Tracking employee time is an essential task for all organizations with hourly workers. The hours worked determine how much each employee gets paid. But while tracking time is a must, there are multiple ways to record and calculate hours. In this eBook, we’ll explore five effective automated time collection methods. Modern time tracking systems are better than manual methods that include paper timesheets, old-fashioned punch card clocks and spreadsheets. If you are a small business owner, consider which time collection system is best suited to meet your time and labor needs.
First, a short explanation of each method. We’ll take a deeper dive ahead.
- Mobile App
- The employee uses a mobile device to punch in and out for shifts in a timekeeping application.
- Geofencing
- Geofencing is a feature of a mobile app. It verifies the location of mobile employee punches with GPS.
- Web Punch
- The employee enters punches in a web portal using a laptop or desktop computer.
- Fixed Hardware Clock
- A physical device that uses a punch card, proximity card or fob, or keypad entry to track employee punches.
- Biometric Time Clock
- A hardware device that uses a unique physical attribute such as a fingerprint or facial scan to identify employees and record shift clocking times.
Each of these methods integrates with specialized employee time and labor software. The complete system provides the highest level of modern payroll management for businesses of all sizes.
Why is Manual Time Tracking a Liability for Modern Businesses?
Now, let’s talk about why these punching processes are better than traditional methods like paper timecards and spreadsheets.
Payroll Errors: Research has found that manual timekeeping can account for a 1% – 8% payroll error rate. Let’s do the math in a scenario where the errors are not in your favor. Even on the lower end, say 2%, that would be $240 extra on a $12,000 payroll – $5,760 annually if you run payroll twice a month.
Additionally, consider the effect of payroll errors on employee morale. Since the number one reason your employees come to work is to get a paycheck, it’s not surprising that payroll problems are a major frustration. In fact, one survey found that after two paycheck errors, half of participants said they would consider looking for another employer. Employee frustration is not the only problem with payroll errors, inaccuracy also increases the risk of a compliance violation, which leads us to the next section…
Compliance Risks: Because of the errors inherent in manual timekeeping, it increases the risk of multiple types of compliance violations. Let’s take overtime, for instance. With manual timekeeping, overtime pay could be based on an undercount of hours. If an employee clocked in late, made math errors on their timecard, or the payroll manager miskeyed a number in a spreadsheet, the employee could be shorted overtime wages.
Similarly, if an employer undercounts hours for a minimum wage employee, that employer ends up committing a minimum wage violation. Stable scheduling, meals/breaks, tip management, and medical leave compliance also depend on accurate tracking. Furthermore, there is a recordkeeping component to every wage and hour law. Clearly, inaccurate time collection throws a wrench into payroll recordkeeping compliance.
Wasted Labor: Manual time tracking could be called wasted time tracking. With paper timecards, employees need to write down their shift start and end times, tally them up at the end of the pay period and submit them to their managers. This averages 15 minutes per week per employee. Managers have to collect timecards, check the calculations, fix any mistakes, and submit to payroll. The payroll manager spends an average of seven minutes per timecard to get the data into the payroll system. Now, you might be thinking that some of these tasks only take a few minutes. That might be true, but these minutes add up and take away from time that could be spent on revenue-generating activities.
Time Theft: Regardless of the industry, many employees commit hours fraud to pad their paycheck. The methods employees use to steal time include clocking in earlier or clocking out later than authorized, failing to clock out for unpaid breaks, fudging on their timecard, or brazenly having a co-worker clock in for them when they are late, or absent altogether.
Lack of Insight: It’s difficult to optimize labor resources with manual timekeeping. Managers don’t have tools to prevent unplanned overtime, plan shift schedules, or allocate employee hours to projects or clients. However, employee timekeeping software does all these things and more. For example, they track employee certifications, multiple pay rates, shift differentials, PTO, and medical leave.
Increased Labor Costs: All of the problems we’ve discussed thus far increase labor costs in one way or another. Errors, time theft, wasted labor hours, and unplanned overtime have an immediate and direct impact on your labor budget. Consider that a Department of Labor investigation, employee legal challenge or compliance violation can be extremely expensive in the long run. As mentioned previously, payroll errors can also lower engagement which can cost you in decreased productivity. Worst case, they can increase employee turnover which results in higher recruiting costs and decreased team performance due to lower collective team expertise and lost institutional knowledge.
As we’ve established, time tracking is critical to business success. When you improve employee time collection, the benefits extend beyond HR to all teams and business functions.
4 Key Findings About Employee Time Tracking for Small Business
- $7.4 billion is lost per day to unrecorded work activities. (FinancesOnline)
- 43% of hourly workers admit to exaggerating the amount of time they work during their shifts. (SoftwareAdvice)
- With manual time tracking, employees who log their time at least once a day are 66% accurate, whereas people who log their time weekly are only 47% accurate, and those who complete their timesheet less than once a week are only 35% accurate. (Accelo)
- The average cost of labor every time an employee fills out a timecard is $9.37. For a company with 100 employees, that’s $937 in employee time every pay period. (EY)
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