MITC RETURN ON INVESTMENT EVALUATION REPORT
FROM A LEADER IN WORKFORCE MANAGEMENT SOLUTIONS
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MITC RETURN ON INVESTMENT EVALUATION REPORT
INTRODUCTION THE BOTTOM LINE Automating time and attendance, billing, payroll and documentation
and
documentation
functions
enables
service organizations to reduce costly payroll errors, increase productivity, and reduce costs. Service organizations adopting MITC achieve a significant return on investment within a relatively short time frame. Many organizations have received payback in 3-6 months, enabling them to pay for the solution with the savings from payroll reductions.
THE CHALLENGE For most service organizations, payroll represents 50-70 percent of overall costs, so there are a number of reasons to consider automating time and attendance functions: Complexity: In order to complete time and attendance tasks accurately, managers need to track — for a large number of employees — complex variables including hours worked, wage rates, pay rules, and leave time such as sick days and vacation time.
“Service organizations adopting MITC achieve a significant return on investment within a relatively short time frame.”
Payroll inflation: Because of the complexity of time and attendance tasks, manual systems are vulnerable to costly
penalties. For service organizations involved in billing
employee fraud and errors such as buddy punching,
federal or state institutions, extra care must be taken to
unauthorized attendance, overlapping shifts, and extra sick
ensure services are not billed erroneously.
or leave days that are incorrectly given because managers are overwhelmed. Productivity: In the absence of automation, time and attendance, payroll, billing and documentation functions are labor intensive and costly. Employees must fill out timesheets that are then collected and re-keyed into a payroll system so that checks can be disbursed. Compliance: All work environments are subject to rules arising from local, federal regulations. Achieving and documenting compliance is both difficult and timeconsuming, but non-compliance can result in costly
MITC includes: Real-time verification of services for payroll and billing An advanced rules engine that applies complex payroll and billing rules Self-service that enables attendance-related data collection directly from employees and managers Manager views that enable supervisors to efficiently analyze data and manage payroll by exception to schedule and/or budget.
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MITC RETURN ON INVESTMENT EVALUATION REPORT These features, combined with integration and billing capabilities, enable service organizations to reduce the workflows required to generate payroll from time and attendance data. By improving rules application, data availability, and workflows, MITC enables service organizations to: Reduce the risk of costly payroll or billing errors and resulting inflated labor costs and missed revenue Eliminate paper and opportunities for human error Deliver pay and billing accurately and on time with consistent practices Free managers to focus on higher-value strategic activities In addition, MITC can collect data from various sources, including telephone, biometric terminals, or any web-enabled device.
leave, fraud, missed billing and unauthorized services. The top seven benefits from MITC: 1. Reduced payroll costs: Service organizations reduce inflated payrolls through better controls of unauthorized attendance, overlapping shifts, buddy punching and unnecessary overtime. 2. Reduced payroll and billing error rates: Service organizations can reduce overpayments due to errors in data re-entry, pay rule applications, and clerical mistakes. 3. Reduced payroll and billing staff time: Service organizations can reduce the number of full time hours the payroll department spends on menial timesheet data entry tasks and manual payroll calculations. 4. Reduced payroll and billing processing time: Service organizations can reduce the time and cost of manual check disbursement, data entry by payroll clerks or administrative
“With improved visibility, service organizations can eliminate labor costs driven by factors such as overtime, unnecessary leave, fraud, missed billing and unauthorized services.”
employees, time spent by employees filling out time cards, and managers’ review and approval of time cards. 5. Reduced unauthorized leave time: Service organizations can reduce the likelihood that employees take more leave time - such as vacation, sick, or personal days - than permitted. 6. Improved
labor
and
billing
reporting:
Service
organizations can use overtime controls and advanced scheduling to reduce both authorized and unauthorized overtime, and to analyze variances between actual, scheduled and budgeted labor costs.
KEY BENEFIT AREAS By automating workflows related to payroll, billing and time and attendance functions, MITC enables service organizations not only to reduce staff time related to these tasks, but also to
7. Streamlined billing: For many service organizations, there is a correlation between time and attendance and billing. By collecting valuable billing information in real time, all the benefits that apply to payroll — such as reduced work flows,
improve payroll and billing visibility.
increased accuracy, faster turnaround, greater visibility
With improved visibility — in the form of standardized reports
— will apply.
and views from MITC — service organizations can eliminate
and increased opportunities to minimize missed billing
labor costs driven by factors such as overtime, unnecessary
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Most significantly, many benefits are direct. A direct benefit is one that is readily estimated, directly observed, and yields a tangible improvement to the organization as either a cost reduction or revenue increase. For example, better labor reporting can result in more efficient scheduling of resources, greater visibility of billing opportunities, and a readily estimated reduction in overtime costs. By contrast, some benefits from technology deployments are indirect and less easily measureable, such as gains in productivity. Direct benefits such as reduced payroll costs can be achieved in all countries. The magnitude of direct benefits does not vary significantly from one country to another. Some of the service organizations using MITC are located in Canada, Ireland, New
“The payroll savings rate is usually in the range of 1-5 percent of payrollrelated costs.�
Zealand and the United Kingdom, where labor markets are more regulated, and unions more active. As a result, the indirect benefits of improved reporting and compliance are extremely
be higher if staff that are remotely located completes time and
significant for these service organizations.
attendance tasks, as is the case at many service organizations.
REDUCED PAYROLL COSTS
REDUCED ERROR RATES
Typically expressed as a percentage of total annual payroll,
Service organizations realize savings by reducing their payroll
payroll saving is by far the largest area in which service
error rate. These savings alone can exceed the entire cost of
organizations recoup cost. The payroll savings rate is usually in
implementing MITC. The average error rate is 1.2 percent. Every
the range of 1-5 percent of payroll-related costs.
organization has some level of error and, even for the service
Any service organization with overtime rates in excess of 2 percent of payroll should make automating time and
organizations whose error rate is 0.5 percent or less, the annual savings often exceed the investment.
attendance an urgent priority. Overtime is typically out-of-
One MITC customer was surprised at just how much payroll
budget for service organizations, and if left unresolved can
had been inflated.
erode the financial viability of the whole organization and cripple its ability to deliver services effectively.
Passages Inc., of Columbia City, Indiana is the leading provider of services for people with disability in their region. In an effort
INTEGRATION
to efficiently and accurately control their payroll costs, Passages
Automation of data entry is valuable because it not only
Scheduling System. Passages’ initial need was to eliminate the
eliminates labor-intensive data re-entry, but also enables
burden of paper timesheets. The time and attendance system
more accurate application of pay and billing rules. The more
installed at Passages allows off-site employees to quickly clock
employees, shift differentials, and collective bargaining
in and out. Supervisors and administrators can now easily see
agreements a service organization has, the higher its payroll
when employees begin and end their shifts and can approve
and billing error rates will be. Payroll and billing errors will also
timesheets electronically.
Inc. implemented an automated Time and Attendance and
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MITC RETURN ON INVESTMENT EVALUATION REPORT Passages’ CFO, David Lehman, was pleasantly surprised to find that the benefits of this system were more far-reaching than he had anticipated, saying, “We originally decided to implement an automated Time and Attendance system to eliminate paper timesheets, streamline payroll and achieve greater accountability. I was surprised, and pleased, by the significant reduction in payroll hours. It has been around 2-3%. There must have been more payroll mistakes in our old system than we thought.” These benefits can be immediate and lasting as Ryan Smith, CEO of Supportive Living Concepts in Pennsylvania was pleased to discover when he started analyzing reports from MITC Time and Attendance on a daily basis: “Prior to my review of our data in MITC, overtime paid out was roughly 3,500 hrs per week; during the 2 week period that I have been utilizing MITC, overtime is down to 1,000 hours per week, a 71% reduction. Additionally, we were paying out roughly 27,000 hours of straight time for the jobs under my review in MITC. Following the use of MITC we are currently paying 21,000 hours of
“During the 2 week period that I have been utilizing MITC, overtime is down to 1,000 hours per week, a 71% reduction.”
straight time, a 29% reduction. It is clear that I am only leveraging 25% of MITC capabilities and can only speculate what results I will
expect to redeploy after automating the manual entry of time
have when we utilize MITC to its full potential.”
and attendance data. They may also examine the ratio of staff hours to total employees compared with peer organizations
STREAMLINING THE PAYROLL PROCESS
that have successfully automated time and attendance, and estimate whether their ratio can be improved by reducing existing payroll staff hours.
Because MITC automates many time and attendance tasks, service organizations typically reassign members of their payroll staffs after their MITC deployment. Automation enabled most service organizations to eliminate or redeploy employees who had been performing payroll functions. In some service organizations, line managers complete payroll tasks. MITC can relieve these employees of such responsibilities, and make them more productive. Payroll and billing staff can
REDUCED PROCESSING TIME Shortened payroll and billing processing time can accompany reductions in staff. However, the magnitude of such benefits varies because processing time is a function of a number of workflows outside of the departments. Administrative staff input end-of-period attendance data
be more efficient because they are auditing data rather than
Supervisors spend time reviewing timesheets
performing clerical tasks.
Employees spend time filling out timesheets
ISSUES TO EXAMINE Service organizations should estimate the number of hours they
Employees spend time cutting manual payroll checks (often performed by payroll staff and captured in the payroll staff benefit)
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For most service organizations, MITC enables them to
states that eliminating manual PTO requests paid for the
fundamentally change — rather than merely accelerate — the
whole system.
payroll process: The Occupational Development Center, Inc. (ODC) is a community rehabilitation non-profit located in Northern Minnesota that receives referrals for services from the Minnesota Rehabilitation Services Branch of the Department of Economic Security and County Social Services. ODC provides job opportunities for over 700 clients a year at 7 different
ISSUES TO EXAMINE In calculating the benefits from reduced unauthorized leave time, service organizations should consider how much time managers currently spend on record keeping related to employee leave time. The amount of unauthorized leave time can also be estimated by interviewing managers to find out
locations.
how often employees are incorrectly given fewer days than
Nancy Cota, Vice President of Human Resources, considers the
degree to which employees take unauthorized time off.
new system a big improvement over paper timesheets:n.”
they are awarded. Managers are typically able to estimate the
Job Coaches are able to track client time and attendance, units and hours worked on a PDA while they assist the clients. At the end of the day, the PDAs are automatically synchronized with the MITC Piece and Production system, eliminating paper timesheets and duplicate data entry.
ISSUES TO EXAMINE
“On average, employees take 1.25 extra days of leave time per year. This is equal to 0.48 percent of payroll.”
In using the MITC ROI Analysis to estimate the benefit from reduced processing time, service organizations should consider the degree to which their operations are centralized or distributed, and the number of non-payroll staff members who are involved in the payroll process. Additionally, benefits will be greater if an organization typically utilizes overtime to complete payroll.
REDUCED LEAVE TIME With a manual system, it is very easy for employees to take unearned time off. For instance, many service organizations have biweekly pay periods. If employees take days off during the first week of a pay period, they can very easily fill out their time card the following week as if they had worked the entire week. Estimation of losses due to unearned time off can be as controversial and difficult as those for payroll error.
BASIS FOR CALCULATION Certain factors can cause the leave time figure to rise significantly, although such gains are difficult to offset because the figure cannot be less than zero. There is more exploitation of paid time off in larger service organizations with multiple remote locations, where it is difficult for management to monitor and eliminate PTO without a labor management solution.
IMPROVED LABOR AND BILLING REPORTING AND COMPLIANCE MITC includes hundreds of standard reports that give managers key labor-related data such as employees who are approaching overtime. Managers can use these reporting tools to reduce
On average, employees take 1.25 extra days of leave time per
overtime costs, examine productivity trends, and ensure
year. This is equal to 0.48 percent of payroll. A CFO in Montana
compliance with rules arising from government regulations.
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MITC RETURN ON INVESTMENT EVALUATION REPORT MITC’s Labor Management and MyCEO analytical tools and reports enable service organizations not only to ensure that they are in compliance with rules arising from government regulations, SourceAmerica contracts and collective bargaining agreements, but also to generate reports proving their compliance.
ISSUES TO EXAMINE In estimating the benefit of reduced overtime in the MITC ROI Analysis, service organizations should consider whether overtime is evenly distributed among the workforce, whether it is incurred appropriately, and what workforces receive the most overtime. If there is little or no reporting on overtime statistics prior to the deployment, the overtime reduction will be more significant as a result of the MITC deployment. The amount of time spent manually generating overtime reports should also be considered as an anticipated benefit. Typical reductions in overtime are in the order of 20-50 percent. Doug Wisby, CFO at MCDS in Kansas, reported a 20 percent reduction in overtime after implementing MITC, which in 6 months alone achieved 100 percent return on investment.
BASIS FOR CALCULATION
“Service organizations deploying MITC experience significant benefits in reducing such payroll costs.”
Sometimes organizations know the amount of their overtime,
ISSUES TO EXAMINE
and have a good sense of their ability to reduce it with MITC.
In estimating the benefit from reduced payroll inflation,
If this is the case, then the formula in the MITC ROI Analysis
service organizations should consider the incidence of, and
calculates the figure based on these factors.
opportunity for, payroll fraud — such as buddy punching,
PAYROLL INFLATION
unauthorized attendance and overlapping shifts — in their organization, as well as other time and attendance inaccuracies
Manual time and attendance processes can be vulnerable to
such as long lunches, late arrivals, and early departures.
inaccuracy, unauthorized attendance, overlapping shifts, buddy punching and other forms of payroll fraud. MITC is designed
BASIS FOR CALCULATION
to limit this abuse, and therefore has significant advantages in
The industry average for total payroll inflation is 0.72 percent,
combating payroll inflation. Service organizations deploying
and in the MITC ROI Analysis, this can be adjusted according to
MITC experience significant benefits in reducing such payroll
a user’s estimated ability to reduce payroll inflation.
costs.
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CONCLUSION A significant benefit from automating time and attendance for service organizations is a reduction in real payroll costs. Returns from this single benefit could justify automation. Other factors include a reduction in the number of errors made when calculating payroll or billing. By using even a conservative estimate for reduced payroll and billing error rates, organizations can quickly assess the potential benefits from automation and decide if further investigation is warranted. MITC customers derive strong benefits from reduced payroll costs and error rate as well as other administrative and productivity savings. On average, service organizations receive full payback within months after an effective deployment. This short payback period suggests that service organizations should place time and attendance automation technology high on their list of priorities, as it is likely to deliver rapid returns at a lower risk than other IT investments. Service organizations considering an investment in MITC should use the associated financial modeling tool, MITC Return on Investment Analysis, to quantify the potential costs and
“A significant benefit from automating time and attendance for service organizations is a reduction in real payroll costs.�
returns from a deployment in their environment.
ABOUT MITC MITC provides modular workforce management solutions and services to support all the needs of service organizations — time and attendance, advanced employee scheduling, payroll rules and reporting engine, workforce analytics, payroll and billing integration, and more. For 25 years, MITC has grown to serve over 1,500 organizations (with anywhere form 5 to 10,000 employees) in the USA, the UK , Africa, Australia, Canada, Ireland and New Zealand. They have selected MITC to help control costs, save time, improve productivity and ensure compliance.
Visit www.mitcsoftware.com to learn more.
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