Time Clocks for Workday & Oracle

Oracle Time & Attendance Solutions to Payroll Error & Fraud

Written by carlos | Sep 12, 2017 12:54:00 PM

The costs of payroll fraud and errors can be significant. The consequences of poor payroll management reverberate extensively, impacting an organization's financial health. 

Enterprises and small businesses use Oracle Cloud Time and Labor to streamline payroll processes. You can also use Oracle integrated with a time clock system like TimeCom, to prevent and detect errors and employees who commit payroll fraud. 

Payroll Error vs Fraud 

Payroll fraud and errors are expensive, but they are different in important ways. 

Employees engage in payroll fraud when they deliberately scheme to get paid more than they’re owed. It can happen in numerous ways. Buddy punching is a common type of payroll fraud. Colleagues help them pad their work hours by clocking in for them when they aren’t working. Fraud invariably leads to the company overpaying for labor. 

In contrast, payroll errors tend to underpay employees. Despite being a mistake, companies pay millions of dollars in noncompliance fines, backpay, and interest due to these errors. Companies also pay higher retention and recruiting costs. 

Fortunately, companies using the right tools, like an integrated Oracle – time clock system, have the tools to avoid and detect a wide range of payroll fraud and errors. 

Main Causes of Payroll Errors and Their Solutions 

Payroll errors generally shortchange the employee, which can lead to serious compliance and legal consequences. Accurate worker categorization and meticulous data collection are fundamental for error-free payroll operations. 

Misclassifying Workers 

Worker misclassification leads to errors and compliance risks with every payroll cycle.  

Common classification mistakes involve:  

  1. Mislabeling employees as independent contractors and vice versa.
  2. Incorrectly assuming hourly wage earners as non-exempt under the Fair Labor Standards Act (FLSA). Many are, while some remain exempt.

Employees, controlled by the company, differ from independent contractors who enjoy more work autonomy. Auditors can label contractors as employees if they are controlled, leading to financial liabilities like unpaid wages and benefits. 

To determine FLSA exemptions, assess pay structures and job duties. Seek guidance from tax and legal experts. In difficult cases, you can get help from the IRS through from SS-8 to determine worker status under the FLSA. Here’s a fact sheet from the Department of Labor that also provides guidance. 

To avoid misclassifying workers, develop comprehensive checklists and HR guidelines. These guidelines should include easy to use rules that guarantee accurate worker classification. Classifying an employee correctly in Oracle Time and Labor ensures correct regulations are followed during payroll. 

GIGO: Garbage Attendance Data in Results in Garbage Payroll Data Out 

Oracle’s payroll system will efficiently calculate hours and overtime. Yet inaccurate data coming into Oracle undermines its efficiency and leads to payroll errors. Manual data collection methods and punch time card entries pose the highest risk compromising payroll accuracy. 

Automating time tracking through TimeCom significantly enhances data accuracy and completeness, critical for error-free payroll. Automated time tracking drastically reduces the chances of inaccurate attendance data entering payroll systems.  

TimeCom's data gathering reduces payroll errors by collecting all necessary data for accurate payroll processing. The payroll system needs more information than work hours and social security numbers. 

For example, you can configure TimeCom to collect: 

  • The work hours' location helps payroll follow tax and overtime laws.  
  • Tips or commissions earned by workers so they’re paid fully with the necessary withholdings. 
  • The specific job role worked during those hours. This feature is useful for companies that cross-trains workers to do different jobs with different pay rates. 

As an Oracle-validated Solution, TimeCom integrates seamlessly with Oracle Cloud Time and Labor. It sends the information gathered quickly to Oracle. This allows for enough time to check and approve it. As a result, it helps you lower the risk of mistakes in payroll. 

Worker Misclassification x GIGO = Costly Payroll Errors 

Combining misclassification and wrong data collection causes expensive mistakes such as incorrect pay calculations and tax errors in payroll. Using automated tools minimizes errors and ensures accurate documentation from the payroll system. 

Taking Control to Minimize Payroll Fraud 

The most common types of payroll fraud involve time theft, often through timesheet fraud or buddy punching.  Automated tools like Oracle Time and Labor with TimeCom help managers, HR, and payroll find and prevent payroll fraud. 

The reliability of TimeCom’s time clocks for Oracle mean you never need manual timesheets as a backup if a time clock loses connectivity.  

You can also configure its rule based time recording to prevent someone from clocking in too early or when they aren’t scheduled. These are other forms of timesheet fraud that are best avoided. If a worker does clock in and work when they aren’t supposed to, the company still must pay them for that time.  

Combining the time clock's attendance data with Oracle's scheduling data helps companies easily identify red flags like 

  • Employees who punch out late. 
  • Pairs of employees who regularly punch in and out form the same time clock within seconds of each other. 

You can select to add a biometric reader to your TimeCom time clock, which virtually eliminates the possibility of buddy punching. 

The TimeCom time clocks can also collect daily attestations from employees that make workers compensation fraud or commissions schemes more difficult. You can require workers to provide the time clock following information every time they punch out: 

  • The time clock can require employees to attest whether they did or did not witness a workplace injury.  
  • Any sales commissions or tips they earned that day. 

Such daily attestations create contemporaneous records that aid in detecting and proving these more complicated types of payroll fraud. If you have to call in a certified fraud examiner, having these time recording and management records will help protect the company. 

Building a Reliable Framework 

Payroll management complexities come with substantial risks and costs. Failing to address these challenges can result in detrimental financial implications stemming from payroll fraud and errors.  

Adopting an automated framework powered by Oracle Cloud Time and Labor, seamlessly integrated with the Timecom attendance data collection system, is a transformative solution. Working together, they help you control costs and avoid legal liabilities due to payroll fraud or error.  

This secure system reduces the chances of payroll fraud and mistakes by collecting and documenting data automatically. It also helps you detect any fraud that may occur. 

Businesses protect themselves from financial and reputational risks inherent in mishandling compensation sent to workers’ bank accounts by addressing payroll fraud and error. 

This integration improves defense, reduces errors and fraud, and increases efficiency in payroll management.