How long does an employer have to fix a payroll error in California?

Employers in California have 30 days to correct payroll errors. If you’re underpaid due to the employer’s payroll error, you’re entitled to one days wage up to 30 days for the mistake. For example, if you normally earn $240 per day ($30 per hour), you multiply that by 30 days and the total is $7200.

By Brad Nakase, Attorney

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Employer Must Fix Payroll Errors

Paying employees on time while making sure that their salaries are appropriate is part of your obligation as an employer to take good care of the individuals you employ. As a worker, you also want to be paid correctly and on schedule. But even with payouts, errors might occur.

As an employer, you must swiftly fix the payroll error and communicate the procedure to your staff. As a worker, you should be aware of your rights regarding your paycheck and what to do if your company makes mistakes with it.

In other words, what precisely occurs in the event of an error in payroll, and then how soon does a company have to fix a payroll error? Please contact our unpaid wage lawyer if your employer has made a payroll error and has not paid you correctly.

What Is an Error in Payroll?

When a business pays a worker too much or too little for a certain pay period, it’s called a payroll error.

This may occur for the following reasons:

  • Erroneous employee benefit or tax withholding deductions
  • Erroneously transferring a delayed payment to the incorrect party
  • Giving workers who took PTO (paid time off) or used unpaid time off the incorrect amount of money
  • Paying a worker who receives a rise at their previous rate
  • Incorrectly charging hourly workers for the incorrect amount of hours worked or hourly rates
  • Not transferring a new hire’s initial salary
  • Not promptly deducting the last paycheck from an outgoing employee
  • Failure to pay the minimum salary required by the state’s government or the FLSA (Fair Labor Standards Act), whichever is greater.

The majority of employers do not purposefully or intentionally tamper with their workers’ wages. However, human error occurs, and these kinds of errors are frequently caused by mis-entry of data or administrative neglect.

You can lessen errors that arise from manual errors by utilizing full-fledged payroll tools that automates the payroll calculation process for every employee by utilizing time monitoring data and actual time attendance, saving you the trouble.

How quickly should businesses fix a payroll error?

Employers must immediately fix a payroll error. By the next payday for the majority of employers.

Nevertheless, there’s a chance you won’t notice the mistake or the staff member won’t notify you right away. Then, it’s critical to understand the regulations governing the processing of payroll and the rights of employees to compensation in the event that an error is discovered.

The amount of time you have to fix a payroll error is not currently governed by any federal rules. That does not imply that you are entitled to your time, especially if you have underpaid a worker. Regarding the amount of time you have to reimburse an underpaid employee (often called to provide them back pay), each state has different regulations.

Oregon Payroll legislation, for instance, states that if the underpaid amount is under 5% of the entire gross amount, you may wait till the following regular paycheck day to fix a payroll error. However, you are given just three working days from the date of notification to make up the difference if the underpaid amount exceeds 5% of your worker’s gross pay.

A typical number of days is established by some governments for resolving payroll issues. If an employee receives a minimum wage in Florida and their compensation is underpaid according to the Florida minimum wage regulations, their employer has a period of 15 days to make the necessary corrections. Once the employer gets a written notification from the employee, the 15-day notice period starts.

‏For information on the labor laws that are applicable to your company, visit the website of your state’s labor department.

How Can Employees Handle Payroll Errors?

Should you, as an employee, discover a mistake in your paycheck, you have an immediate obligation to notify your employer. In particular, explain the issue to them and provide documentation in the form of a copy of your paycheck. HR (human resources) or administration can then address the issue as quickly as possible.

How About Making a Federal Government Complaint?

Employees may submit a grievance to the federal Wage and Hour Division, the agency in charge of overseeing back pay, within 2 years of the payroll error occurrence if it is not fixed.

You have a three-year period to file a complaint if you think your employer purposefully withheld your wages rather than doing it accidentally.

Employers are not required by federal law to provide a back pay timeframe in the event that an appeal is made. Instead, while reviewing employee complaints, the Wage and Hour Division establishes rules for the amount that businesses owe workers and when it must be paid.

Workers may also receive liquidated damages, which is recompense for any further losses they might have sustained as a result of insufficient payment. For example, if an employee does not receive their entire paycheck, it could indicate that they were unable to pay their card bills in whole and were therefore charged late fees. Or there’s a chance they’ll face foreclosure.

The amount of liquidated damages typically corresponds to the back pay owed to an employee. Therefore, if you are an employee and the employer owes you $500 in back pay, you will be compensated $500 for your lost wages in addition to $500 of liquidated damages.

Is It Possible to Complain to the Government of Your State?

Indeed, you are able to complain to your state as well. The procedure may differ based on your location, but generally speaking, you can get in touch with the labor department or other organization that deals with labor regulations.

In the event that the state government determines that the business has broken labor regulations, it may be forced to reimburse you for any unpaid wages or other benefits. In order to deter such infractions in the future, they might also charge the employer penalties or other fines.

You should take immediate action if you think your company has committed a payroll error since there are timelines for submitting grievances to the state authorities.

Can a Lawsuit Be Filed?

As a worker, you also have the option to sue for back wages, liquidated damages, and legal fees in a private lawsuit. Even while a private lawsuit could result in a larger payout, it can be tedious and detrimental to your working relationship with your company.

Before choosing to file a lawsuit against your company, you should seek legal counsel from a lawyer.

Can Employers Be Fined By States For Payroll Mistakes?

Certain states penalize companies who violate wage laws in addition to seeking back pay.

Consequences for delayed paychecks or insufficient payment errors, for instance, are stipulated under the California Wage Law. In California, workers are entitled to thirty days’ worth of compensation, or one full day’s pay at their normal rate for every day that their employer waits to correct the error.

Consider the scenario where you work in California and get paid three days beyond the deadline. Thus, even after your employer corrected the payroll issue, you are still entitled to an extra 3 full days of compensation. A $450 waiting time penalty is yours if your daily income is $150 or more.

Employers can prevent issues such as this by utilizing payroll software which sends out notifications via email for payroll, ensuring that no payday is missed.

You have the option to refute your employee’s pay claim if you think you paid them an appropriate amount. States have different procedures for resolving conflicts.

What Would Happen If I Paid an Employee Too Much?

Payroll irregularities might result in employees receiving a larger paycheck than they were supposed to. For both companies and employees, excess payment errors can be challenging. Naturally, employees would prefer to retain the money. While fixing the mistake is necessary, companies don’t want to enrage staff members.

Three methods can be used by the employer to correct an overpayment.

  1. Request reimbursement in one single sum for the money that you overpaid.
  2. Resolve a payroll issue by deducting the whole amount from a subsequent payment.
  3. Till the entire overage is repaid, space out the payment by deducting lesser amounts from paychecks. Since taking a full deduction could put them in violation of minimum wage requirements, employers may decide to use this option.

Although businesses can recoup their costs, most states mandate that they give notice to workers before taking any money from their wages.

An unintentional overpayment is regarded as a salary advance under federal law. This implies that the business can recover damages by withholding the overpayment from a worker’s subsequent salary, even if accomplishing so reduces the worker’s overtime compensation or minimum wage.

Nevertheless, in order to avoid violating the minimum wage laws, the employer might need to spread apart the deductions because some jurisdictions forbid businesses from making deductions that will lower their minimum wage payouts.

The amount of money that can be withheld from one paycheck is likewise limited in several states. Employers are prohibited by payroll law in Indiana from withholding over 25 percent of an employee’s entire compensation from one paycheck. Therefore, you might have split out deductions over 2 paychecks if you overpaid a worker by thirty percent. By doing this, you can get your money back without significantly compromising the worker’s regular salary.

Employers are required to abide by state rules, even if federal legislation is more permissive if those laws restrict the amount that can be withheld from a worker’s pay in order to correct a payroll error.

Combining Everything: How to fix a payroll error?

As soon as mistakes are found, employers typically attempt to resolve payroll disparities. Errors can be prevented even better if they are caught before checks and wire transfers are executed, keeping the staff members safe from harm.

Federal law establishes a time limit within which employees must report a payroll problem, but state laws determine how quickly an employer must fix a payroll error after they become aware of it.

You may find the most recent information about wage payment requirements on the Department of Labor website of your state. Encouraging your staff to be patient and make timely corrections will help maintain the accuracy of your payroll information.

All is well, though, when your payroll is processed efficiently and all employees are paid on schedule. A possible method for doing so? Cut away from the human data-entering process by implementing payroll software.

Have a quick question? We answered nearly 2000 FAQs.

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