14 Dec Preventing Costly Employee Time Theft
In very simplistic terms, time theft occurs when an employee receives pay for time they have not worked. But time theft occurs in many ways with varying levels of intent, severity, and financial cost. For employers with employees compensated hourly (non-exempt), time theft costs employers countless dollars in wages and productivity each year. Have you considered what 10 minutes per day, per employee can cost an organization each pay period and year?! The number is staggering! And when a time system is not in place, the number per employee is closer to 15-30 minutes per day.
The solution is seemingly simple… a modern time and labor tracking system. But without a modern time and labor system to prevent some of the most common forms of theft, employers end up paying far more in wages, payroll taxes and lost productivity each year. Although time alone is not a complete measurement of employee productivity, for hourly staff, it’s a very important aspect.
Employee wages are among an employer’s greatest expenses. This statement is not a new revelation. But the ability to control this expense has been problematic for employers for many years. In recent years, through technology, the tools to address this problem have improved immensely.
Poor Systems Increase Labor Costs
Time fraud, or time theft, is a labor expense that often goes unaccounted for. Most commonly, it is the result of poor tracking systems and attendance policies. Due to inadequate systems, employers establish loose policies that invite costly employee behaviors, such as late arrival and early departure or punch time estimating. Whether the employee abuse is done out of carelessness or a desire for self-gain can vary. But either way, the unnecessary cost to the employer is high.
An employer’s total workforce expense includes but is not limited to… wages, benefits, the cost of administration, insurance, payroll taxes and so on. These costs have an enormous impact on the organization’s bottom line, and many employers are overpaying due to poor systems, tracking, and employee time theft.
Common Forms of Employee Time Theft
Even just 10 minutes per day of overpaid wages per employee can result in thousands of overpaid wages each pay period and year. If you don’t currently utilize a modern time and labor system to track employee hours and minimize time theft, your organization is most likely paying a significant cost.
Let’s quickly review the most common forms of employee time theft.
- Employee Punching Approximating – Perhaps the most common form of employee time theft occurs when employees are asked to record punch times without the use of an automated time clock or time stamp. Not paying employees to the minute is a tremendously expensive practice. Not only does it increase the likelihood of employees arriving late, leaving early, and taking extended breaks (lunch and rest periods), but it also leads to rampant punch rounding in the employee’s favor… as much as 10-40 minutes per day.Unfortunately for the employer, employees will routinely round their estimated in/out times in their own favor. And inevitably, when employees forget a punch time or two each period, they have no choice but to estimate, which is once again most commonly done in their favor. But is the employee to blame? If employers are asking employees to be responsible for remembering and recording times “manually,” overpaying employees based on approximated times should be expected.
- Timesheet Manipulation – Related to the previous item, do your employees enter their hours or simply clock in/out? If your current timekeeping system does not automatically record in/out times for arrivals and departures both for shifts and breaks, the likelihood for employee timesheet manipulation is very high. Ensure your staff uses a modern time clock that minimizes how much error goes into paid hours and wages.
- “Buddy Punching” – One of the most common forms of employee time theft relates to “employee buddy punching,” where one employee clocks in for another who is perhaps running late, leaving early or off-site. This “favor” between employees can seem innocent to the offender, but the practice results in high costs in overpaid wages and lost productivity. Fix this problem with a simple biometric time clock option.
- Reporting time for mobile or off-site employees – When hourly employees routinely work off-site, remotely, or run errands for the company, accurately reporting employee hours can become a challenge. More importantly, this scenario can open the company to time theft. While historically, technology options to solve this problem were expensive or limited, today they are readily available and highly economical. If your current time and attendance system does not offer a mobile app with time tracking and GPS location tracking to verify employees are both on time and on site (wherever that may be), it’s time to make a change.
- Unmanaged Overtime – When employee scheduling, time tracking and reporting systems are inadequate, it is common for employees to accrue more overtime than what is authorized or intended by management. But without proper controls, management and the organization won’t have the time to address the issue.Whether employees are arriving early to work, staying late, skipping or shortening meal periods, or getting over-scheduled… all of these activities can lead to uncontrolled and inflated overtime pay. This problem, however, is solved with a modern time tracking solution and/or scheduling solution.
Employee time theft is difficult to track, but very costly to the organization! With labor being the greatest or among the greatest employer expenses, it is vital to implement economical tools to maximize that expense while minimizing the cost. A time and labor solution, especially one that is unified with your payroll and HR system, is the most effective tool for controlling that large expense.
Contact a Human Capital Management (HCM) Specialist at Payroll Link today if you have any questions on the benefits of implementing a time and labor solution.