For small businesses with employees, payroll is a significant part of operations—both financially and administratively. Payroll tasks overlap with complex employment laws and confusing tax rules and can affect various business areas.
Understanding overall payroll statistics and trends can help you estimate when certain workforce changes might affect your business. This can help you prepare and find innovative solutions that might help lower payroll expenses, boost employee morale, and reduce the hassle that this process typically brings.
Looking for more tips for handling your payroll process? Check out our guide for managing your payroll efficiently.
Payroll Trends
1. Biweekly payroll is the most common payroll run (BLS)
According to the most recent data, payroll runs done every other week/biweekly are the most common in the US, with nearly half of all companies using this payroll frequency. Second most common is weekly payroll, followed by twice monthly. Monthly payroll encompasses less than 5% of US company payroll.
2. One in four US workers lives in a pay transparency state (CNBC)
Many states and cities now require employers to provide some level of pay transparency to employees and applicants. Whether companies have to disclose the pay range to applicants or post it in public job ads, these laws are taking hold—and your company must ensure compliance.
Even if your company has no business operations in a state, if you’re posting a job ad that will be viewed by candidates in Colorado, for example, you must post the pay range in that job ad to comply with Colorado law.
Employee Payroll Statistics
3. Nearly 3% of US workers changed jobs each month in early 2022 (Pew)
About 4 million workers changed jobs each month in the first quarter of 2022. Why? For more pay. By going to a new employer, workers were able to increase their pay. This share of workers changing jobs each month translates to an annual turnover rate of 30%. All companies need to do to decrease their own turnover is to increase their employee retention budget equal to or above their new hire budget.
4. 63% of workers live paycheck to paycheck (CNBC)
Not only do paycheck errors make employees more likely to leave a company, but they also put them in actual financial distress. When employees cannot meet their financial obligations, they may have trouble focusing and producing high-quality work. More companies are offering employees the right to access their pay as they earn it via on-demand pay options that many payroll services provide.
5. 93% of employees are paid through direct deposit (American Payroll Association)
Although still options for some businesses, paying employees in cash and paper checks aren’t as common. Direct deposit allows employees to be paid electronically, reducing the risk of fraud, theft, or loss of paycheck. It’s also usually free for many small businesses through their payroll software/service provider.
If your company isn’t offering direct deposit payments to your employees, you risk losing access to potential new employees who don’t want to deal with paper paychecks.
6. Only 25% of workers have updated their W-4 (Association of International Certified Professional Accountants)
In 2019, the IRS updated Form W-4 to enable more accurate withholding information. If employees don’t update this form, they (and you) could be paying inaccurate taxes, creating more work at tax time and potentially higher taxes for them.
7. There are 59 million gig economy workers (Upwork)
Hiring gig workers, which make up about 36% of the US workforce, requires you to ensure that you are classifying the workers correctly and paying them in accordance with your state paycheck laws. Partnering with gig workers can help your business, but you need to pay attention to the legal issues involved.
8. Nearly twice as many workers prefer higher wages over better health benefits (American Payroll Association)
When surveyed, just under 35% of workers wanted better health benefits from their employer, while over 65% preferred higher wages. This shows that while benefits are important to workers, they must be balanced with competitive wages that allow the worker to have a higher quality of life.
Company Payroll Statistics
9. Nearly $7 billion in penalties collected for company payroll errors (IRS)
Payroll mistakes cause problems for employees and massive financial troubles for companies. The most common payroll mistake is “failure to pay,” which could mean not paying employees at all or paying them incorrectly. For this reason alone, the IRS collected over $1 billion dollars in penalties.
10. Over 90% of workers say they always receive their paycheck on time (American Payroll Association)
Despite the IRS levying enormous fines for payroll mistakes, over 90% of US workers surveyed say their paycheck is always on time. That’s good news for the vast majority of businesses and their employees, who can be seriously impacted by late paychecks.
11. Payroll outsourcing is projected to grow by nearly 6% over the next four years (technavio)
Payroll outsourcing is projected to increase quite dramatically through 2027, creating a $7 billion market. This illustrates just how many companies are looking to outsource their payroll needs.
12. Up to 30% of companies misclassify employees (National Employment Law Project)
Calling employees independent contractors to save on taxes is something 10% to 30% of employers do. If caught or sued, these companies face back taxes, missed overtime pay, and fines.
Payroll Statistics Frequently Asked Questions (FAQs)
According to the US Small Business Administration Office of Advocacy, 81% of companies (about 26 million), have no employees, which means they have no payroll.
The most common pay frequency in the US is every other week, which accounts for nearly half of all payroll runs in the US. This is sometimes referred to as biweekly payroll, which is ambiguous and why we use the phrase every other week.
It depends on your payroll frequency. Here’s a breakdown:
- Weekly: 52 pay periods
- Every other week: 26 pay periods
- Twice monthly: 24 pay periods
- Monthly: 12 pay periods
Bottom Line
Today’s workforce is changing. But paying employees, gig workers, and independent contractors remains a vital piece of the puzzle. Not knowing payroll trends can leave your company behind and exposed to legal liability. Formalizing your processes internally or partnering with an outsourced payroll service can be easier and more cost-effective for your small business.
