The Risks of Pen & Paper Timekeeping

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Relying on a manual input method (Excel, punch cards, paper time sheets) to track time and attendance, rather than an automated system, places your company at risk.  According to a 2011 report conducted by the Aberdeen Group, one-in-three companies still use manual timekeeping methods regardless of these risks.  There are two, broad risk categories: financial loss and government compliance.

Financial Loss

 Stealing Time.  Your employees steal time in a variety of ways and for a variety of reasons: they ask another employee to “buddy punch” their time card; they take a few extra minutes for breaks or for lunches; they come to work late or leave work early; they make errors when completing their time sheets; and, finally, they use their computers for personal reasons, the most common method of employee time theft.   “The APA estimates up to 10 minutes per day per employee is lost due to tardy arrivals, early departures and long breaks or lunches.  It may not seem as though a few minutes a day would make that much difference, but just 10 minutes a day can translate into over 30 hours per employee each and every year!”  Your employees probably don’t even realize just how much time they’re actually stealing.  In fact, most employees are just not aware of how much time they spend completing other tasks than actually completing productive work.  If your employees don’t know how much time they’re stealing, as their manager, do you?  Using an accurate, automated timekeeping system not only holds your employees accountable for the time they spend doing those other, non-work related tasks, but it empowers you with knowledge – you will know exactly who is abusing time, and you will know in real-time.  You then have the ability to intervene quickly before more time and money is lost.

Overtime & Absenteeism.  Today’s economy makes it imperative for businesses, especially small businesses, to have a tight control on expenses.  If you’re on a budget, then an important part of managing your finances is managing just how much those employees work – especially if you’re trying to limit overtime hours.  Knowing each employee’s time worked will prevent both over-scheduling and under-scheduling.  Without easy access to data, it is difficult to schedule your employees’ time effectively.  Keep in mind it’s even more difficult to accurately track employee time when absences come into play.  You need to know whether that employee qualifies for Paid Time Off (PTO).  If your method for tracking this information is by pen and paper or punch cards, more than likely you’ve paid employees too much or not credited them enough PTO.  A time and attendance system that is fully implemented will help you determine absenteeism patterns; assisting you in the identification of employees who are frequently absent and, additionally, which employees have to cover for missing staff.

Government Compliance

Accounting Mistakes.  Manual, pen and paper timekeeping is fraught with error.  The larger your company – the more people you employ – the greater your opportunity for mistakes.  Employee overpayments due to mistakes in data entry, misapplication of pay rules and similar clerical mistakes don’t need to occur.   According to the American Payroll Association (APA), companies that lack automated timekeeping have up to an 8 percent error rate on their payroll.  What does this mean for you?  Saying there is an 8% rate of error does not detail how that actually affects your payroll.  One error alone could have a huge, monetary impact on your actual pay-out.  Certain errors could embroil you in employee litigation.  Maybe you’ve been lucky, so far, but these human errors and their damage become negligible through the implementation of an automated timekeeping solution.

It’s the Law.  Accurate time and attendance records are required by law.  Legal disputes over employee wages and employee hours are two of the fastest-growing areas of litigation. Compliance audits are a frequent focus of the federal Department of Labor (DOL) – especially if they have received any employee complaints.  Whether potential legal problems come from unhappy employees or from the DOL, you will spend more time and more money than necessary solving problems easily eliminated with an automated time and attendance system.

Companies must understand and follow the Fair Labor Standards Act (FLSA) to protect both their interests and the interests of their employees. The FLSA has established the following:

  • Covered employees must be paid at least the federal minimum wage of $7.25 per hour for all hours worked up to 40 per week.
  • Employees must be paid time and one half for all hours worked beyond 40 hours per week.
  • Employers must maintain accurate time and payroll records.
  • Employers who are found in violation of the FLSA are liable to employees for their back wages and an equal amount in liquidated damages

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An effective time and attendance management system is a powerful and inexpensive way to rein in your financial losses due to employee time theft, accounting inefficiency, and government non-compliance.  Is your pen and paper method cumbersome and costly?  The only way you will know is to actually investigate.   Take the time to research negative, financial impact of your timekeeping method and then seriously consider moving to an automated timekeeping solution.

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Brian Sutter

Brian Sutter

Director of Marketing at Wasp Barcode
Brian Sutter is the Director of Marketing at Wasp, responsible for the development and execution of the company’s marketing strategy. His role encompasses brand management, direct and channel marketing, public relations, advertising, and social media. He also writes and speaks on topics related to helping small business owners grow their business and improve operational efficiency.
Brian Sutter
Brian Sutter