In labor-intensive sectors like healthcare, hospitality, and manufacturing, payroll is the largest recurring expense and the most prone to silent errors. From duplicate payments to inconsistent pay rules across locations, even well-run organizations struggle to manage the complexity. Under pressure to cut costs and ensure compliance, finance teams are increasingly discovering how much risk and unnecessary costs are hiding in their payroll data.
After working with dozens of finance departments in industries with high headcounts and operational complexities, I’ve seen the same challenges appear again and again – even among sophisticated teams. Below are four overlooked payroll risks that could be costing your business thousands per cycle, and what controllers can do to mitigate them.
Overtime Abuse and Inefficiency
In sectors with round-the-clock coverage like home care or logistics, overtime is expected, but unplanned spikes often go undetected until it’s too late. Whether it’s unscheduled double shifts or missed clock-outs, we’ve seen organizations unknowingly spend six figures in excess labor costs due to basic oversights. Manual reviews rarely catch every discrepancy. Instead, controllers can implement routine, cross-system audits (e.g., timekeeping vs. payroll data) to ensure that overtime aligns with policy, not just habit.
Misclassified Roles and Pay Rates
When pay rates vary by location, role, or time of day, even small classification errors can add up. For example, if an employee codes incorrectly on one shift and misses a night differential, it can lead to systemic underpayments or compliance exposure. Conversely, applying a premium where it doesn’t belong can quietly inflate payroll. These errors, applied hundreds of times over a year, can cost millions of dollars. Controllers should work closely with HR to align pay codes to business rules and establish a clear audit trail.
Duplicate or Unapproved Payments
It may sound like a worst-case scenario, but duplicate payments, whether to active employees or in error to terminated staff, are more common than many finance leaders realize. In decentralized operations or during peak hiring seasons, data sync issues between HR and payroll systems can lead to employees being paid twice, or not removed on time. Regular reviews or exception reports can catch these before they impact cash flow.
Legal Exposure and Policy Violations
Whether exceeding meal break thresholds, missing required rest time, or inconsistent application of PTO, policy violations often go unflagged, especially in multi-site operations. While these may not trigger an alert in payroll software, they can lead to legal exposure or costly corrections down the road. Controllers should consider proactively implementing pre-payroll review protocols and data validation rules that surface these violations.
Why This Matters More Than Ever
Labor-intensive businesses are operating in a constrained environment. Finance teams are stretched thin, and their leaders are being asked to do more with less, all while managing growing compliance complexity. The answer isn’t to add more spreadsheets or more people. It’s to build systems that give controllers real visibility into what’s working, what’s not, and what needs fixing before it hits the ledger.
Payroll is a strategic lever for organizations, especially for those in labor-intensive industries. AI and automation allow finance teams to enhance payroll data accuracy and quality through robust internal controls, enabling faster, more informed strategic decision-making. When overlooked, it can become a potential liability and a significant drag on revenue. By identifying hidden risks and taking proactive steps, controllers can help protect margins, reduce waste, and bring much-needed clarity to one of the most critical areas of the business.
Yuval Brot is the CEO and co-founder of Celery, a financial operations platform built to help finance teams in labor-intensive industries reduce costs, improve oversight, and ensure compliance.
