So what’s the big deal? You can handle calculating your employees’ hours for payroll on your own. Who needs fancy employee time clock software anyway?
In the article “The Five Most Costly Payroll Mistakes & How to Avoid Them” Priority HR cites human error as the number one cause of inaccuracies when generating payroll. The article states that, “Employees frequently forget to fill in their cards daily and then go by the best of their recollection at the end of the pay period, or turn in pay cards with missing information”.
Considering this observation, you have to wonder whether you are really saving any money with all the time and effort required to correct such errors on your employee time cards — not to mention the cost of errors that go undetected. To demonstrate the potential costs, let’s think through a couple of hypotheticals.
In the first scenario, imagine that your employee has an amazing memory, except for when it comes to filling out her time card each day. Nonetheless, you trust your employee and simply ask that she access that amazing memory of hers and fill out her time card after the fact. Imagine that your employee is more accurate than most and is off by only one minute. Instead of reporting that she actually arrived at 8:01, she reports that he arrived at 8:00. Let’s say the same phenomenon plays out at the end of the work day, and instead of reporting that she actually left at 4:59, she reports that she left at 5:00. Now let’s run the numbers.
• 1 minute in morning + 1 minute in evening = 2-minute discrepancy each day
• 2 minutes each day x 5 days a week = 10-minute discrepancy each week
• 10 minutes per week x 52 weeks in a year = 520-minute discrepancy per year
• 520 minutes / 60 minutes in an hour = 8.67-hour discrepancy each year
• 8.67-hour discrepancy x $9 hourly wage = $78 per year for a simple 2 minute daily mistake
A simple, two-minute inaccuracy repeated daily by a great employee could cost you $78 per year. But imagine a more realistic scenario. Let’s say a second employee has a more average memory. Suppose he also forgets to fill out his timecard. He thinks he arrived at work at 8:00, when in reality he stopped for coffee on the way to work and didn’t get in until 8:05. His reporting creates a five-minute inaccuracy in the morning. At the end of the day, he looks at his watch and discovers that it is time to leave. However, he doesn’t realize that his watch is two minutes fast. As a result, he actually leaves at 4:58, though he reports leaving at 5:00. As a result, his total time card has a seven-minute discrepancy for the day. No big deal right? That is until, the situation repeats itself. Again, let’s run the numbers.
• 5 minutes in morning + 2 minutes in evening = 7-minute discrepancy each day
• 7 minutes each day x 5 days a week = 35-minute discrepancy each week
• 35 minutes per week x 52 weeks in a year = 1820-minute discrepancy each year
• 1820 minutes / 60 minutes in an hour = 30.33-hour discrepancy each year
• 30.33-hour discrepancy x $9 hourly wage = $273 for a simple 7 minute daily mistake
Wow, so between your two well-intentioned yet fallible employees, your company has just lost $351 due to human error. Are you sure a time clock software isn’t worth the investment?