Give Your Time and Attendance System a Performance Review
If you are like most employers, your HR and management teams make a concerted effort to ensure your employees receive regular feedback and performance reviews on a timely basis. Assessing people and their performance can be challenging, but employers see the benefit in both employee engagement and legal protections for their business. Unfortunately, employers are not always as savvy and attentive when it comes to conducting internal reviews of their systems and policies and that lack of oversight could have a much more significant impact on compliance issues and the bottom line.
An area of human capital management that should receive regular reviews is how the employer is tracking time and attendance for its workers. This is critical, not only because it affects employee pay and attendance and punctuality is a measurement often used in employee performance review, but also because it can be a minefield of major compliance problems when not administered properly.
When conducting an employee performance review, it is fairly easy to find a template that you can utilize or at least revise to make it suit your company’s needs. But how can you go about conducting a time and attendance system overview? Here are some tips on things to look for:
Time and Attendance Compliance Checkup
One of the best places to start in conducting a review is areas that pose a high risk for penalties for not complying with federal, state or local laws or regulations.
Federal and state labor laws typically permit employers to round their employee time punches to the nearest whole number increment (typically 5, 10 or 15 minutes, with 15 being the most common). The thought is that tracking time to the exact minute and calculating the resulting pay is not feasible. In order to implement this into timekeeping practices, employers must ensure that the rounding is fair and does not favor the employer. So, for example, an employer cannot setup rounding rules that always round down, thus shorting an employee. Also employers are not permitted to schedule an employee to work from 8:00am until 4:35pm with a half hour for lunch otherwise the employer is getting 5 extra minutes from the employee each day or 35 minutes each week that should actually be paid overtime.
If an employer wanted to set up rounding rules for 15-minute pay increments, they should round down for punches between 1 to 7 minutes and round up for punches between the 8 to 14 minute mark.
Employee missed punches are one of the greatest headaches for employers when it comes to time and attendance tracking. Although it is tempting, you CANNOT dock an employee’s pay to try to teach them a lesson should they forget to clock in or out because under Fair Labor Standards, employers MUST pay employees for ALL time worked (save the incremental amount of time accounted for by rounding rules).
Missed punches can be an indicator of tardiness problems for certain employees, but in many cases it is a task that even your best performers may occasionally miss in their workday. Having a system like CheckmateHCM Solutions’ Time and Attendance module that alerts HR and managers within a specified timeframe when an employee misses a punch, can help curb some of the problems presented by the common workplace issue. Such alerts can prompt managers to check-in with employees who have forgotten to punch-in and make timely corrections with a proper audit trail. This helps to ensure that employees are paid for time worked and any issues related to attendance and/or a pattern of habitually missing punches can be documented and addressed.
Ensuring that your system is accounting properly for overtime, is not always an easy task. Unlike other labor laws which may be a bit more uniform across the board, overtime laws can vary significantly from state to state and even down to the local level. To avoid potential penalties, fines and legal action by employees, you should regularly ensure that your timekeeping system is configured to track overtime based on the current regulations for where the employee is performing work.
Blended Pay Rates
Tracking of overtime and the resulting pay can become more complex when you have employees who perform a variety of jobs within your organization. You are not permitted to pay the employee at the rate for their position in which they earn the lowest pay rate. By the same token, paying an employee at the highest rate of pay may not be the most economical approach for your business.
Instead, you should apply a blended pay rate. Blended pay rates are calculated using the following formula:
[Job A: (Pay Rate) x (Hours) + Job B: (Pay Rate) x (Hours) + Job C: (Pay Rate) x (Hours)] ÷ [Total Hours for Jobs A, B and C] = Blended Rate
As an example, if one week your employee Joe Smith works as a retail associate at $8.00/hr for the first 20 hours, then as a shift manager at $11.00/hr for the next 18 hours and finally on the last day of the pay period as a inventory clerk for $7.45/hr for 4 hours, the weighted calculation for blended pay would look like this for this week only:
[($8.00/hr x 20 hrs) + ($11.00/hr x 18 hrs) + ($7.45/hr x 4 hrs)] ÷ (20 + 18 + 4) = $9.23/hr
So Joe Smith would get paid $160 for his time as a retail associate, $198 for his time in the shift manager role and $14.90 for the first 2 hours of his time as inventory clerk before hitting the 2 hours of overtime which would be paid at the $9.23/hr blended rate equalling $18.46. Joe’s total net pay for the entire week would be $391.36.
Blended pay rates need to be recalculated each pay period using the weighted formula noted above.
If you are using paper timesheets, they must be completed using indelible ink. This is to prevent anyone from making alterations to them after the fact without the employee (or employer) knowing. Any changes or corrections made, must be documented and acknowledged by the employee to ensure the employee is paid appropriately for all hours work.
Automated systems are capable of providing an audit trail for any revisions made once an employee completes the timesheet to create compliant tracking of changes and required approvals.
Recordkeeping and Retention
The Fair Labor Standards Act requires that employers maintain records for how they determined an employee’s pay for at least 2 years and all payroll records themselves must be maintained for 3 years. That means that employers should keep copies of timecards for a minimum of 2 years. If you are keeping manual timecards that can be quite an undertaking and require significant storage physical storage space. You may also need to keep 2 copies of each timesheet to make producing them easier by keeping one file per pay period with copies of all employee timesheets and then separate files for each employee with his or her timecards.
Here is a quick reference list from the Department of Labor on what information employers should maintain and how long various categories of records should be stored: https://www.dol.gov/sites/dolgov/files/WHD/legacy/files/whdfs21.pdf
Get to the Bottom Line On Time
Many employers who start out using paper timesheets have never evaluated the true cost of processing them each pay period, which increases exponentially as their workforce grows. The same can be said for companies using disparate systems to track time and process payroll, which requires a series of steps to export, format and import data. As with many processes, it continues to be “the way we have always done it” and is never really questioned.
You can quickly assess how much your manual timesheet system is likely costing you by adding up:
Employee Entry/Manager Approval Cost: (Avg EE pay rate x # EEs x 5 min/EE)
Payroll Processing Cost: (Pay clerk rate x # EEs x 5 min/EE)
Data Entry Error Rate Cost: (Total payroll x 2 % manual error rate)
So, as an example let’s say that you have 100 hourly employees and your average rate of pay for each hourly employee is $25/hr and you have a payroll clerk who processes your payroll on a weekly basis who earns $20/hr. For the Total Payroll, we’ll assume a regular 40-hour workweek for all employees with no overtime to keep it simple. If you are using manual timesheets, here is an estimate of how much your time tracking and payroll processing is costing your company (remember to convert the 5 minutes to hours by dividing it by 60, which gives you 0.0833):
($25.00 x 100 x 5 minutes) + ($20.00 x 100 x 5 minutes) + (($25.00 x 40 hrs/wk x 100)) x 2% = Total Weekly Cost
$208.25 + $166.60 + $2,000.00 = $2,374.85 per week
By implementing an automated employee time and attendance solution, like the one offered by CheckmateHCM Solutions that automatically carries employee hours over to payroll processing, your company can realize significant savings. Rather than it taking 5 minutes each week for an employee to complete his/her timesheet and then have manager check it, an employee could spend less than 10 seconds clocking in and out each day through a time clock, desktop or their mobile device giving them more time to focus on other tasks. It also helps to eliminate potential time theft mistakes in noting incorrect start and finish work times as well as manual data entry errors for payroll clerks having to enter each timecard into the system when processing payroll and the significant time investment they make to complete this task.
Once you’ve completed this calculation, you can easily determine if switching to an automated system is right for you by comparing the estimate cost above against a quote for automated time and attendance and payroll services. Ready to get started?