Even as we hope that we’ve seen the bottom of the recession, many of us are still watching our expenses closely. While economic output may have stopped contracting according to economists, it doesn’t feel like the recession is over. Most families are saving more, paying down their debt and cutting back on discretionary expenses like lattes and vacations. Faced with job losses and pay freezes, we’ve rediscovered the difference between necessity and luxury.
Businesses are in the same boat. According to an April survey by Watson Wyatt, 70% of businesses have implemented some level of layoffs or downsizing. For many, though, the difficult measures they’ve already taken haven’t been enough. So what more can organizations do if they need to manage expenses even more closely?
They can get back to basics. For families and businesses, this means measuring what you spend so you can plan and manage to a budget. It means inspecting your largest variable expenses for opportunities to reduce those expenses. For most organizations, that’s the workforce, somewhere between 30% and 80% of their operating budget on average.
According to Nucleus Reseach, many companies still rely on paper based or semi-automated timekeeping and payroll solutions, yet payroll errors can cost them over 1% of their payroll per year. In my conversation with David Caruso earlier this year, he indicated that more manufacturers are focusing on the use of automation to manage labor cost and productivity as they’ve reached the point of diminishing returns with other strategies for cost containment. It can be hard to justify the capital outlay to invest in the hardware and software needed to automate time and attendance data collection, however the measurable returns are there to be had.
What has your company done to make the case to spend more in order to save more?
In a recent survey we conducted with Harris Interactive, we asked over 700 hourly paid employees if they had ever cheated in reporting their hours in order to increase their paycheck. Twenty-one percent indicated that they had. Not surprisingly, of the 21% of respondents who admitted to cheating on their time reporting, the highest percentage (35%) of them were using paper based systems. As the means of time reporting became more automated and harder to deceive, the percentage of cheaters declined, with only 5% of those using biometric time clocks reporting themselves as having gamed the system. Among those who cheated, the tactics included:
- Punching in earlier or out later than scheduled (69%)
- Adding extra time to their timesheet (22%)
- Failure to punch out for meals or breaks (14%)
- Having someone else punch them in or out (5%)
How much does time theft hurt businesses? A recent Diagnostic Assessment analysis Kronos conducted for a 6,800 employee manufacturer revealed rounding-rule abuse cost of over 1.3% of total wages paid. The 4 worst-performing departments in terms of rounding-rule abuse cost the organization approximately $3.6M annually. According to a 2006 Nucleus Research Report ROI report, companies with manual time and attendance systems typically incur unnecessary payroll costs upwards of 1.2 percent of their total payroll costs due to inaccurate application of pay rules, as well as human errors, intentional and otherwise.
Feelings run high on both sides of this issue. This discussion thread from Woodweb, a website for the woodworking industry, is a spirited debate between employers and workers regarding whether automated time tracking is a necessary management tool or Orwellian incursion. The truth lies in how the tools are used, of course. Employee punches collected by time clocks are indisputable data elements. Friction between employers and employees, or failure to comply with standards such as those set by FMLA, FLSA or union rules, is caused by how that data is used to calculate pay. Fair and legal policies, consistently applied via technology, can help to close those gaps.