is to always be careful and delicate when dealing with issues surrounding payroll. Even if you’re legally allowed to reclaim money that’s overpaid, you should be careful in how you do it. This is especially true if you leveraged the payments for press, as in the case of many companies during the pandemic. Once an error has been detected, work with payroll and HR to determine a sensible, and sensitive, way of addressing the issue. Keep communications friendly and reconsider harshly worded collection threats.
Payroll and accounting errors plague grocery chain
Tesco, a British multinational grocery chain, has been plagued by payroll related errors adding up to administrative, and social, nightmare. In March of this year a payroll error left 140,000 staff underpaid. This impacted nearly a third of their existing staff and 40,000 former workers. It was only last year when they made news for over and under paying up to 300 former workers after laying them off. The public might have been more forgiving for some of these errors had the same company not had a large accounting scandal in 2017.
The takeaway here is the importance of auditing your payroll and accounting practices on a regular basis. Any time an error does occur, you should perform a deep dive into your processes to pinpoint what happened. Use that information to create a system for finding, resolving, or eliminating similar errors in the future. It also pays to consider implementing new payroll practices, including new software, that is designed to limit errors, verify data and streamline processes to prevent issues.
As you can see, payroll problems can lead to some pretty scary, and uncomfortable, situations. But, mistakes don’t have to make headlines to make trouble for your organization. Something that seems small can lead to problems when it involves payroll, HR and benefits administration. That’s why it’s important to prioritize administrative tasks, stay ahead of regulations and know when you need outside help to get everything done on time and correctly.
The material presented here is educational in nature and is not intended to be, nor should be relied upon, as legal or financial advice. Please consult with an attorney or financial professional for advice.