Here are 2 eye-popping facts.
– American Payroll Association says that companies using traditional time and attendance systems show an error rate between 1 – 8% of total payroll!
– 43% of employees surveyed said they had exaggerated the number of worked hours at least once.
Time & attendance tracking and its management are critical to any organization, irrespective of its size or the methods used to determine employee pay. As employee time and attendance records are a crucial input to payroll calculation, poor and outdated T&A systems can be perilous to organizations resulting in a detrimental impact to their bottom line. Using such systems might cost them millions of dollars each year in lost productivity and could jeopardize workforce morale.
Let’s look at the major risks that could be attributed to organizations using a poor time solution.
1. Disgruntled Workforce
Erroneous payroll is a serious issue that might take a huge hit on the overall employee experience at your organization. There have been several material wage underpayments within businesses that have made headlines over the years. An employer’s failure to accurately record productive work hours and break hours make it difficult to calculate minimum entitlements.
As a result, employees find themselves underpaid with no means to substantiate the exact hours spent working for their employer often resulting in a negative impact on employee wellness.
2. Accumulation of Financial Obligations
Late payments, underpayments, overpayments, and pay corrections can result in accumulation of financial obligations for the employer which will increase the burden of your finance teams. Eventually, your company’s financial liabilities will begin to rise gradually.
3. Class Action Lawsuits
Improper time and attendance management, as already said, takes a huge toll on payroll. When your employees are not aptly paid, it pushes employers to make up the difference between what should have been paid (referred to as ‘back pay’) and what you actually paid.
To put things into perspective, let’s look at what US Labor Law – FLSA says. As per this law, the employer when proved to have underpaid employees are required to provide minimum and/or overtime wages by one of the following methods:
i. The Wage and Hour Division might be supervising the back-wage payments.
ii. The Secretary of Labor can raise a legal suit for back wages and an equal sum as liquidated damages.
iii. The affected employee may file a private lawsuit demanding back pay, an equal sum as liquidated damages, with attorney’s fees and court costs as an additional expense.
iv. The Secretary of Labor may acquire an injunction to curb any person from breaching the FLSA, including the illegal withholding of proper minimum wage and overtime pay.
Normally, a two-year statute of limitations applies to the recovery of back pay. In the event of willful violations, a three-year statute of limitations applies.
4. Marred Reputation
This is a mere spillover effect from the lawsuits that companies using a poor and outdated time & attendance management system could be forced to face. Hitting the headlines for underpaying overtime employees, losing class action suits, and paying the plaintiffs will create a ripple effect on the organization’s overall market value and goodwill, thereby becoming a potential threat to future business.
Is there a silver bullet?
With the top risks of using a traditional, outdated system for clocking time and attendance explained, now does the question “Is there a silver bullet?” have an answer?
Companies that strictly follow the ‘Record Right Pay Right’ principle will successfully dodge these risks and deliver accurate payroll with close to zero errors. Tech based time and attendance systems have been replacing manual time recording processes and companies have been able to reduce dependencies on human labor, enhance employee experience, and maintain their reputation in the market. Incorporating automated processes to replace manual ones needs a well-thought-out plan and a watchful allocation of resources, as well as the integration of the latest technology.
Automated time and attendance systems can help companies defend themselves against claims of non-compliance with wage and hour laws. Furthermore, such systems non-invasively integrate with payroll solutions which will open doors to the following benefits.
• Automatically apply classifications, labor contracts, and policies as and when each employee’s paycheck is processed.
• Easily determine benefit eligibility as per the Affordable Care Act.
• Virtually minimize payroll errors due to manual data entry.
• Pay employees for their actual time spent working, sidestepping legal suits and back wages.
HR Outsourcing – A Viable Solution
With the amplified prominence and significance now given to accurate recording of employee time and attendance in pay claims, more and more companies are considering alternatives such as business outsourcing as a cost-effective and strategically viable option. While this is true, it is imperative to choose the right solution provider. Neeyamo leverages cutting-edge automation, configurable workflows and seamless integration capabilities to offer flexible and scalable solutions with automated roster/shift management.
Furthermore, Neeyamo’s T&A solution has the ability to calculate precise overtime and generate comprehensive time and attendance reports providing employers with meaningful insights on employees’ productive work hours.
Are you concerned that your time and attendance issues may be negatively affecting your profits? Do get back to us and we will help you accurately record employee time and attendance.