Payroll departments have long depended on experienced professionals who know more than how to push the right buttons. They know why an employee is treated differently, which numbers should trigger a second look and what went wrong the last time a seemingly routine change disrupted payroll.
The challenge for employers is figuring out how to transfer that knowledge without also transferring outdated assumptions, workarounds or mistakes.
A 2026 survey commissioned by OnTheClock adds some data to that question. The survey found that 45% of payroll handlers reported having formal training or certification, while 42% learned through trial and error on the job and 31% were taught by a predecessor.
Among respondents taught by a predecessor, only 24% said their company had never made a payroll mistake, compared with 34% among respondents with formal training or certification.
The survey measured respondents’ reported experiences and raises a useful question for payroll leaders: Is learning how an organization has historically processed payroll enough preparation for managing the payroll it needs to run today?
For Crystal Pait, payroll implementation manager at OnTheClock and a payroll professional with more than two decades of experience, the answer is no.
“You learn how your predecessor did things, but often not why,” Pait told Checkpoint News. “You inherit their shortcuts, their workarounds and sometimes their mistakes.”
Experience is valuable, but so is questioning it
Informal payroll training has an advantage that is difficult to reproduce in a classroom: institutional knowledge.
A long-serving payroll professional may understand why particular workers are configured differently, which historical problems produced current processes, and where unusual exceptions reside within a payroll system.
Losing that knowledge can create its own risk.
“When a long-tenured payroll professional leaves, much of what they know goes with them,” Pait said. She said companies that manage such transitions well document their processes, cross-train employees and, when possible, provide overlap between the departing and incoming payroll professionals.
But the same knowledge that makes an experienced employee valuable can become a weakness when an organization’s practices are passed down without being reconsidered against current requirements.
“If something was set up wrong 10 years ago, it gets handed down as ‘the way we do it,’ and nobody questions it,” Pait said.
The OnTheClock findings provide some support for taking a closer look at that risk.
The company said 76% of respondents taught payroll by a predecessor reported their company had experienced a payroll mistake. By comparison, the corresponding figure among respondents reporting formal training or certification was 66% based on the survey’s reported 34% error-free rate.
The broader survey also found that 63% of respondents said their companies had experienced a payroll mistake.
The survey provides a snapshot of payroll practices among small and midsize employers. It was conducted from August 15 to August 21, 2026, among 525 U.S. business owners and HR or operations decision-makers to offer a snapshot of a particular employer population.
Today’s payroll rules can expose yesterday’s assumptions
There is another limitation to knowledge handed down from one payroll practitioner to another: new compliance requirements have no institutional history.
Changes involving qualified overtime compensation under the One Big Beautiful Bill Act offer a current example.
The law created an individual income tax deduction for qualified overtime compensation, but the provision does not mean that all overtime suddenly becomes tax-free. IRS guidance explains that qualified overtime compensation generally involves overtime required under Section 7 of the Fair Labor Standards Act and that the qualified amount is the portion above the worker’s regular rate. The IRS also says qualified overtime compensation must be separately reported for employees to claim the deduction.
For example, the familiar time-and-a-half calculation generally means the additional one-half portion required under the FLSA is the qualified overtime amount, not the employee’s entire overtime payment. Overtime paid solely because of requirements outside the FLSA does not automatically qualify.
The reporting environment is changing as well. For tax year 2026, Form W-2 reporting includes new Box 12 codes associated with the provisions, including TP for cash tips and TT for qualified overtime compensation.
Those requirements demonstrate why historical experience and current technical knowledge perform different functions.
“Nobody learned that from the person before them, because nobody has done it before,” Pait said.
Similar challenges are arising at the state level.
Minnesota’s Paid Leave program launched January 1, 2026, providing payments, job protections and health-insurance continuation under the state’s program. Maine’s Paid Family and Medical Leave program began providing benefits for qualifying leave occurring on or after May 1, 2026, with eligible workers potentially receiving up to 12 weeks of paid leave in a benefit year.
For multistate employers, developments such as these mean a procedure that worked last year may not answer the compliance question confronting payroll this year.
Some payroll knowledge is harder to document
The most difficult expertise to replace may not be a tax rate or a step-by-step procedure. It may be judgment.
Pait described it as “the sixth sense that something is off.”
“Experienced payroll people know the patterns,” she said. “They know the total cash requirement usually lands around a certain number, so when it comes in high or low, they stop and look before the money goes out.”
That type of experience presents a complication for succession planning because an employer can document procedures more easily than it can document instinct.
The vulnerability can be particularly pronounced in activities employees perform only periodically. Pait identified year-end processing, tax reconciliations, W-2 corrections, garnishments, employee state transfers and retroactive pay among areas where accumulated experience can matter.
That distinction also challenges a simplistic conclusion from the survey.
If predecessor-trained respondents reported more errors, the answer is not necessarily to reduce mentoring. Doing so could accelerate the loss of precisely the company-specific knowledge an incoming professional needs.
Instead, Pait argues for combining the two forms of learning.
“The best setup is both: learn the company from the person who knows it, and learn the rules through formal training and certifications like the CPP or FPC,” she said.
Documentation can preserve more than a checklist
The tension between formal and informal knowledge has practical implications for succession planning.
Pait recommends documenting not only how payroll processes are performed, but why.
“The main payroll person should have an SOP for everything they do, covering which buttons to press and why they press them,” she said. “The next person needs the reasoning, not just the steps.”
Documentation also presents its own risk if it becomes static.
“Those SOPs also have to be updated whenever a law, system or process changes,” Pait said. “An outdated SOP can do more harm than having none.”
Cross-training can provide another layer. Pait recommends involving backup personnel in payroll processing and system changes periodically and having them actually run payroll while the primary professional reviews their work. She also recommends ensuring backup personnel have appropriate system access in advance.
The underlying distinction is important: reading instructions for payroll is not the same experience as being accountable for completing payroll.
Automation changes the skills question
Technology could make the training debate more important rather than less.
The OnTheClock survey found substantial interest among small-business leaders in the use of AI for payroll, according to Pait. She said 68% of the business owners, CEOs and founders surveyed felt positively about AI helping with payroll, but only 11% were comfortable allowing AI to handle payroll at present. Half said being able to review payroll before submission would make them more comfortable.
That gap between interest and trust points toward another role for the next generation of payroll professionals: reviewing the work performed by technology.
“The software will keep taking on more of the math,” Pait said. “The next generation’s job is to know when the math is wrong.”
That does not diminish the importance of technical knowledge. It arguably makes understanding what sits behind the calculation more consequential.
Automation can produce a number quickly. Determining whether the inputs, classifications, configuration and underlying legal treatment are correct remains a separate question.
For Pait, that means payroll professionals will continue to need attention to detail, pattern recognition, knowledge of payroll rules and the willingness to challenge an unexpected result. They also need enough technology fluency to understand the systems producing those results.
Technology therefore does not necessarily resolve the tension between institutional knowledge and formal education. It introduces another source of knowledge that payroll practitioners must know when to trust and when to question.
Errors give the training debate real stakes
The consequences of payroll errors make the training issue more than an academic debate.
The OnTheClock survey found 63% of respondents reported that their companies had experienced a payroll mistake. According to Pait, among respondents reporting errors, 45% said the errors cost their companies time, 30% reported losing money through reimbursements or tax penalties, and 14% said an employee resigned over an issue.
The results help illustrate why an employer’s approach to payroll succession can become a business issue rather than simply a staffing issue.
Losing an experienced employee without capturing institutional knowledge creates one risk. Passing established practices to a successor without testing them against current law creates another. Assuming technology can replace either function produces yet another.
That makes the survey’s most interesting finding something more nuanced than formal training beating informal training.
The evidence instead points toward a question payroll organizations increasingly may have to confront: How do they preserve what experienced practitioners know while ensuring the next generation knows when established practice needs to change?
Pait’s answer is to avoid choosing between experience and education.
“Mentorship teaches someone your company,” she said. “Formal training keeps them current on the rules.”
And as payroll systems become more automated, she sees human judgment remaining central.
“AI can run the numbers,” Pait said. “It still takes a person to know when they’re wrong.”
Key takeaways
- Informal training and formal education serve different purposes. Mentoring can preserve company-specific knowledge, while structured education can help payroll professionals keep pace with changing compliance requirements.
- New rules test inherited processes. Federal qualified-overtime reporting requirements and newly operational state paid-leave programs provide examples of requirements payroll professionals must learn regardless of how processes historically were handled.
- Some of the hardest knowledge to replace is judgment. Experienced practitioners can develop familiarity with payroll patterns and anomalies that may be difficult to capture in a procedure manual.
- Documentation should explain why, not only how. Procedures that preserve reasoning and are updated when rules or systems change can make institutional knowledge more transferable.
- Automation does not remove the need for payroll expertise. Pait argues that as systems perform more calculations, payroll professionals will still need the knowledge and judgment to recognize when an output does not make sense.
- The larger issue is resilience. Rather than choosing between mentoring, formal education and technology, employers may reduce payroll risk by combining institutional knowledge transfer, continuing technical education, cross-training and informed human review.
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