What Happens When Your Payroll Is Late (and How to Avoid It)

It’s 3 a.m., and your eyes shoot open. You realize your business’s payroll is going to be late. What now?

This is a tale as old as time. Whether you do your own payroll or outsource it, I’ll tell you the consequences of late payroll, the reasons why it may be late, and what you can do to fix it (quickly!).

At CSI Accounting & Payroll, we’ve provided small business payroll for decades. We’ve heard tons of late payroll horror stories from new clients, and we’ve even seen some of our own clients forget to report their payroll on time. Here, I’ll address these questions:

• What are the consequences of late payroll?
• Why is my payroll going to be late?
• What can I do if my payroll is late? How do I fix it?

Consequences of Late Payroll

First of all, are you in trouble if your business’s payroll is late? It depends. If you’re consistently paying your staff late, then you may face penalties for wage violations if they report you to the state.

If this isn’t happening consistently, there are still other consequences to keep in mind, such as:

• Employees not getting paid. This might mean they can’t pay their bills.
• Employee dissatisfaction. Beyond money, not paying your employees can damage trust. You may see lower productivity or turnover.
• Increased errors. If you try to fix a missed payroll in a hurry, you are more likely to get it wrong.
• Time wasted. If payroll is late because you’re waiting on reporting, you may work late while waiting for that information. Otherwise, working on a solution to late payroll almost always takes longer than just running payroll on time.

Payroll taxes are the one thing that you don’t need to be as concerned about. You have some time between pay day and when taxes are due, even if payroll is delayed. (But if you do miss payroll tax deadlines, read more about back payroll taxes.)

Next, I’ll cover some common reasons why payroll may be late.

Reasons Why Payroll Is Late

There are several causes of late payroll. They can include:

• Lack of funds. If you have insufficient funds in your designated account, then payroll can’t be distributed.
• Missing payroll reporting. A common example is if a manager is late in reporting employee hours worked to you. Otherwise, when entering this data, you may simply forget to hit “submit”.
• Late payroll processing. If you work with a service, you need to submit your payroll details before their deadline. Most large payroll services will say that if you’re late, you’re out of luck.
• Missing employee information. This typically means you haven’t gotten banking details or other personal information of a new employee yet. Make sure you complete new hire reporting promptly!
• Missing vendor details. For example, health insurance deductions would influence payroll, so payroll can’t be submitted until these details come out.
• Glaring errors. Not all errors are apparent, but if they’re noticeable right away, it’s best to fix them before running payroll. This takes time, which may result in payroll being late.

Most of these can be avoided if you put good systems in place or partner with a reliable payroll service that doesn’t have more clients than it can handle.

Now, let’s cover what options you have if your payroll is going to be late.

What to Do if Payroll Is Late

Although you may have some Band-Aid solutions, it’s not a good idea to rely on them. Let’s talk about options for the following solutions.

DIY Payroll

If you do your own payroll, you can write out some checks to your employees immediately and deal with catching up later. The downside is that if this becomes routine, you can easily fall behind with your payroll responsibilities.

Large Payroll Providers

For big-name payroll services like ADP, we’ve heard from new clients that they did nothing to help. Bigger companies won’t budge on deadlines at all. They’ll just tell you that your employees will be paid late.

An important distinction here is that many large providers market themselves as payroll services… when really, they’re SaaS (software as a service) and do not provide great hands-on support, even in a payroll emergency.

Small Payroll Providers

Unlike large providers that are very hands-off with their clients, small providers like CSI may be able to do next-day or same-day ACH payments if you’re late to submit your payroll details… but the rush comes with an additional cost.

Otherwise, to dodge that cost, we’ve provided net amounts so our clients can write out checks, then processed their payroll through our system without sending out payments.

Remember, we’re here to help, but this is emergency service. It shouldn’t be the norm. We want to treat our clients equally, so we need to be available to provide top-notch support to everyone.

Pay Your Team on Time!

Now that you know about the consequences of late payroll, common reasons why payroll is late, and what you can do about it, are you ready to check out CSI’s payroll services?

To see if we can be a good fit for your business, click the button below for a free consultation:

Not ready to talk? That’s okay! First, learn more about what your per-process payroll costs may be by clicking the image below: