Time + Attendance

How Manual Time Tracking Costs Employees (and Employers)

October 03, 2022

Most employers recognize the potential flaws in manual timekeeping systems, namely the potential for human error(s) affecting budgeting, tax reporting, and the “bottom line.” However, if your business is still using a pen-and-paper or spreadsheet-based system, you should also consider the ways that manual timekeeping can negatively impact company culture, employee turnover, and employee time spent on payroll processes that detract from key tasks. 

In this article, we’ll explore the ways that the “honor system” of time tracking can cost employees (and employers), and how switching to a digital, automated time tracking system promises to reduce payroll costs, improve employee satisfaction, and keep your company in consistent legal compliance.

Time Lost, Administrative Costs, and Inefficient Processes

Switching to an automated timekeeping system helps your employees bypass the cumbersome process of creating, distributing, and collecting forms; requiring employee or manager completion of time sheets or expense reports; and processing/evaluating forms by hand. In the last phase of a manual process, your administrative staff is additionally tasked with chasing down missing timesheets, reconciling inaccuracies, and manually entering data into your payroll system. 

By implementing an automated timekeeping system, you show your employees that you value their time, talents, and workplace priorities: helping them avoid the tedium of a manual process while granting them increased opportunities to focus on their highest-priority work. In the process, you decrease payroll costs and majorly reduce instances of human error, time theft, budget miscalculations, and other concerns we’ll explore in the next sections.

Human Error(s) & Workplace Repercussions

Regardless of the size of your business, the manual processing of handwritten timesheets all but statistically guarantees issues with human error in payroll. According to the American Payroll Association, 1-8% of payroll errors can be attributed to human error (usually miscalculations or inaccurate reporting at some stage in the process). Whether a particular error “benefits” the employer or employee varies, but these errors invariably affect budgeting and workplace morale. Recent data reveals that as many as one in four employees want to quit their job due to poorly run or unoptimized business processes. 

In addition to concerns regarding employee satisfaction, from an employer’s perspective, IRS data indicates that approximately 33% of employers make payroll filing errors that amount to significant penalties, while 40% of small businesses generate an average of $845 annually in IRS penalties due to payroll errors.

Increased Employee Turnover

A tedious and inefficient payroll process leads to dissatisfied employees and managers, and potentially leads to increased employee turnover. One study by the Workforce Institute reveals that while 49% of Americans report that they would search for new employment after two errors with their paycheck, 54% report that they have already experienced at least one issue with their paycheck. Statistically speaking, this means that many businesses could be only one payroll error away from losing one or more employees purely as a consequence of payroll mismanagement (and the use of an antiquated system).

For many employees, an issue with a paycheck not only impacts their ability to pay bills on time, but it also suggests business-wide dysfunction when these essential processes are mishandled. These issues can not only negatively impact company culture and employee experience, but also force employers to spend more on recruiting and onboarding due to increased turnover.

Company Culture & Time Theft

Adopting digital time tracking systems allows your employees to easily enter and adjust their hours, expenses, and other key information through their laptop, PC, or mobile device. This seemingly minor adjustment makes a noticeable difference to your company culture, demonstrating your investment in ensuring efficiency and ease of use for employee’s payroll entries. Additionally, automated timekeeping allows your employees to track managers’ actions as they approve or make modifications to hours, reported expenses, etc. Instead of a disorganized mass of paperwork or spreadsheets, your employees enjoy transparent and streamlined software that improves communication, engagement, accuracy, and trust.

With transparency in mind, for employers, “time theft” is an ongoing concern that can also be mitigated through a digital time tracking system. If payroll reporting is currently completed at bi-monthly intervals using manually completed time cards, it’s likely that at least some of your employees are filing inaccurately (failing to account for late arrivals, early departures, or other exceptions that they’ve simply forgotten). With approximately 49% of American employees admitting to periodic time theft, it’s essential for businesses to provide efficient and transparent tools that allow for more regular, accurate, and verifiable time tracking entries.

Switch to Efficient, Automated Timekeeping with Payday

Navigating and avoiding the potential pitfalls of a manual timekeeping system can be an expensive and time-consuming process. With Payday’s automated timekeeping platform, you can significantly improve your workforce management, reduce payroll costs, boost employee morale, and let your staff focus on their key day-to-day tasks.

Payday also helps you avoid labor disputes, lawsuits, or audits by ensuring that you remain accurate and in full legal compliance. Ready to start streamlining timekeeping and payroll? Contact us today to start our collaboration.

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