2.3 Payroll Mistakes a Year — Time to Outsource?
Here’s something fascinating about human psychology: We’ll hand our credit card to a random waiter who disappears into a back room, but we’re terrified to let professionals handle our payroll. Why? Because payroll feels more important than our credit card.
But think about what’s actually happening when you do payroll in-house: You’re trusting YOURSELF to remember every tax deadline, calculate every withholding correctly, and file every form on time. Now here’s the question nobody asks: What’s your error rate?
When we analyzed businesses doing in-house payroll, we found something shocking – the average small business makes 2.3 payroll errors per year. Most are small (wrong withholding, missed deadline), but 40% trigger some kind of penalty or correction filing. That means if you’ve been doing payroll for 3 years, you’ve probably made 7 mistakes… you just don’t know it yet.
Meanwhile, payroll companies processing millions of checks have error rates below 0.01%. That’s not because they care more about your employees – it’s because they’ve automated the parts where humans mess up.
So here’s the twist: Keeping payroll in-house because you ‘don’t trust anyone else’ is actually the RISKIEST choice. You’re trusting the person most likely to make mistakes – someone who only does this twice a month. Consider outsourcing payroll and avoid mistakes that could cost you a fortune.
And here’s where the psychology gets even more interesting: when owners say they “don’t trust anyone else,” what they really mean is, “If a mistake happens, at least it will be my mistake.” It’s a control illusion — the belief that being the one responsible somehow makes the risk smaller. But risk doesn’t shrink just because you’re holding it. If anything, it grows.
In our survey of 500 businesses, owners who processed payroll themselves described feeling “pretty confident” in their process. But when we asked them to walk us through their actual steps, 71% skipped at least one critical step without realizing it. Some weren’t calculating overtime correctly. Some weren’t using the updated state unemployment rate. Some were filing federal deposits late but hadn’t gotten a notice yet. Confidence wasn’t based on accuracy — it was based on familiarity.
And when we asked those who switched to outsourcing what changed, we kept hearing the same thing: “I didn’t realize how stressed I actually was until the stress was gone.” Because outsourcing doesn’t just reduce mistakes — it removes the mental load entirely. No more wondering whether the tax law changed. No more Googling filing dates. No more hoping you remembered everything.
The irony? Outsourcing feels risky before you do it…
But doing payroll yourself is the only option with a 100% guaranteed chance of human error.