Can Payroll Be Reversed?

Can Payroll Be Reversed?

October 26, 2022By admin

Payroll is an important and necessary part of any company with paid employees; however, it can bring challenges. One example of an unforeseen payroll challenge is when payroll is distributed incorrectly or to the wrong people. That sounds like a dire situation, right? How can these issues get resolved?

This article contains helpful information about payroll reversals and why they happen, as well as how payroll companies can help with payroll reversals; and why it’s a good idea to outsource your business’ payroll to a trusted, local payroll company.

What Is Payroll Reversal?

A payroll reversal happens when an employer needs to retrieve money incorrectly paid out to an employee. In this case, the company requests the bank to reverse the payroll deposit; the deposit is then removed from the receiver’s account and returned to the company. Payroll reversals are an unpleasant and frustrating experience for both employer and employee.

Why Do Payroll Reversals Happen?

There are a few reasons why a company may need to initiate a payroll reversal. Most of the time, payroll won’t need to be changed after it’s distributed. However, there can be errors or typos in the amount deposited in an employee’s account. 

Sometimes the need for a payroll reversal is more than an accounting/numerical error; the employee could have also been paid by mistake. For example, an employee may have recently left the company, and administrators never canceled their scheduled payroll. There’s also a rare possibility that an employee was mixed up with another employee and accidentally got paid the wrong amount. Whatever the reason, companies occasionally need to use payroll reversals to correct payment errors after they’re already distributed.

Payroll Reversal – How Can Payroll Companies Help?

Payroll reversals are sometimes necessary, but they still take time and resources to complete. When a business outsources its payroll to a third-party company, it can manage payroll and any issues resulting from it. Payroll reversals are one example of this. 

But, it should be understood that the likelihood of clerical and accounting errors goes down drastically when companies use the services of a third-party payroll company. Payroll companies can manage the reversal and communicate with the affected employees so that the business doesn’t have to.

Outsource Payroll to Save Resources

With many employees needing to get paid and small businesses strapped for resources, there are bound to be errors every once in a while. If a business manages its own payroll, these mistakes may cost valuable time,  resources, and even staff members. There is value in outsourcing payroll to avoid these types of errors. 

Brabo Payroll manages mass payroll so that growing businesses can focus on other tasks.

Brabo is one the best payroll companies for small businesses because we care for businesses in our local community and want to support them as they continue to thrive. 

Learn more about our payroll services and get started with a consultation.