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Time, attendance software can slash labor costs

Automating time and attendance can improve accuracy and cut costs across billing, compliance and employee management, industry observers say.

One of the best things organizations seeking to control escalating labor costs can do is add time and attendance software to their operations, according to industry analysts.

"Labor costs are a huge part of all corporate budgets, and implementing time and attendance is the best way to control them," said Felicia Cheek, global payroll practice leader for The Hackett Group, based in Miami.

Collecting time and attendance tracking information is often one of the biggest expenses of payroll. One Hackett Group study found it accounted for 32% of payroll processing. Implementing an automated time and attendance system not only improves accuracy -- which saves money -- but it directly affects billing, compliance and employee management.

Analysts say the return on investment is high and the payback on the investment can be as short as a few months.

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"You need to have time and attendance if you have hourly employees -- even if you only have a small number," said Paul Hamerman, vice president and principal analyst in business applications at Forrester Research Inc. in Cambridge, Mass. "You don't want to enter time manually -- it's inefficient, error-prone and complex."

Simply being able to track salary overpayments with time and attendance systems may provide huge savings. For instance, Hackett's 2010 global payroll performance study of 120 U.S. companies found that they made annual salary overpayments of $979,883 on average and only recouped 71% of that money.

Compliance and the ability to minimize the legal risks associated with pay or labor disputes are big reasons to implement time and attendance tracking software, especially if a company's system is manual, Cheek said.

"It is really the best way to maintain compliance because you can enforce it through the system, and if any there are changes in any state or federal rules, the vendor sends updates to reflect those changes," she said.

Keeping track and adjusting rules manually can be a headache. For instance, if a company decides to open a California office, it would need to track overtime on a daily versus a weekly basis.

Or because of the recessionary tax grab by several states, if a consulting company regularly works in New York but is based out of Atlanta, New York requires you to keep track of instate hours worked so applicable taxes can be calculated. Such rules can be hard to track and apply without a good time and attendance tracking system.

For years, Kronos Inc. has been the dominant player in offering time and attendance systems, a position helped by payroll giant ADP, which resells Kronos' time and attendance software.

But similar to changes happening in the payroll processing marketplace, time and attendance systems are being rolled up into a new class of end-to-end human resources systems delivered as cloud-based services, which means there are new players to consider.

When time and attendance, payroll, scheduling, absence management and self-service are rolled into what's sometimes referred to as workforce management software, managers gain insight to the root cause of excessive overtime, inequities and operational inefficiencies, Cheek said. This allows them to make appropriate adjustments, which often leads to lower labor costs.

Expertise key to time, attendance tracking

Because of complex rules and regulations, and the different needs industries possess, analysts say those looking for a time and attendance package should look for industry-specific expertise.

"These systems tend to cater to specific types of industries based upon how their workers need to be scheduled and what kind of payrolls they have," Hamerman said.

Companies then need to determine if additional products, such as flexible scheduling or integration with payroll, can offer additional savings and look for a package that incorporates those services, Cheek and Hamerman said.

Integrating systems such as payroll, leave management and time and attendance, can eliminate the need for rounding, overstated hours and understated breaks.

An Illinois-based health system saved $2.2 million in costs over three years and slashed overtime by 30% when it added flexible scheduling and the ability to allow employees to bid on shifts, according to a study on core HR functions by research company Aberdeen Group Inc.

The biggest challenge when adding time and attendance tracking to an organization is the time it takes to configure the program, Hamerman said.

"The tricky part is configuring the system to encapsulate all the time reporting rules that companies have, from shift differential overtime to other kinds of payroll rules that can be extraordinary complex," he said. "If you have a fairly large workforce with rules driven by different collective bargaining agreements, it takes quite a bit of time to set up the system.

"At the end of the day, we are talking about money."

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