When most employees receive their paycheck or direct-deposit receipt, they simply glance at the bottom line. But although 8 in 10 monitor their bank accounts closely on payday and nearly half check their paystubs weekly, nearly one-third are confused about their payroll deductions.
“Given that nearly a third of respondents have detected errors in their paychecks at some point, their stress is not unfounded,” according to a new report from Deel. “And as artificial intelligence increasingly gets incorporated into payroll systems, that anxiety may intensify.”
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A recent survey by the global payroll service found that:
- 1 in 6 workers are stressed about payroll accuracy;
- 1 in 3 have noticed paycheck errors; and
- Just over half all full-time employees are concerned about AI handling their payroll data.
According to the research, workers are more confident that they know the amounts of their streaming subscriptions and phone bills than whether they understand critical paycheck deductions such as federal taxes, health insurance premiums and retirement contributions. Often, the amounts being deducted from paychecks are much higher than streaming service bills, but people still don’t know them.
Employers can take several steps to help clear up the confusion. First, clearly break down paychecks, Use clear, human-readable descriptions. Instead of sometimes-cryptic codes such as “401K PRE” or “MED EE,” consider using “401k Pre-Tax” or “Medical Health Deduction -- EE Only.”
Next, tie pay slip literacy to financial literacy training. Teach employees how to understand their net income, track deductions year-over-year and plan for benefits changes or withholding adjustments by creating internal training that employees must complete during onboarding and then annually.
Then create a “how to read your paycheck” guide. Build an easy-to-read document for employees to access and reference that describes all earning codes and deductions. Showing a picture of a redacted pays slip with examples would be helpful to demonstrate to employees. Finally, make the payroll team available for drop-in time monthly or quarterly to answer questions about such topics as paychecks, taxes or changes in deductions.
“As employee engagement globally hovers at a near dismal low of 23%, employers who invest in clear compensation education will have a competitive edge,” the report concluded. “The boost to confidence about their hard-earned wages and knowledge about savings and deductions can directly drive engagement.”
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Alan Goforth
Alan Goforth is a freelance writer in suburban Kansas City. In addition to freelancing for several publications, he has written a dozen books about sports and other topics.
