WHY TIME & ATTENDANCE IS A PRIORITY
FROM A LEADER IN WORKFORCE MANAGEMENT SOLUTIONS
www.mitcsoftware.com
INTRODUCTION
WHY TIME AND ATTENDANCE IS A PRIORITY Is payroll your largest expense? For service organizations, payroll is typically 50–70 percent of total costs. When automation and improved accuracy reduce this cost by even a small percentage, there is a significant positive financial impact. Good financial practices identify cost items in descending order for review during a recession. For service organizations, payroll-related costs should be at the top of the agenda. Time and attendance is a low-risk, low-cost way to reduce payroll costs and improve productivity. Service organizations that already have time and attendance may consider maximizing the breadth of their deployment, extending it to other workforce-related functions or ensuring they have the most cost-effective solution.
Life can be difficult for Chief Financial Officers and Chief Information Officers. They have to reduce costs, but their workforces may already be lean, and their budgets for
“Time and attendance is a low-risk, low-cost way to reduce payroll costs and improve productivity.”
productivity-improving IT investments may be shrinking. However, significant cost reductions can be achieved by deploying time and attendance solutions that focus on labor costs, typically a service organization’s largest expense. Properly deployed, these applications, as well as complementary applications for other workforce-related functions, can
Time and attendance applications provide an automated way to identify the number of hours each employee worked, apply applicable pay rules, produce payroll checks accurately, and for
substantially reduce various types of overcompensation and improve productivity at relatively low cost with minimal operational risk.
some organizations, report billable hours. Because these applications improve accuracy and automate processes that would otherwise be manual or semi-automated with workarounds, service organizations typically achieve significant cost reductions following a deployment. Many effective service organizations that have time and attendance also have applications for payroll-related activities such as scheduling and the tracking of paid time off.
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WHY TIME AND ATTENDANCE IS A PRIORITY THE WORST TIMES ARE THE BEST TIMES FOR TIME AND ATTENDANCE Because time and attendance enables significant cost reductions, has relatively low costs, and has little operational risk, organizations should rank it favorably when deciding how to spend their IT budgets. Organizations should always consider potential investments on a project-by-project basis. There are some special considerations that make investments in time and attendance more attractive than most other investments, especially for service organizations with large payroll cost structures.
Benefits: The average payroll error rate is 1.2 percent. Properly deployed, time and attendance can rapidly eliminate up to 95 percent of this cost. Costs: Relative to the benefits, the costs of time and attendance, hardware, software, personnel, and training tend to be low. When combined with the magnitude of benefits, this means time and attendance deployments normally have high return on investment and rapid payback. Risk: Time and attendance deployments do not pose a risk to operationally critical workflows, or to relationships with employees or third parties. Although these deployments pose a small risk to the first pay period after the ‘go-live’ date, this can be fully mitigated by following proven implementation plans,
“There are some special considerations that make investments in time and attendance more attractive than alternatives.”
pilot programs and a gradual roll out. In addition to typically having a rapid payback, time and attendance deployments are also more effective over the long run than the most common cost reduction strategies. Organizations normally reduce costs by laying off employees and/or cutting compensation. Unfortunately, this does not solve the underlying problem of payroll errors, timesheet falsification, excessive overtime, unauthorized attendance, and overlapping shifts. Simply laying off employees or reducing pay rates leaves all of these dangerous practices in place, although in a smaller organization. Payroll cost to the service organization may be temporarily mitigated, but can actually increase as employees respond to downward pressure on pay with more extreme behavior. Uncompetitive practices remain in place, jeopardizing the future.
“The average payroll error rate is 1.2 percent. Properly deployed, time and attendance can rapidly eliminate up to 95 percent of this cost.” 2
TIME AND ATTENDANCE In the absence of automation, service organizations cut payroll checks to their hourly employees based on workflows that are inaccurate, inflated, lengthy, paper-based, and prone to errors. Employees record their hourly attendance on paper timesheets, which are periodically approved by managers, who may then process that information for the payroll department. Once timesheet data arrives in a payroll department, it is manually entered into payroll, often only after manually calculated pay rules are applied. Unfortunately, these
“Time and attendance eliminates the inaccuracies of a manual system by automatically gathering attendance information, applying pre-set pay rules, and automating the calculation of pay for payroll.�
manual systems tend to be inaccurate because they rely on honest data input from the employee, as well as accurate
PTO Tracking enables managers to track more accurately the
manual data transfer and calculations by supervisors and
number of days off their employees have accrued and how
payroll clerks.
many remain.
Time and attendance eliminates the inaccuracies of a manual
Scheduling enables managers to fill open positions quickly,
system by automatically gathering attendance information,
and to create and distribute schedules rapidly. It also gives
applying pre-set pay rules, and automating the calculation
managers the information they need to assign time to
of pay for payroll. This also relieves managers and payroll
employees who are unlikely to be paid at overtime rates.
administrators of distracting and costly workflows, including the review, authorization, and input of data from paper timesheets. Service organizations with time and attendance systems typically augment them with other functionalities, including:
Activities Tracking enables managers to keep track of exactly what tasks employees spend their time on, in order to improve billing, cost accounting and labor cost analysis.
BENEFITS Whether a service organization deploys time and attendance for the first time, replaces an ineffective or costly solution, or augments an existing deployment by extending it or adding complements to it, service organizations can expect to reduce payroll costs and improve productivity.
LOWER PAYROLL COSTS By replacing error-prone human workflows with automation, time and attendance can lower payroll costs by eliminating sources of overpayment. The primary sources of payroll overpayment are payroll error and payroll inflation. Payroll Error occurs as the result of human error when information is manually transmitted through the payroll process.
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WHY TIME AND ATTENDANCE IS A PRIORITY Payroll Inflation occurs when employees or managers overstate the amount of time an employee has worked, either intentionally or unintentionally — typically by clocking in early or clocking out late. This payroll error causes overpayment by an average of 1.2 percent. The average rate of payroll inflation is 0.72 percent. Because time and attendance automates the collection of attendance data, its transfer to payroll, and the application of complex pay-rule calculations, service organizations deploying these systems can significantly reduce administration and error-related payroll costs. Because these cost reductions are so large, most service organizations that deploy MITC pay for the solution with the savings from payroll error elimination alone.
“Deploying time and attendance for the first time can also lead to improved productivity.”
The average payroll error rate is 1.2 percent of total payroll. When time and attendance applications are properly deployed, up to 95 percent of this cost is eliminated. Service organizations typically achieve significant cost reductions by automating time and attendance workflows. MITC customers have reduced payroll related costs by 1 to 5 percent by replacing paper timesheets. The average payback on a MITC deployment can be as little as
Managers become more productive because they are quickly able to view, approve, and submit attendance information from employees. MITC deployments make managers more productive by reducing time and attendance and scheduling administration. No-show and check-awake alerts further reduce the time managers spend on routine time and attendance verification tasks. Voicemail allows managers to communicate
3 to 6 months.
with remote employees using telephone timekeeping without
IMPROVED PRODUCTIVITY
Payroll administrators no longer have to manually collect,
Deploying time and attendance for the first time can also lead to improved productivity. Many service organizations use
incurring travel time or costs.
check, and transmit data from timesheets.
highly complex manual processes to compile and certify their
BREADTH MAXIMIZES THE BENEFITS
time and attendance information. When these workflows and
Service organizations that already have time and attendance
processes are automated, a variety of workers become more productive: Employees can quickly provide their time and attendance data over the telephone, the Web, at their PCs, or at time data terminals. Additionally, MITC voicemail and self-service improve communication with employees at no additional cost.
applications should make sure that their deployment touches as much of their workforce as possible, and is as cost-effective as possible. Organizations typically adopt time and attendance or related applications with a rolling deployment. Unfortunately, these deployments sometimes slow down or stall once a large portion of the workforce is tracked.
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In fact, service organizations sometimes fail to fully deploy because the initial returns on even a partial deployment can be so high that sponsors think all of the requirements have been met. Other causes of partial adoption include cultural resistance, geographically remote sites, or diversion of IT budget to other projects. MITC’s time and attendance audits are provided six months after initial deployment and annually thereafter. These audits help MITC customers identify partial deployments and ensure
For example, managers with automated leave reporting always
maximum return on investment.
know the number of days off each of their direct reports has
Cost reductions are readily achieved when deployments are extended to new employee populations or are enhanced by additional applications such as scheduling or self-service. Breadth doesn’t apply only to time and attendance. Automating scheduling and using related best practices can further reduce overtime costs.
accrued and used. As a result, these managers spend less time in face-to-face meetings regarding time-off requests and grant employees far fewer unearned days off. Similarly, scheduling can enable managers to match open shifts rapidly with available, least-cost employees who have the required skill set for that shift.
CONCLUSION “MITC’s time and attendance audits are provided 6 months after initial deployment and annually thereafter. These audits help MITC customers identify partial deployments and ensure maximum return on investment.”
CFOs can reduce costs and increase operational efficiency by investing in time and attendance. Whether a service organization undertakes an initial deployment, broadens one, extends its functionality with complementary applications, or replaces a cost-inefficient system, the investments in time and attendance can reduce payroll by eliminating payroll error, payroll inflation, unearned leave, and overtime. Service organizations should also invest in these applications because, properly deployed, these applications can improve the productivity of employees, managers, and payroll administrators.
AUTOMATE MORE THAN TIME & ATTENDANCE Service organizations can reduce labor costs further by complementing their time and attendance deployments with applications for managing workforce-related tasks such as scheduling, activity tracking, biling, and leave management.
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