Time to act?

The answer? Leveraging best practice methodologies during the implementation of a time and attendance system.

What business processes can a time and attendance system help streamline?
Time and attendance software is used to automate a labor and paper-intensive processes, and most systems have the following basic characteristics:

• There are one or more methods to collect or enter time and attendance information. Typical options include a badge reader (e.g. an electronic ‘time clock’) or direct entry of data through a web browser.
• Enquiry and review functions to allow the time and attendance data to be reviewed, corrected and approved by a manager
• Calculation engine to apply pay rules to determine the type of hours and amounts to pay
• Interface features to send the information to payroll

Behind these basic capabilities are many additional features that you may not know about. Some things you will see in various time and attendance systems include other options for collecting data such as touchtone phones and biometric devices. Systems with web-based features often include workflow functions to support employee service and manager self-service, e-mail integration, absence and leave management functions such as vacation accrual calculations, and labor/project tracking. More advanced systems include features to ensure labor law and regulatory compliance with laws such as the Fair Labor Standards Act, the Family Medical Leave Act and Sarbanes-Oxley.

What is the typical rate of return for implementing a time and attendance system?
Implementing a time and attendance system can save most employers between 2-5 percent of their total payroll in improved efficiencies and staff reductions. The actual savings and return depend on how manual the current process is and the features of the time and attendance system that is used. The American Payroll Association along with information from numerous studies has confirmed the substantial savings from using automated time and attendance systems.

These savings stem from a variety of areas, including paper reduction, elimination of ‘time theft’ (hours paid but not worked), managing leave liability, controlling overtime, fewer errors due to automated calculations, eliminating duplicate data entry, and elimination of fines and lawsuits. Overall, a payback period of less than 12 months is typical and is easily justified in almost every organization.

Are there any common myths or misconceptions about time and attendance systems?
There are many myths about time and attendance systems that may sidetrack an organization from implementing a system or prevent them from realizing the benefits of a time and attendance system. The most common myth is that time and attendance systems are only for hourly (non-exempt) employees who need to use badge readers. In fact, modern systems today are deployed enterprise-wide to both hourly and salaried employees via a web-browser to give them the capability to report project hours, report absences, request time off, and perform self service inquiries among other things.

Another common myth is that time and attendance systems are meant to deal with ‘hours’ only, not ‘pay’. In fact, best practices often dictate that you calculate gross pay in time and attendance system in order to automate all calculations, provide a proper audit trail, and support retroactive calculations properly.

The best advice is that before you decide what a system should do for your organization; speak to those who are knowledgeable about time and attendance systems and what they can do for you. Consultants and vendors provide a good place to start.

Is a timekeeping system essential to comply with the Fair Labor Standards Act?
The Department of Labor recovered more than US$196 million in back wages in 2004 as a result of FLSA violations. Using a time and attendance system makes compliance with the Fair Labor Standards Act (FLSA) much easier. Good time and attendance systems will automatically collect time worked, apply overtime rules consistently, and use advance calculations to handle the regular rate of pay calculations. These will all minimize the chance of a labor violation or lawsuit. Our studies have shown that 75 percent of all employers do not recognize or properly understand critical time and labor regulations, which mandate detailed recordkeeping requirements and complex calculations. By automating the timekeeping process, these required complex calculations are defined and carried out within the software to ensure a reliable way of staying in compliance.

What about the Family Medical Leave Act?
Among other requirements, employees are eligible for Family Medical Leave (FMLA) time off if they worked 1250 hours in the prior year. FMLA therefore requires a method of tracking employee time to properly comply with its requirements. Automating this process within a timekeeping system proves to be the most efficient method. Because FMLA leave may include handling the intermittent leave, leave requests, and qualification based on worked hours, automating this process with a time and attendance system can ensure that employees immediately know whether or not FMLA time is available to them.

Do I need a timekeeping system to comply with Sarbanes-Oxley?
Sarbanes-Oxley (SOX) does not require or mandate any specific types of software or recordkeeping requirements. However, Sarbanes-Oxley requires employers to have proper controls and procedures in place. Because payroll is generally the single largest expense of most employers it is natural for auditors to ask “What controls are in place to ensure employees are paid accurately and only with authorization?”

A time and attendance system will help satisfy your auditors need to have accuracy and authorization in your processes. With a time and attendance system the process of calculating pay, such as overtime, is automated. This removes the subjectivity and potential for error from the process that is present in a manual system. All time and attendance systems also have some type of manager review and approval mechanism. This ensures that employee time is properly authorized before checks are processed. In summary, a time and attendance system is an almost essential part of complying with the Sarbanes-Oxley requirements.

What are ‘best practices’ and why are they so important?
Simply put, best practices are the most efficient methods to achieve a positive result that have been learned through experience. By learning the lessons from other organizations, your organization can benefit without going through a trial and error process.

In my experience, there is not usually a single best practice for every time and attendance task or process you encounter each day. For example, we have learned that there are multiple best practices for collecting time and attendance data. The choice of which method an organization should use depends on a myriad of factors such as layout of the office/plant, skill level of employees, use of PCs for other business activities, type of data to be collected, etc. A trained consultant who knows the best practices and how to apply them can bring tremendous value to an organization.

What are some best practices in time and attendance?
There are literally dozens of best practices that our team has learned over the years. Some of them, however, are pretty universal and apply in almost every situation.

Perhaps the first rule and best practice is that employees should enter data and the software should apply the HR/payroll rules and calculations. This is important to (a) ensure accuracy and consistency in your calculations and (b) eliminate subjectivity in the process of calculating employee pay. Often times pay rules are very complex and automating the calculations should be a key goal.

Another best practice is that corrections or amendments to prior periods should be done in time and attendance and go through the same approval workflow and calculation process. Once users make corrections, the software should recalculate prior period time sheets in order to correct the errors and calculate the adjustments automatically. By relying on the software to do the calculations and adjustments you continue to comply with the first best practice described above.

Utilizing a trained consultant who understands time and attendance processes, labor regulations, and best practices is the best way to ensure you identify and leverage the experiences of many organizations.

How do these best practices affect the choice of a time and attendance system?
Implementing an automated timekeeping solution can yield a very big payback. But before you dive into a system, make sure you know what best practices will apply to your situation. Not every time and attendance system will facilitate the best practices that apply to your organization. If the system cannot facilitate these practices then it is not a good fit for your organization. Carefully consider the features of the software and how they tie into these best practices. Doing so will yield successful results.