You ran payroll … and realized you made a mistake. Great. If you catch the mistake quickly enough, you may be able to void or cancel payroll. But, there are several factors at play.
What if you pay employees via direct deposit—can you cancel payroll? A payroll cancellation might be possible even if you pay employees with direct deposit. Again, it depends on your situation.
Read on to learn more about voiding payrolls.
Skip Ahead
- What is payroll cancellation?
- When can payroll cancel a direct deposit?
- How to cancel payroll
- What to do if voiding isn’t an option
- How to prevent payroll mistakes
What is payroll cancellation?
A payroll void or cancellation is an employer’s attempt to stop a payment, typically a direct deposit, after processing payroll.
A payroll cancellation might be possible if you make a qualifying mistake processing payroll and are still within the cutoff window.
Understand that voiding a payroll quickly becomes complicated if you notice the mistake too late. For example, most payroll providers will not get involved with collections if you attempt to recoup funds that are already deposited in an employee’s account.
When can payroll cancel a direct deposit?
Maybe you made a duplicate payment. Or, maybe you realized you don’t have enough money in your account.
You might need to void a payroll if you:
- Made a duplicate payment
- Sent payment to the wrong account
- Sent the wrong payment amount
The status of the money in the processing timeline is key when it comes to whether a payroll can be voided.
Canceling a payroll may be doable if you try to void the transaction the:
- Day you run payroll, where money hasn’t been collected from your bank yet. You can void the payroll to stop the collection request.
- Day after you run payroll up until the day before the pay date, where money has been collected from your bank but not sent to the employee. You can void the payroll and reverse money back to your bank account.
You generally cannot cancel payroll if you try to void the transaction on:
- Payday, where money is in the employee’s bank account. Typically, you must handle this with the employee to recover the funds.
| Timing | Can You Typically Cancel the Payroll? |
|---|---|
| Day you run payroll | Yes |
| Day after you run payroll up until the day before pay date | Yes |
| Pay date | No |
How to cancel payroll
Voiding a direct deposit and canceling a payroll is possible but not guaranteed. Use the following steps to learn how to cancel payroll if you make a mistake.
How to cancel payroll:
- Contact your payroll provider or bank ASAP
You notice that you make a duplicate payment, sent the payment to the wrong account, or paid the wrong amount.
Contact your online payroll provider or bank immediately. They can help you determine if you can cancel and undo the transaction. - Take action
Submit your request. If you use payroll software, your provider should have specific instructions on how to cancel payroll in the system.
For example, this is how you void a paycheck in Patriot Software. - Keep accurate records
Always keep a paper trail on everything you do in payroll! Your records should show the voided payroll.
What to do if voiding isn’t an option
It’s important to remember payroll companies are not debt collectors. You may have other options if you notice your mistake too late and can’t cancel the payment.
Instead of a cancellation, you can correct a payroll overpayment and similar errors by talking with the employee and:
- Asking for repayment: If you overpaid the employee, you can ask them to return the overpaid amount. If you paid them instead of another employee, ask them to return the entire amount.
- Deducting the amount: You can deduct the overpaid amount from the employee’s future paycheck or paychecks.
Before doing anything, check your state laws. For example, Washington requires that you catch the error and implement a plan within a certain period.
Make sure to also notify the employee in writing and include key information about the incident.
How to prevent payroll mistakes
Payroll mistakes happen. But there are ways to prevent errors—and avoid voiding payrolls altogether.
Use the following tips to help prevent payroll cancellations in your business:
- Use payroll software to handle calculations for you
- Double check payroll entries before processing
- Use time and attendance software that integrates with payroll
- Train employees who handle payroll to spot entry errors
- Always keep good, up-to-date records
Make payday less hectic. Let Patriot’s payroll calculate everything from tax deductions to take-home pay. Get your free trial today!
This is not intended as legal advice; for more information, please click here.
