Time and Attendance Best Practices
KEYS TO TIME AND ATTENDANCE BEST PRACTICES
No matter which benchmarking study you look at, capturing and reporting employee time and attendance is still a manual process for a majority of companies. For the over 120 companies that participated in the American Payroll Association's 2008 Payroll Best Practices Benchmarking/Performance Study, the largest source of payroll errors (21%) was attributed to time reporting.
If your organization still captures time manually, there is a high probability that your error rate is being negatively impacted. Improving the accuracy of payroll is an obvious benefit from a time and attendance system. More quantifiable benefits are measured by the system's ability to impact the company's bottom line. This article will discuss the proven "best practices" you should consider if an implementation of an automated solution is in your company's future.
As more and more companies more toward sophisticated workforce management systems designed to improve staff scheduling, allow for workforce planning, and forecast labor cost savings, automated time and attendance systems are becoming an integral part of the overall workforce management solution. According to a 2009 HR Management article, implementing a time and attendance system can save most companies between 2%-5% of their total payroll costs, gained through improved process efficiencies and staff reductions. These systems also typically provide one of the quickest returns on investment your company can make in payroll-related software.
There are literally dozens of best practices that have been proven, observed, or are emerging for the time and attendance collection process. Not every time and attendance system will facilitate the best practices that apply to your organization. The following is a list of the proven best practices for time and attendance systems that are applicable to any size company in any industry:
- Use web-enabled time collection tools. These tools - used to record, calculate, and validate time worked - provide the ability to enter, view, and edit employee time via the Web.
- Verified time-worked should post automatically to payroll system. Employee hours to be paid should pass automatically to payroll via an interface, regardless of supervisory failure to electronically approve the timecard.
- Track and report employee time, through user-defined labor accounts, ret. Tracking and reporting of employee time should be charged to various cost centers for any given period of time, whether it be during a day, week, or any pay period.
- Use exception-based time for exempt and salaried nonexempt employees when organization does not have labor-tracking distribution requirements. Non-hourly employees should post only exceptions to their base 40-hour workweek in their timecard. These would include but not be limited to vacation, sick, personal day, holiday, and overtime tracking earnings codes.
- Use web-enabled tools to capture accrued and actual time-off. This involves web-based access to view accrued non-worked hours as calculated by the business rules, and the ability to record the use of non-worked hours by the employee.
- Build employee absence ratings into managerial appraisal system. This involves the assignment of ratings or points to various absences from work, including but not limited to late arrivals, sick, and unexcused absences.
- Use one enterprise-wide time and attendance application for all labor management, time reporting, and employee leave entitlements. Use a single time and attendance application distributed throughout the organization as a tool for the management, reporting, and tracking of employee time, labor, and leave data. As stated earlier, not every time and attendance system will facilitate the best practices that apply to your organization. However, there are two systems that are universal and can be applied in almost every situation:
•1. Employees should enter time data, and the application should apply the human resources/payroll rules and calculations. This is important to both ensure accuracy and consistency in the calculations, and to eliminate all subjectivity in the pay calculation process. The more complex your organization, the more complex your rules, so automating the calculations should definitely be a goal.
•2. Corrections or changes to prior pay periods should be done in the system and be subjected to the same approval workflow and calculation process. Once an employee makes a correction, the software should recalculate prior period timecards in order to automatically correct the errors and calculate any adjustments.
- Research statistics. The Aberdeen Group recently published a report that was a compilation of survey responses from 333 organizations (representing all sizes, industries, and geographies) that examined the strategies of best-in-class companies. This research focused on how these performers provide the proper automation, integration, and access to make a time and attendance system lead to increased accuracy of data, increased revenue, and decreased labor costs.
Aberdeen used four Key Performance Indicators (KPI's) to distinguish the best-in-class from all other organizations when it came to capturing and acting on time and attendance data:
- 65% improved accuracy of time and data through reductions in time theft and buddy punching
- 60% increased revenue per employee
- 59% decreased overtime as a percentage of total labor costs.
- 47% decreased labor costs as a percentage of sales.
Survey results showed that best-in-class organizations shared several common characteristics:
- 88% partially or fully automated the time and attendance data collection process.
- 81% standardized processes for collecting time and attendance data.
- 76% had a single repository for all time and attendance data.
- 71% had fully integrated their time and attendance systems, by using either single or multiple vendor applications.
As your company moves towards automating its time and attendance process, carefully consider the various features offered and how they link into best practices.
Ask the vendors you are considering to demonstrate the functionality needed in your organization. Also, ask them questions about the software that is pertinent to your organization, and talk to other companies that have implemented their solution to find out what is working well and any lessons learned. Including these activities in your project plan will help generate successful results.