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Is Your Payroll Impacting Employee Turnover?

Lauren DeBisschop
Dec 5, 2022

Oftentimes, the workplace environment and culture are the first items to be evaluated when employee turnover is high. However, there are many factors that impact the employee experience, pay being one of the most crucial. When payroll errors occur, it can take a few days to resolve the issue and distribute the correct paycheck. In the meantime, workers may experience unwanted financial stress.

When workers feel stressed and consider their employer to blame, they are much more likely to leave their position in search of something new. Some employees may even quit their job after experiencing a single late or incorrect paycheck. As such, the accuracy and efficiency of payroll plays a significant role in employee retention rates and is a factor worth evaluating when trying to keep workers happy.

The Importance of Low Employee Turnover

Changes in the economic and social climate of the U.S. in the past few years have increased employee turnover drastically. Workers are more likely to voluntarily leave a job in search of career development, higher pay, and a greater work-life balance .

As turnover increases, the productivity and performance of a company tend to drop, and the effects can be drastic:

  • The greater the turnover a company experiences, the more its performance decreases.
  • Employee turnover has the greatest negative effects on employee attitude, employee productivity, and customer satisfaction.
  • The smaller the company, the greater the impact of employee turnover.i

In addition, the cost of an employee leaving is at an all-time high. Employers not only lose money when employees vacate their position, but they also lose valuable time as they search for a suitable replacement.

  • It’s currently estimated that it costs the equivalent of six to nine months of an employee’s salary to replace them when they leaveii
  • It takes companies an average of 94 days to replace a highly skilled worker after a vacancy occursiii
  • It takes a little over six months for a company to break even on new manager hiresiv  

Currently, the job market is very strong, making the new hire search significantly more difficult and the cost even higher.

The importance of keeping employee turnover low cannot be understated. In today’s world, companies must work to find unique solutions that meet the demands of employees and increase employee retention rates as much as possible.  

Payroll as Part of the Employee Experience

Creating an effective employee retention strategy can be tough in the current socioeconomic climate, so it’s worth looking at every factor that impacts the workplace to improve retention rates.  

Although generally undervalued, payroll is a crucial component of the employee experience, as it affects one of the most important things to workers: their paycheck. With inflation at a 40-year high, getting employee pay correct is crucial – as workers cannot afford a mistake on their paycheck.

Payroll can have a significant impact on employee satisfaction and the overall company culture. When payroll is accurate, efficient, and on-time, it can:

  • Improve employees’ financial well-being
  • Reduce stress amongst employees and employers
  • Foster a sense of trust and transparency
  • Make employees feel valued and respected

Mistakes can severely diminish trust with workers, even resulting in a hit to the reputation of the company overall. After that, it can be extremely difficult to not only keep employees but find replacements when turnover happens.  

The Value of Payroll

As worker behaviors and priorities have shifted over the years, companies have worked to adapt to new work models, new regulations, and more. Along the way, it’s become even more clear how important payroll is to the overall employee experience.

When payroll is adaptable to changes in worker’s situations and easy to update when necessary, employees are generally happier and more satisfied. If payroll fails to keep up, the implications are drastic for not only the worker but the employer too.

In recent years, three major developments have forced companies to evolve their payroll systems. With each, it has become clear that when payroll is correct, employee retention can be positively impacted, but when payroll is incorrect, turnover can increase.

side by side comparisons of payroll benefits 1

side by side comparisons of payroll benefits 3

side by side comparisons of payroll benefits

Read Contractor or Employee? The DOL has Proposed a Return to FLSA Classification Standards

Overall, accurate and efficient payroll can have a drastic and positive impact on workers and their experience on the job. With a more positive experience comes higher employee satisfaction, which can result in higher retention rates and less chance of experiencing costly turnover.  

Leveraging Payroll for More

Organizations that are set up with an efficient payroll system spend less time fixing errors and have more time to spend working on additional ways to attract and retain top talent. This extra energy is crucial because workers are increasingly expecting more from their employers.  

Financial wellness benefits have gained increasing popularity in recent years as a way to support workers and reduce employee turnover. The unfortunate truth is that one in five workers in the U.S. say they cannot make it from paycheck to paycheck,v so offering earned wage (EWA), or on-demand pay, has given workers increased incentive to stay with their employer.

A recent survey from Greenshades gathered insights from 233 HR professionals across the world. When asked about their company’s use of payroll add-ons, 33% indicated that their company is currently offering EWA. In addition, 48 % of those said the innovative add-on is having a positive impact on their employeesvi.

Being able to leverage a payroll system to offer a benefit such as earned wage access can give organizations a better chance of keeping employee turnover low. In fact, new research has shown that a significant portion of employees would stay longer with a company if they were offered earned wage access at no cost to them.vii

screenshot of ebook

To learn more about how payroll has an impact on employee turnover, download the white paper, The Role of Payroll in Employee Retention.

In Conclusion

In a competitive market, businesses need any advantage they can find to keep employees happy and turnover rates low. A modern payroll technology that can handle complex calculations, maintain compliance, and provide the benefits of earned wage access is one way companies can gain the edge they need. Wondering how to choose the right payroll system for your business?  


i Park, T.-Y., & Shaw, J. D. (2013).Turnover rates and organizational performance: A meta-analysis. Journalof Applied Psychology, 98(2), 268–309.

ii Lynchburg Regional SHRM. 2017. “Essential Elements of Employee Retention | Lynchburg Regional SHRM.” October 29, 2017.


iv TERRA Staffing Group. 2020. “The Real Cost of Employee Turnover in 2020.” TERRA Staffing Group. November 4, 2020.

v Jessica Dickier, 1 in 5 Workers Runs Out of MoneyBefore Payday, Survey Says, CNBC (March 30, 2022), found at­payday-survey-finds-.htmI.

vi Greenshades and HR.Research Institute. “Payroll Security, Regulation, and Innovation Survey 2022." November 21, 2022

vii Christopher Wood, On-Demand Pay: 60 percent of U.S. Workers Want Daily Access to Earned Wages, CPA Practice Advisor (July 25, 2022), found at

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