Common Payroll Mistakes that Cause Delays in Salary Disbursement

All employees are excited about one thing in their job, and it is for their salary for hard work. However, simple payroll mistakes could result in delays and inaccurate payments. These mistakes could create mistrust, troublesome disputes, and a hassle for both the company and the employee.

Knowing that payroll errors can affect your employee's trust, you as a business owner or an HR professional must be aware of the common mistakes that could happen in processing payroll.

Payroll includes complex and repetitive calculations with benefits, deductions, and other pay elements. Mistakes can’t be avoided even if you’re a seasoned HR practitioner. In this article, we will discuss the common mistakes in creating payroll and how you can avoid them.

1. Lack of timesheet validation

In every pay cycle, a timesheet validation mistake is faced by many HR practitioners. This happens when employee working hours are not tracked properly. What happens when timesheet validation is not properly validated? This leads to inaccurate overtime or undertime.

Overtime & Undertime

Overtime worked by employees may go unrecorded and uncompensated due to inadequate timesheet validation. This can lead to financial losses for employees, potential legal issues for the company, and inaccurate data for payroll and budgeting.

If the management fails to verify the accuracy of reported hours, undertime and overtime could be costly to both the company and the employee. The common reason for the lack of validation can be due to manual processes, lack of oversight, or software limitations. This ultimately led to potential inconsistencies and missed working hours.

The solution

Implementing robust and automated timesheet validation in the payroll system helps with this problem. Features like real-time employee attendance tracking, and overtime approval workflows can significantly reduce the risk of unrecorded overtime. Using a system that enables this feature will ensure accurate compensation for employees.

2. Income Tax Mistakes

Misclassifying payments that are subject to tax deductions is also one of the common mistakes that happens here in the Philippines labor landscape. In general, compensations are subjected to tax. However, there are exceptions based on BIR form 2316. Sometimes it is overlooked and causes legal problems.

The solution

Knowing, listing, and understanding the exemptions is a big help in avoiding these tax mistakes. The simple thing to do is always check and review the Revenue Regulations No. 11-2018 provided by BIR.

Take note of the exceptions such as:

  • Basic Salary, Holiday Pay, Overtime Pay, Night Shift Differential, and Hazard Pay of the minimum wage earners (MWE)
  • 13th Month Pay and Other Benefits (maximum of P90,000)
  • De Minimis Benefits
  • SSS, GSIS, PHIC & PAG-IBIG Contributions and Union Dues (Employee share only)
  • Salaries and Other Forms of Compensation

Another key to solving income tax mistakes is to use a payroll system that automatically includes or excludes deductions for the compensation eligible for income tax returns. With a dedicated payroll system

3. Wrong payroll computations

Another frustrating mistake is wrong paycheck computations. HR practitioners have to keep track of payroll elements such as deductions, benefits, bonuses, and much more. Also adding different pay rates for holidays, a manual payroll such as spreadsheets tends to create a lot of inaccuracies. This causes delays in payroll, and much worse is underpaying employees which can cause employee dissatisfaction.

The solution

The best solution to inaccurate payroll is to have a dedicated system that is loaded with correct formulas for different occasions. With the right payroll system, you will never have a problem with holiday pay, overtime pay, and other computations.

A good payroll solution will also provide updates on the latest regulations for benefits. Having a system that is up to date with the latest contribution rates such as SSS, PhilHealth, and PAG-Ibig will ensure that your organization is always compliant no matter what changes will occur.

4. Having Disorganized Employee Records

Payroll errors are unavoidable, especially when employee records are disorganized. This often happens when employee documents such as birth certificates, school diplomas, and medical records are not properly arranged and stored.

In such a situation, document loss may occur. Finding these documents may take time and energy at the times that these records are needed. Not only is this confusing for HR, but it can also cause discontent within the company due to inconvenience.

The solution

To avoid such problems, it's crucial to have a systematic way of organizing employee records. First, ensure that all information in the records is accurate and complete for each employee.

Then, utilize payroll software to simplify the process of uploading and updating employee records. In addition, regular review and updates of employee records are essential to avoid outdated or incorrect information.

By properly organizing employee records, the process of record keeping would be easier thus reducing the likelihood of costly payroll mistakes.


We discussed common payroll mistakes HR is encountering. Now that you know the mistakes and the possible solutions, you and your HR team can utilize this information to prevent this in the future.

If you are looking for an HRIS payroll software that can address the problems above, feel free to contact us so that we can show you how SATO Den’s solutions can help you.

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