Businesses exist to provide a product or service to their customers. And most businesses rely on employees to produce, manage, and deliver it. Which means that time and attendance is critical to an organization's functionality.
In addition, labor is also the single largest expense category for most small businesses. While it can vary drastically depending on the type of business, labor typically accounts for about 30 to 50 percent of the total cost of operations. Consequently, maintaining effective control of your payroll costs is a significant determining factor for a company's success.
Time and Attendance
Workforce management includes the proper handling of time and attendance records, which are necessary to provide an accurate picture of labor costs and the overall health of a company.
What makes time and attendance accounting so important? There are a number of operational reasons for this management function. Forecasting and budgeting, staff scheduling and compliance all play a critical part of the overall workforce management process.
In other words, effective workforce management requires businesses to forecast labor requirements and create and manage their staff schedules to accomplish particular tasks on an hourly and daily basis. Having a comprehensive management system will provide improved employee efficiency, accurate time and attendance tracking and better labor planning, which will result in lower operational costs and better customer service.
However, there are a few significant reasons that time and attendance matters for businesses.
Avoid Overpaying and Underpaying
In the early days of a business it's often fairly easy to track labor hours. Owners are often working side-by-side with their few employees and time and attendance tends to be taken for granted. However, as the business grows, this manual approach to time and attendance tracking can lead to serious issues of over and under payment of employees.
For example, assume you hire a cashier to work in your store. Although he's scheduled for a 40 hour workweek, he routinely arrives 5 to 10 minutes late for work, and his half hour lunch breaks consistently go over 30 minutes. But, because you have no accurate method to track and record time and attendance, you choose to overlook the tardiness and continue to pay him for a full 40 hours each week.
While it may seem to be merely an annoyance, the fact is that you are overpaying your employee more than 2 hours of labor each week. At the Federal minimum wage that's nearly $15 a week, or almost $780 a year. While this may not seem like much, it can actually become quite costly if you have three or four employees doing the same thing.
Or consider the opposite scenario.
Instead of arriving late each day, your worker regularly comes in early and stays late to help get the store open and closed. While admirable, without proper time and attendance accounting, your employee will have been underpaid for several hours of labor for the week. In addition, you may have likely underpaid him for overtime hours.
This becomes a serious issue should your employee decide to make a claim to the Department of Labor. A lack of proper accountability could land your company in serious trouble.
Improve Employee Morale
The truth is that, while there will be workers who want to arrive late or leave early, the majority of your employees will comply with their schedules and show up and leave when they're supposed to. However, if you don't have a time and attendance recording process in place to monitor employee hours, those employees who do only arrive on time will resent those who arrive late, but still get paid for the time not worked.
Employees who do clock in and out on time must pick up the slack for workers who come in late and leave early.
This can eventually lead to resentment, employee morale issues, and eventually disgruntled workers that might actually quit. And, in that scenario, you now not only have the added costs of hiring new employees, you will have lost employees who had demonstrated loyalty to your company.
And you will probably still have the perpetually tardy worker on your payroll!
Time and attendance accounting are vital for providing an accurate picture of your labor costs. And using a third-party vendor can provide you with the time and attendance systems you need to ensure you only pay for hours worked, while helping you identify potential problem employees.
Optimize Business Growth
Forecasting demand and resource requirements a year, two years or even five years into the future is a common business practice. Unfortunately, it is also one fraught with missteps and miscalculations. In fact, according to one study,
“The error rate in the U.S. on a one-year forecast of demand at the stock keeping unit (SKU) code or individual product level, for example, is over 30 percent”
This being the case, one can imagine the uncertainty of forecasting labor and HR needs. Any kind of accurate or realistic forecast must be based on factual data that has been compiled over time, and then a projection created from that with the assumptions and predictions available for a given market or industry.
The problems, however, are quite a few, not the least being a lack of accurate and comprehensive time and attendance-related data. The solution, is also multi-fold according to a post at the Society for Human Resource Management (SHRM) website:
"The organization must foster a data-driven planning culture and be willing to value the planning process as much as the actual plan. The managers who participate in this planning process will then be better equipped to make decisions as business results and forecasts change—and more skilled at simulating how changes in business objectives and conditions require different talent sets. The organization must also invest in workforce planning technology that supports predictive supply analytics, bottom-up demand planning, employee- level action-planning, and summarization of gaps."
Finding Solutions in Partnering
It is inevitable that technology and other forces will create a dynamic evolution of the HR field. However, with informed strategy and planning, successful organizations can ride the coming wave and prevent being left behind.
In addition to a growing and demanding role in recruiting, hiring, and continually training employees, the HR staff will still be responsible for every other function they are typically tasked with such as payroll management, tax filings, employee records compliance, and so forth.
Considering alternatives such as outsourcing is increasingly becoming a cost-effective and strategic option. Accuchex can help you in managing your HR needs, payroll processes, and staying on top of compliance demands. Get your Free Download: Payroll Outsourcing Guide to help you make an informed decision or call Accuchex Payroll and Workforce Management Services at 877-422-2824.