The Payroll Time Clock Advantage

Some companies think the money a payroll time clock (or several) costs is too much for their business to afford. Sound like your company? You'd better think again. If your company has more than 20 employees, and you have not automated your time and attendance system, you may be losing a lot of money.

Accuracy/Lost Time Savings: Several studies show that the cost savings from increased accuracy can easily pay for the time and attendance program.

The American Payroll Association says a typical company will be 92% - 99% accurate in their keying in payroll data. Even assuming a conservative 99% accuracy rate will result in significant savings. Consider the hypothetical example of Company A:

  • Number of timed employees---------------------- 100
  • Payroll per pay period (weekly)------------- $48,000
  • Annual payroll (hourly employees)----- $2,496,000
  • Annual Accuracy Savings 1%------------- $24,960

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Robert Half and Associates and American Payroll Association report that an average of 3 hours and 51 minutes of time is lost per week due to long lunches, long breaks, early punch/late departures, etc.

Assuming the hypothetical Company A is only losing 5 minutes per day in lost time the following payroll time clock savings would be realized:

  • Lost productivity per day---------------------- 5 minutes
  • Average employee’s rate/hour-------------------- $8.00
  • Average wages overpaid daily per employee---- $.67
  • Total number of employees (Hourly)---------------- 100
  • Total wages overpaid weekly----------------------- $335
  • Annual Lost Time Savings------------------- $17,420

Overtime can also be an issue. When time is not being tracked as efficiently as possible, overtime may occur when it shouldn’t which can cause profit leaks.

Because overtime is paid at 1 ½ times the hourly rate of each employee, the following estimate shows the impact when the amount is reduced. Assuming overtime at Company A is at a rate of 2% and that improved controls can reduce this amount by 10%, then the following dollar amount could be recouped:

  • Annual payroll------------------------------------------- $2,496,000
  • Add overtime of 2%----------------------------------------- $49,920
  • Amount saved with 10% overtime recapture----- $49,920
  • Payroll-time-clock implementation would result in Company A saving $92,300 even using conservative estimates. By plugging numbers into the above formulas, you can see how much savings you may be able to realize.

    In addition, NOT automating your Time and Attendance can put you at risk for labor disputes. In May, 2011, the Department of Labor (DOL) introduced a new smartphone application through Apple called the DOL Timesheet. Intended to assist employees in determining if they are being paid accurate wages, it tracks regular work hours, break times and overtime hours. It also links workers to the DOL website, where they may find information about their rights under the Fair Labor Standards Act (FLSA) and how to file a complaint against their employer.

    Should the DOL audit a company, automated Time and Attendance will carry more authority (and thus prevent many labor disputes) than written paper records. With employees armed with the most current technology, it is in a company's best interest to have automated time and attendance on their side.

    Of course, there are scenarios where the benefits to using a time clock are unclear. For example, if the company is small with very predictable, easy to track schedules, the necessity of a time clock diminishes.

    The best  type of time clock will be different for various business circumstances and needs. Use the following information to determine the best kind of payroll time clock for your business:

    Types of Time and Attendance Hardware:

  • Punch Cards
  • PC/Employee Time and Attendance Software
  • Swipe Cards, Badges, and Pins
  • Biometric Time and Attendance Hardware
  • Telephone

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