White Paper on Return on Investment for Automatic Time and Labor Management

Transcription

1 White Paper on Return on Investment for Automatic Time and Labor Management

2 Table of Contents Calculating Return on Investment: 3 Automation: 4 Card audit savings: 4 Savings in lost time: 4 Savings from eliminating errors: 5 Total savings summary 5 Spreadsheet: 5

3 Calculating Return on Investment: The following illustration is conservative yet yields a 1,000, savings for a 500 employee business. Time and attendance systems can pay for themselves in the matter of months, surely less than a year! Automation is one of the key features to realizing the return on investment with time and attendance. Today using bar code, RFID or biometric readers an employee can identify themselves to a system in seconds, quicker than finding a paper card in a rack and orienting it to a punch device. From there no one needs to figure if it was within a grace period or round it. No one needs to determine if it is early or late. No one needs to add or repunch it. This is just the start of the transactions let alone the interface to payroll! Use of the PC, networks, databases and in some cases the internet all comes into play when automating a time and attendance system. Card Audit and calculating takes a great amount of time where some companies hire full time employees I.E. Time Keepers to calculate and audit time cards. If the time cards are hand written time keepers or supervisors are taking a maximum amount of time to review, calculate and edit then typically re-enter the time into a spread sheet or payroll system. Automation reduces the audit time dramatically by pre processing punches against rules defined within the system. Lost time or also known as time theft I.E. beating the clock by punching a minute after a scheduled punch to win the benefit of a manually monitored rounding rule, or simply taking a long lunch or being tardy and having the ability to beat the system by not having to be subject to an automated system is significant enough that time clock manufactures have adopted biometric readers to eliminate buddy punching the practice of punching in and out your co-worker. Eliminate errors by automating the punches, reliving the calculating and other manual entry. Even the best of keyboardists make errors at the rate of 1 error in every 300 keystrokes. Automating time and attendance is the error Eliminator! According to industry experts the American Payroll Association¹, automating Time and Attendance processes saves an estimated $ per employee per year. These savings are the result of a reduction in the cost of processing payroll, reduction in human error in recording time, elimination of unauthorized overtime and reduction in the time spent on employees information requests. We will exhibit possible savings up to $ per employee per year. The balance of this document describes the math and includes a spreadsheet for your benefit. If interested in a working copy of the document please contact Acumen Data Systems, Inc at or visit ¹From Trends in Time and Attendance presented at the 22 nd Annual Congress of the American Payroll Association, Apr. 27, 2004

4 Automation: Automation reduces repetitive manual tasks found in manual payroll systems requiring time card collection corrections & calculations usually by the payroll manager. Manual systems lead to errors and hurts productivity. If these mundane tasks could be eliminated or shortened it would give employees more time to improve the company as a whole. This simple exercise will help you to determine your approximate R.O.I. received from automating payroll. How many employees currently punch in and out on a time clock? 500 What is their average hourly rate? $16.00 How many minutes does it take to review and total each time card? 3 (Typically 7 minutes) What is the hourly rate of the person reviewing the time cards? $16.00 What % of the calculation of the cards is inaccurate do to improper rounding, calculation errors, transposition errors and improper application of payroll rules? 2% (Typically 1 to 8 %) How many standard hours do your employees work in a pay period? 40 How much time per employee do you lose each day due to: long lunches, early departures, breaks, supervisor rounding, tardiness, incorrect totaling. 20 (Typically 49 minutes per employee per day) Card audit savings: Studies have shown that manual calculation of time cards takes approximately 7 minutes per card each pay period. Conservatively I have estimated 3 minutes per card. Automation will reduce that to 1 minute per card. Minutes saved per card X number of cards 2 min. X 500 cards = total savings in minutes of Total minutes saved weekly = 5000 Total hours saved weekly = total minutes/ 60 minutes = 83.3 Payroll managers rate X hours saved weekly = savings in dollars weekly: $ Monthly savings (4.33 weeks x weekly savings) = $ Yearly savings ( 52 weeks x weekly savings) = $ Savings in lost time: Lost time or time theft savings consists of wages recaptured by the systems rounding and restriction capabilities. The average weekly theft (long lunches, tardiness, etc.) Is 49 minutes typically. I estimated a conservative 20 minutes. Daily lost productivity = 20 min. / 60 min. =.33 hours.33 x average employee rate = average wages overpaid daily. $5.28 Multiply by 5 days = average wages overpaid weekly. $26.40 Multiply by number of employees = the total wages recaptured weekly. $ Total wages recaptured monthly = total wages recaptured weekly x 4.33 = $ Total wages recaptured yearly = total wages recaptured weekly x 52 weeks = $

5 Savings from eliminating errors: Studies have shown inaccuracy in the calculation of totals to be between 1 & 8 % I have used 2 % to be conservative. Number of employees X average hourly rate X average hours worked weekly = total weekly payroll expense. $ The total weekly savings from the elimination of errors is the total weekly payroll expense X the 2% human error factor: Weekly payroll X 2% = $ weekly savings. Weekly savings X 4.33 = $ monthly savings. The savings recaptured yearly is equal to the recaptured weekly saving x 52 weeks in the year. Weekly savings X 52 = $ yearly savings. Total savings summary Weekly audit savings = $ Weekly error savings = $ Weekly wages recaptured = $ Add the above three numbers to arrive at the per weekly payroll savings = $ Weekly savings X 4.33 = $ monthly savings. Weekly savings X 52 = $ yearly savings. Spreadsheet: The next page is an embedded Excel Spreadsheet filled with the above data. If the spreadsheet is doubleclicked on when using Microsoft Office the Excel spreadsheet will open for edit using Excel.

6 Return on Investment Automation ROI Number of hourly employees? 500 Average hourly rate of employee? Number of minutes to review/total each time card (APA 7)? 3 Hourly rate of person reviewing time card? Percentage of inaccurate time cards (APA 1-8)? 2% Number of standard hours an employee worked in a pay period? Daily lost time in minutes for an employee (Calculation, Rouding) (APA 49)? 20 Card Audit Savings Total savings in minutes 1000 Total minutes saved weekly 5000 Total hours saved weekly 83.3 Savings in dollars weekly $1, Monthly savings $5, Yearly Savings $69, Savings in Lost Time Daily lost productivity in hours 0.33 Average wages overpaid daily $5.28 Average wages overpaid weekly $26.40 Total wages recaptured weekly $13, Total wages recaptured monthly $57, Total wages recaptured yearly $686, Savings from Eliminating Errors Total weekly payroll expense $320, Weekly savings $6, Monthly savings $27, Yearly Savings $332, Total Savings Summary Weekly audit savings $1, Weekly error savings $6, Weekly wages recaptured $13, Weekly payroll savings $20, Monthly payroll savings $90, Yearly Payroll Savings $1,088,533.33