Pandora s Clock: Exposing the Hidden Costs of Time & Attendance Management March 2009
executive summary In 2008, ADP Canada commissioned a study by Environics Research Group to identify and determine the total costs of all human resources administrative functions performed by companies in Canada. The key findings of the survey were as follows: The average total cost to an organization to perform all HR-related functions was $798 per employee per year. Time and attendance activities account for over 40% of the annual HR costs. Identifying and addressing inefficiencies in time and attendance tracking processes will help organizations realize both a reduction in real dollar expenditures, as well as time and opportunity savings. Purpose The goal of the study was to determine the total cost of human resources administration and identify the HR task(s) most likely to yield cost savings when outsourced. Methodology The study was conducted between March 5 and April 2, 2008 via com puter-aided telephone interviews with 202 organizations represen ting a full range of industries and sectors, as well as geographical locations across Canada. Pandora s Clock: Exploring the Hidden Costs of Time & Attendance Management 1
Key Findings The average total cost to an organization to perform all HR-related functions was $798 per employee per year. The study found that for all HR related activities, companies incurred a very significant amount in HR costs on an annual basis. Total Cost Overall Annual Average * $333,346 Average per Pay Period (based on 26 weeks) ** $12,821 Average per Employee per Year $798 * Represents the average cost of all HR functions for all companies surveyed ** Average cost of HR functions per employee pay period Total Costs by Company Size and Region per Employee per Year Company Size 50 249 Employees $1,094 250 499 Employees $908 500 999 Employees $512 1000+ Employees $283 Region West $714 Ontario $867 Quebec $793 Atlantic $672 The study identified a broad range of costly administrative functions related to HR, and measured the time and resources associated with each. As the chart below illustrates, with the exception of IT Database Maintenance and HR Hotline/Service Centre, organizations in a broad range of sectors and sizes share many of the same HR tasks, all of which cost a company dearly. As such, optimizing efficiency is crucially important and a primary objective for human resources operations. Percentage of Companies that Incur Function / Process Costs HR Computer Employee Records Management Employee Absence Tracking Annual Emp. Hires & Terminations Systems Management Training Requests Answering Queries - Forms Employee Time Capture Employee Communications Weekly Changes / Modifications Monthly Performance Review / Reward Employee Benefits Management Forms IT Database Maintenance HR Hotline / Service Centre 38 76 96 96 100 100 100 20% 40% 60% 80% 100% 98 98 Task / Function Pandora s Clock: Exploring the Hidden Costs of Time & Attendance Management 2
Key Findings Time and Attendance activities account for over 40% of the annual HR Costs. Today, human resources personnel are responsible for many functions within their organizations. These activities range from the purely administrative (e.g. time and attendance) to highly strategic (e.g. recruitment and retention). Companies have shared their average costs for each HR area. Average Annual Costs ($) for Each Function / Process Employee Time Capture Systems Management HR Hotline / Service Centre Employee Records Management Employee Terminations Training Requests Employee Hires Employee Benefits Management Employee Absence Tracking Communications Data Storage Communications Software Performance Review / Reward IT Database Maintenance Answering Queries Forms Employee Communications Making Changes HR Computer Forms $29,112 $21,222 $20,372 $19,962 $19,596 $17,511 $15,696 $9,893 $9,563 $9,550 $9,031 $6,030 $3,934 $3,887 $1,5 $135 $45,730 $156,376 $0 $20,000 $40,000 $60,000 $80,000 $100,000 $120,000 $140,000 $160,000 Companies said of all the functions performed, time and attendance activities, such as time capture and absence tracking, make up a significant component fully 40% of the total annual costs of HR administration. Average Annual Costs Average Cost per Employee per Year Percentage of HR Costs / Year Employee Time Capture $156,376 $241.02 30.2% Employee Absence Tracking $15,696 $82.37 10.3% Total Time & Attendance $172,072 $323.39 40.5% All HR Functions $333,346 $798.00 100% Pandora s Clock: Exploring the Hidden Costs of Time & Attendance Management 3
Key Findings Identifying and addressing inefficiencies in time and attendance tracking processes will help organizations realize both a reduction in real dollar expenditures, as well as time and opportunity savings. While one would expect that organizations that incur major costs for a single activity would seek to identify ways to reduce that expense, many companies reported that they continue to manage time and attendance activities using labour-intensive manual processes with one-third to one-half still relying on paper forms and documents. Employee Time Capture Paper Form 32% In-House System 28% Fax 5% Employee Absence Tracking Paper Form 47% In-House System 28% Fax 6% In addition, time and attendance management functions also involve other activities which add complexity, duplication and inefficiencies as well as increase exposure to errors in an organization. These tasks include collecting hours, reviewing and routing data and seeking approval from management before transferring data to payroll, among others. Time Tracking Tasks Resulting in Increased Costs Time/work spent by Employees on Time Data Time/work spent > By Employee Manager Reviewing Hours > By HR/Payroll on Reminders > By HR/Payroll on Collecting Employee Hours Senior Manager Approval for Time Data Information Required > Time/work spent on Approval Process > Time for Approval Routing Process Pandora s Clock: Exploring the Hidden Costs of Time & Attendance Management 4
CONCLUSION In today s turbulent economy, the importance of identifying and managing costs is paramount. Most organizations have many HR administration needs, and in fact, most of these needs are shared across a broad spectrum of industries by organizations of varying sizes. According to the study, the average total cost to organizations for managing these activities is $333,346, or $798 per employee, per year. Within this annual expenditure, the study demonstrates that the single greatest cost area is time and attendance administration, which accounted for over 40% of the total annual costs. While HR administration in general, and time and attendance administration specifically, can be a significant expense within an organization, there are many opportunities to realize savings by addressing labour-intensive, antiquated processes such as manual, paper-driven recordkeeping. Organizations that seek to improve their bottom line should include a thorough examination of the costs of HR administration, starting with time and attendance administration. Pandora s Clock: Exploring the Hidden Costs of Time & Attendance Management 5
About ADP ADP Canada is a leading provider of a comprehensive range of payroll, human resources management, benefits administration, time and labour management, occupational health and safety, comprehensive outsourcing and consulting services to businesses across the country. Our suite of services also includes tax filing and reporting services. With major offices in Toronto, Montreal, Vancouver, Halifax and Calgary, and smaller, satellite operations in other Canadian communities, we employ approximately 1,800 Canadian associates. ADP Canada is a subsidiary of Automatic Data Processing, Inc. (NYSE: ADP). With approximately 50,000 clients, ADP Canada is one of the largest providers of business outsourcing solutions in the country. Leveraging its extensive experience, ADP offers HR, payroll, time and labour management solutions from a single source. ADP s easy-to-use solutions for employers provide superior value to companies of all types and sizes. ABOUT ENVIRONICS RESEARCH GROUP Environics is one of Canada s leading marketing and social survey research consultancies with a reputation for integrity, accuracy and insight. Co-founded in 1970 by Michael Adams, the firm has evolved into a multi-disciplined international research and consulting group. Headquartered in Toronto, the firm has offices and affiliates in Ottawa, Calgary, Montreal, Oakland, New York and Washington D.C. Environics offers its clients a broad array of research, consulting and communications services, from traditional public opinion polling and market research to advanced studies of human values and social change, in addition to consulting to aid our clients product design, marketing, communications and human resource strategies. Environics is a full-service research firm experienced in conducting telephone surveys, on-line surveys, personal in-home interviews, postal surveys, panel studies and focus groups, conducting approximately 2,000 focus groups and 250,000 interviews a year. Pandora s Clock: Exploring the Hidden Costs of Time & Attendance Management 6
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