Return on Investment

Is it possible to calculate a return on investment when considering a time and labor solution?

How much do your existing methods really cost? Also consider how much time and money your organization can expect to save in a given year with improved methods of calculating employee time and attendance data.

The following are four key areas to consider when calculating ROI.

1. Reduced Payroll Errors

The most obvious cost savings experienced by an organization that automates time and labor tracking comes from a reduction of payroll errors.

Because labor is often the biggest expense item in an organization, it may represent 40 to 50 percent of a company’s total costs. Studies by the American Payroll Association (APA) show that payroll overpayment errors represent 0.5 to 1.5 percent of gross payroll. Thus, costs from payroll error have the potential to be significant.

For many organizations, pay calculations are complex and federal pay rules, union contracts, and state regulations only make the payroll process more challenging.

When determing an ROI on automating that process, remember that payroll errors due to incorrect time collection and improperly applied rules and regulations are eliminated by an automated or web-hosted system.

2. Eliminating Manual Data Entry

It costs money to maintain a manual time and attendance tracking system.

From hand-writing start/end times, to reviewing missing punches on a paper punch card, the bottom line is that your organization is applying time and resources to collect employee work data and enter it into a system.

Shortening this processing time and freeing the payroll or HR department’s time for more meaningful tasks can produce significant savings.

Thus, when looking at an ROI total, make a simple calculation of the number of hours it currently takes to prepare payroll each week, and apply the pay rate of the team involved.

3. Self-Service Functionality

By providing employees with secure kiosks or self service systems that enable them to manage their personal information and request paid time off, the workloads of the human resource or payroll departments are decreased.

This resource reduction is another key factor in the return an organization receives by automating its time and labor processes. Note that HR and payroll staff is freed from the burden of answering employee questions such as:

• Allowed time off balances.
• Time worked and absences in the current pay period.
• Schedule access.
• Time-off requests and approvals.

These self-service functions empower employees with this important information, and cut overhead costs in human resource and payroll departments.

4. Eliminating “time theft”

Payroll “inflation” occurs when employees report inaccurate information on their timecards. Even when done unintentionally, the time may be rounded-up in favor of the employee.

According to the APA employee time theft exceeds 10 minutes on average per day, per employee. In fact, analysts conclude that time theft costs American businesses hundreds of millions of dollars each year.

The costs to business include not only employee wages, but also matching FICA and other employer-paid expenses, lost productivity, and reduced morale.

So when evaluating an ROI of an improved process, take into consideration that these “lost” minutes may represent hundreds of hours and tens of thousands of dollars every pay period for even smaller employers.

Switching to biometric hand readers or finger print time clocks significantly reduces the costs of employee time theft.

ROI and the Bottom Line

The choice to move to an automated model of employee time and attendance systems deserves careful consideration. With the right solution you can quickly realize a return on investment and improve your bottom line.