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Benefits of Automating Time and Attendance

Manual time and attendance systems use paper time cards and time sheets that employees fill out and managers oversee for accuracy. However, time and attendance information is subject to human error when various employees such as workers, managers, and payroll administrators all perform tasks that involve recording the numbers.

Employees punch in and out when they arrive at work, go to lunch, take a break, or leave for the day. Generally, managers must add up the minutes and hours worked, using each employee’s time card, and fill in a time sheet indicating hours worked for the week. Managers also spend time filling out attendance records based on whether employees punched the clock. A lot of man hours go into calculating time and attendance when using a manual system.

What is an automated time and attendance system?
An automated time and attendance system eliminates the time clock and instead uses a bar code scanner, pin number pad, or an even more technologically advanced system such as a biometric scanner. When using a bar code scanner, employees have I.D. cards and swipe the card. A pin number pad allows employees to enter their individually assigned pin number as identification. A biometric scanner works by scanning an employee’s finger, hand, or eye; the device immediately identifies them. Any of these three methods connect the identification device to a computer that in turn sends the work-hours information to a database interfacing with a software payroll program.

In addition to helping companies improve payroll efficiency and accuracy, automated systems also eliminate time theft and avoid payroll fraud.

Improved payroll efficiency and accuracy
An automated system tabulates work times immediately, accurately, and in a matter of seconds. The system eliminates the cumulative hours spent by employees and managers collecting time cards, figuring out hours, and filling in time sheets. It reduces company costs spent on paper punch cards. Company executives can instantly generate reports about absenteeism or lateness, analyze overtime, and create schedules that best utilize employee work time, thereby increasing productivity. Time and attendance systems integrated with payroll systems to supply accurate employee-hours information seamlessly, without the human error factor that runs up costs.

Eliminate employee time theft
A common practice when using manual time cards is to round off figures. With extra minutes here and there as employees punch in and out for breaks and lunch, supervisors may decide to subtract or add a few minutes to make calculations easier and arrive at whole figures. A 23 minute break may be reported as a 20 minute break, which also keeps the employee and supervisor out of trouble for a slightly overlong break. However, over time this practice can add up to a difference of thousands of extra payroll dollars, a tremendous expense for an employer.

“Buddy punching” is another type of time theft and is a coined term that describes one employee punching the time card for another employee. When an employee is going to be late returning from a break, he may ask another employee to punch his card to hide the lateness. Or a more extreme example of time theft is asking another employee to punch a card when altogether absent from work. Automated time and attendance systems can help you cut down on these and other time theft problems.

Avoid Payroll Fraud

The FBI reported a fraud case where a Hamden, Connecticut, payroll specialist embezzled $150,000 from a company called Omega Engineering Inc. According to the FBI, the company used a manual payroll system, and the specialist prepared and emailed weekly spreadsheets to an outside payroll company for processing. She entered false information that inflated her hours worked, which over a four-year period from 2006 to 2010 overpaid her by $150,689 in salary and $11,528 in Medicare and Social Security taxes. She was able to hide her embezzlement by altering Omega’s composite payroll report, making it appear like she received normal paychecks.

While this example is extreme, payroll fraud occurs more often than most people realize. The Association of Certified Fraud Examiners (ACFE), an organization that studies global occupational fraud, reported in 2010 that 8.5 percent of worldwide fraud takes the form of payroll fraud, and that small businesses are the most victimized because they lack the anti-fraud controls that larger companies have.

Steps that mid-sized and small businesses can take to avoid payroll fraud include:

•   Using an automated time and attendance system;
•   Whenever possible, reducing the use of checks and substituting direct deposit or pay cards, as checks are more commonly subject to fraud;
•   Running thorough background checks (criminal, credit, alias searches, previous employment, education credentials, Social Security verification, etc.) before hiring payroll specialists;
•   Securing access to payroll information by requiring computer login, minimizing the number of employees with login access, and requiring secure storage and/or shredding of printed documents;
•   Setting up an Automated Clearing House (ACH) filter with the bank for electronic payments, which allows banks to monitor vendor debits.
If you are using a manual time and attendance system, consider replacing it with an automated system and using an experienced and reputable outside payroll service.

Published: April 16, 2013
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For more than 20 years, PayChoice has helped small- and medium-sized businesses (SMB) succeed by providing them a Fortune 500-style suite of payroll and HR services that frees the owner to focus on growing and managing their business.