Complex Systems with Patrick McKenzie (patio11) Payroll, pins, and punch cards
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Apr 2, 2026 A deep dive into why public payroll modernization so often collapses. Exploration of hidden rules, tolerated fraud, and why documenting payroll becomes impossible. A history of tax withholding and how employers became deputized collectors. An explanation of payroll providers, float mechanics, and how fintech daily-pay tools challenge payday lending.
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Payroll Rules Live In Practice Not Documents
- Payroll projects fail because the true rules are distributed across decades of contracts, side letters, local practice, and unwritten customs.
- Vendors can't rely on a single spec; fact-finding uncovers hidden, highly specific rules like holiday multipliers practiced only in particular departments.
Pay Modernization Exposes Hidden Fraud Incentives
- Modernizing payroll often surfaces routine, institutionalized behaviors that are fraud-adjacent, which stakeholders won't volunteer.
- Documented rules may differ from 'how we do things here,' making truthful specification reveal damaging practices.
How Pension Spiking Rewards Late Career Manipulation
- Patrick describes pension spiking: employees time high pay, overtime, or temporary promotions to inflate final years used in pension formulas.
- A brief multi-year income spike can yield seven-figure present-value pension increases tolerated by insiders.