Labor costs are typically the single largest cost of any business. The percentage of overall budget dedicated to labor can range anywhere from ten to 30 percent. That’s why reducing labor costs is the single most effective change a business can make when it needs to improve its margin.
Using a time clock system to track employee time is a necessary tool for any company to take control over what it’s really paying employees. Here are just five of the ways a time clock system will reduce your labor costs.
Any company still using manual time reporting is definitely overpaying on its labor costs. Part of this overpayment comes from people intentionally padding their hours, as 43% of hourly workers admit to doing. The rest of it comes from human error. There are multiple points along the time reporting chain for human error. From employees misreporting time to data entry errors logging the time into your payroll system, each instance is another potential of failure that increases your labor costs.
Moving to a punch clock to log worker hours eliminates the need for that data entry layer, freeing up that admin resource to do other work or even eliminating those work hours altogether. Either way, your company is saving money.
When your company uses a time clock that includes an employee self-service interface, employees can update HR on critical demographic data themselves. This reduces lag time that may come by requiring employees to fill out paperwork or send an email about the changes, and then waiting for the admin to enter the information into payroll.
While an employee self-service interface on your time clock reduces this admin labor cost, its biggest potential savings is not having to pay noncompliance fines or penalties due to avoidable payroll errors.
Another way using a time clock can reduce labor costs is by reducing the costs of reporting on that labor. With each punch in or out, the employee’s presence (or not) at work is logged in the back-end system in near real-time. That provides a solid audit trail that makes creating reports easy and accurate, whether it’s an internal report that helps your company optimize workforce scheduling or identify potential time theft, or external reports that are needed for legal or regulatory purposes.
Instead of paying scheduled work, the employee time clock ensures a company only pays for actual time worked. Because employees know their punch-in and punch-out times are recorded, they are more likely to hold themselves accountable for making sure they return from breaks on time or stay until the end of the work shift.
Biometric clocks can eliminate buddy punching, which is a main driver of the time theft that leaks revenue from your company’s bottom line. If you’re not using biometric clocks, just knowing that HR and managers have better analytical tools to identify time theft helps keep employees honest about their time.
Overtime costs are budget killers. They blow up your labor budget. They also open your company up to potential federal and state law noncompliance penalties if people wind up working unscheduled overtime hours because they do things like not take lunch breaks or stay late.
The best way to manage your overtime labor costs is to use the data entered into the time clocks to send red flags to managers before unexpected overtime gets out of control. Such flags include noting which employees aren’t punching in and out for lunch, or punching in outside their scheduled hours, or are trending to exceed scheduled hours within a specific time period.
If you want to hear more about how the right time clock system can improve your payroll accuracy and efficiency, check out our case study. Don’t forget to download our free Time and Reporting guide and to contact us today with any questions.