Payroll matters. Whether you have a single location, a dozen, or more, your approach to payroll has a significant downstream impact on how your business operates 24/7—not just on payday. This is especially true for companies that employ an hourly workforce, since correcting timesheets can take hours, and any mistake can result in a costly fine.
So, how are owners and operators navigating payroll in 2024? We asked this question to a group of 250 business owners, HR managers, and others who spend their days managing hourly workers.
Our goal? Learn about all things hourly payroll—strategies, challenges, and shortcomings. While several themes emerged, one primary takeaway came through again and again and again: most businesses that employ hourly workers are spending too much time and energy on payroll, thanks to an over-reliance on outdated solutions, manual processes, and disjointed tools.
We created The State of Hourly Payroll to share the results from our survey with you in a digestible format. We dive into the data and unpack the biggest challenges across the most common payroll methods used by hourly businesses and how you can overcome them.
Most importantly, we also include suggestions—backed by the recommendations of your peers—to help you increase the speed and accuracy of each hourly payroll run.
While repetition can make payroll seem “simple,” there are a lot of details that need to come together for a successful hourly payroll run.
Next time you sit down to run payroll, make a note of every step. Each detail. Every potential mistake. A few of these important factors include:
The longer the list becomes, the more time each hourly payroll run takes. But what specifically is taking up the most time? And what are the biggest problems presented by these challenges?
Notice anything? The biggest challenges faced when running hourly payroll have nothing to do with actually getting paychecks printed or direct deposit… deposited. The primary obstacles all have to do with making sure data is accurate before it gets to payroll.
As an example, let’s dive into the issue of inaccurate clock-ins and clock-outs. When workers don’t clock in and out at the right time, small inaccuracies are introduced into the process. This can impact compliance with labor laws regarding overtime, breaks, and shift lengths. Since correcting timesheets often requires double-checking with employees or supervisors, the whole process is slowed down by just a few small inaccuracies.
Each platform or tool included in your payroll process increases the risk of additional inaccuracies. Each manual transfer or re-entry of data is one more opportunity for something to go wrong—whether it’s a simple typo, a miscalculated hour, or a missed update. These small errors can quickly add up, leading to bigger problems like incorrect pay, regulatory non-compliance, and disgruntled employees.
When weighing different payroll options, many hourly businesses face a tough decision: maintain control by keeping it in-house or gain efficiency by outsourcing the process. In almost all accounts, our survey respondents struggled to achieve a satisfactory balance between control, efficiency, and accuracy.
Many organizations (55.5% of respondents) prefer to keep hourly payroll processes in-house to maintain a higher level of control. And of those, 23% are relying on manual methods like spreadsheets.
Handling hourly payroll internally brings the benefit of being able to tailor the process to their specific needs. But control comes at a cost. 22.22% of respondents using spreadsheets cited incorrect or disorganized data as a top issue. Additionally, 30% of those employing in-house methods spend more than 5 hours per pay period on payroll-related tasks.
On the other side of the coin, 38.9% of our respondents choose to outsource their payroll to accountants or payroll services.
Of those that use external payroll services, 70% spend 3 hours or less on payroll per pay period.
While outsourcing hourly payroll can definitely save time, it’s not without its challenges. One of the biggest potential downsides is a lack of control and visibility. When someone else is handling the payroll for hourly workers, it can be harder to catch issues like incorrect clock-ins or missed breaks, which can lead to inaccuracies that affect both compliance and employee satisfaction.
Additionally, relying on external services probably means that your payroll is disconnected from the rest of your HR platforms, so you’re on the hook to constantly move data between systems to manage time tracking, scheduling, and more. Not only does this mean an increased risk of errors, but it can actually reduce the very efficiency you’re trying to gain by choosing outside payroll help in the first place.
Survey respondents who kept their payroll in-house reported the highest variation in time spent on hourly payroll, with significant percentages spending anywhere from less than 1 hour to more than 10 hours. This variability highlights how crucial it is to choose the right payroll solution for your needs and priorities.
Based on the results of our survey, which payroll solution seems to provide the best balance between control, efficiency, and accuracy? Internal payroll software. But a word of warning: they are not all built the same.
The best payroll software should be intuitive, easy to navigate, and tailored to handle the specific challenges of managing hourly workers. Look for software that automates time-consuming tasks like reviewing timesheets, calculating withholdings, and staying compliant with labor laws. It should also integrate seamlessly with your other HR tools so all your data flows smoothly from one step to the next, reducing the need for manual entry and minimizing the risk of errors.
To stay competitive in 2025 and beyond, hourly businesses are increasingly integrating their HR and payroll systems in order to work smarter and more efficiently. Those that rely on manual or outdated processes risk spending too much time and resources on administrative tasks, making it harder to hire and retain staff, deliver excellent customer service, and scale their operations.
73.6% of respondents said it would be valuable or extremely valuable to streamline hiring, onboarding, time tracking, and payroll into a single platform.
Notably, 64% of respondents also stated it is very or extremely important that their payroll platform meets the needs of employing an hourly workforce, which includes managing multiple positions, varying hours, and compliance.
With such complexity lurking in hourly payroll (compliance, labor laws, etc.), customer support is paramount. 66.5% of respondents said it’s very or extremely important that their payroll provider offers a great support experience.
Support for hourly payroll is absolutely critical because payroll isn’t just about numbers—it’s about people. When issues arise, like a mistake in someone’s paycheck or a compliance question that needs immediate attention, it’s essential to receive fast, expert help.
Unfortunately, too many providers either aren’t true payroll experts, lack specific expertise in the complexities of hourly payroll or are simply too slow to respond when you need them most. This can leave you scrambling to fix problems on your own, potentially leading to even more mistakes and frustration. In contrast, having timely, knowledgeable support from a provider who truly understands the ins and outs of hourly payroll means you can address issues before they escalate.
The data is clear: outdated and disjointed payroll processes are making hourly payroll more difficult than it needs to be. The majority of businesses are struggling with issues that stem from misaligned, manual methods, fragmented systems, and a lack of integration between payroll and essential HR processes like time tracking and compliance management. These inefficiencies lead to more time spent on payroll, higher risks of errors, and increased frustration for both payroll managers and employees.
By simplifying your payroll operations and integrating everything into one cohesive system, you can reduce errors, save time, and ensure accuracy—all while building trust and loyalty with your team. Workstream’s all-in-one payroll solution consolidates your hiring, onboarding, employee records, time clocks, shift scheduling, payroll, and more into one simple platform built specifically for the hourly workforce. With expert support from actual payroll specialists and an average migration time of just two weeks, Workstream makes it easy to streamline your hourly payroll and start seeing the benefits right away.
Take the first step toward a smoother payroll experience with Workstream’s all-in-one solution, and let us help you take the hassle out of managing hourly payroll.