The Billion-Dollar Payroll Problem: Why a Lack of Standards is Costing Businesses

In the world of business finance, nearly every major function operates under a defined set of industry standards. 

Accounting follows Generally Accepted Accounting Principles (GAAP), financial reporting abides by International Financial Reporting Standards (IFRS), and audits are guided by structured compliance frameworks. 

Yet, despite being one of the largest recurring expenses for most businesses, payroll lacks a universal rulebook. Hillel and Yuval, Co-Founders of Celery, hit the nail on the head when this topic arose in a recent podcast: we have rules for just about everything in finance, but payroll is still the Wild West.

When we talk about payroll, we’re talking about your employees' livelihoods, yet we’re relying on manual reviews, crossing our fingers and hoping for the best. 

Since there is no standardized best-practice model, companies are left to develop their own internal payroll processes from scratch. Some rely on custom spreadsheets, others invest in payroll software, and many depend on third-party providers—but without a unified system, each approach is vulnerable to inefficiencies, errors, and compliance risks. The lack of standardized procedures forces every company to reinvent the wheel—often at a steep cost.

The result is jaw-dropping. Research estimates that businesses collectively lose $35 billion annually due to miscalculations, incorrect deductions, compliance failures, and administrative mistakes. 

A "minor" mistake that bleeds billions

When companies assess financial risk, payroll errors rarely top the list of concerns. Many finance leaders assume their payroll operations are running smoothly, and if discrepancies arise, they appear small enough to be dismissed as minor inefficiencies.

But the reality is different. Payroll inaccuracy averages at about 1% error rate. At first glance, a 1% error rate may seem small—but for a company with an annual payroll of $100 million, that is $1 million in preventable losses per year.

Now, scale that up across industries. This 1% margin of error balloons into $35 billion in annual losses—a staggering amount that could be redirected toward business growth, employee benefits, or operational improvements. It would certainly help solve a lot of companies' budget issues.

Where are these hidden errors coming from?

That’s a tough question because they really can come from anywhere, including:

• Miscalculated wages and deductions, leading to overpayments or underpayments.
• Incorrect tax withholdings, resulting in compliance penalties.
• Duplicate payments or missed reimbursements, causing financial discrepancies.
• Misclassified employees, leading to unexpected tax liabilities.

And, to remind you, it’s not just about the millions of dollars falling out of your bottom line. It’s about trust, morale, and retaining good employees to help your business continue to grow.

Managing payroll without a standardized approach

With no universal payroll framework in place, companies have been forced to create their own solutions. These are the four most common approaches.

1. The ‘Best spreadsheet in the industry’ model

Some companies take pride in building what they consider the best payroll tracking spreadsheet in their industry. 

Pro: These internally developed files are designed to handle tax deductions, benefits, overtime calculations, and compliance checks—all manually updated by payroll teams.

Con: Spreadsheets are prone to human error, difficult to scale, and cannot keep pace with changing tax regulations.

2. Internal payroll review committees

To counteract payroll inaccuracies, some businesses form dedicated payroll auditing teams.

Pro: In-house team is there to manually review data, ensuring accuracy before payroll is processed.

Con: These reviews are time-consuming, expensive, and reactive—errors are often caught only after they’ve impacted employees.

3. Outsourcing payroll to third-party providers

Many companies rely on external payroll providers or PEOs to handle calculations, tax filings, and compliance. 

Pro: These services reduce administrative burden, but they don’t eliminate payroll errors—businesses still need to audit their payroll provider’s work.

Con: Companies assume outsourcing solves payroll accuracy, but errors can still occur, leading to employee disputes and regulatory fines.

4. AI payroll software

A growing number of organizations are implementing AI-driven payroll solutions.

Pro: They automate payroll calculations, detect errors in real-time, and flag potential compliance risks before they cause financial damage.

Con: Many businesses are unaware of these technologies, assuming that advanced automation is reserved for large enterprises.

While some of these strategies help minimize payroll errors, they fail to address the larger issue—the absence of a standardized approach to payroll processing, auditing, and compliance. This leaves businesses constantly playing defense instead of proactively ensuring payroll accuracy.

How to take control of payroll 

While payroll lacks a formal industry standard today, businesses don’t have to wait for one to emerge. Organizations can start improving payroll accuracy immediately by taking these steps:

1. Move from manual to automated payroll audits – AI-powered payroll review tools detect errors in real time, eliminating the risks of human oversight.
2. Establish structured payroll review processes – Even without a universal standard, companies should define internal payroll accuracy benchmarks to improve consistency.
3. Integrate real-time payroll error detection – Catching payroll mistakes before they impact employees prevents financial losses and compliance issues.
4. Advocate for industry-wide payroll reform – Finance leaders should push for a standardized payroll accuracy framework, similar to GAAP in accounting.

*Enter Celery.*

Founded by Yuval Brot and Hillel Shalev, Celery was built on a simple yet powerful insight:

Why do businesses accept payroll errors as a given, when other financial processes operate with near-perfect accuracy?

Celery recognized that payroll errors weren’t just an operational nuisance—they were a massive financial liability. 

Our approach focuses on shifting payroll auditing from a reactive, error-correction process to a proactive, automated system that prevents errors before they happen.

Celery’s payroll auditing technology is built on three core principles:

1. Real-Time Payroll Monitoring
   Instead of waiting until payroll is processed to catch mistakes, Celery’s platform audits payroll data continuously, flagging anomalies before they lead to costly errors.
2. AI-Driven Anomaly Detection
   By analyzing historical payroll data, Celery identifies irregularities—such as duplicate payments, tax miscalculations, or unauthorized bonuses—before they impact a company’s finances.
3. Standardization
   Celery isn’t just solving payroll errors—it’s opening the door for payroll best practices. By educating businesses on the financial risks of payroll inaccuracy, Celery is advocating for a new standard in payroll compliance and automation.

Final thoughts: Stop accepting payroll errors as the norm

Payroll has long been treated as an unavoidable administrative function rather than a critical financial discipline. The lack of industry-wide standards has forced businesses to develop fragmented, inconsistent payroll processes, leading to billions in avoidable losses.

But payroll errors don’t have to be a cost of doing business. With automation, AI-driven auditing, and a push for standardized best practices, companies can dramatically reduce payroll errors, improve compliance, and reclaim millions in lost revenue.

Celery is proving that payroll accuracy isn’t just possible—it’s actually easier to achieve than you think. It’s time to shift from damage control to proactive payroll.