Time Tracking for Payroll: Avoid Common Pitfalls and Errors
Natasa Djalovic
Last update on:
October 29, 2024 9:12 AM
Published on:
Running accurate and timely payroll is fundamental to achieving organizational success. An effective payroll system helps you create a positive work environment, build trust with your employees, and protect the financial health of your business.
Traditional payroll management tools rely on manual processes and outdated methods, which are a breeding ground for errors, inefficiency, and legal pitfalls.
Payroll time tracking software has emerged as a powerful solution for modern businesses looking to make better use of their time while streamlining tedious payroll processes.
Maintaining accurate payroll involves more than just simply issuing timely paychecks. Payroll itself directly impacts several aspects of your organization.
Employee morale and productivity
Employees rely on consistent paychecks to meet financial obligations and achieve personal goals. When payroll errors cause paychecks to be late or inaccurate, employees experience significant stress and anxiety, and often begin to distrust their employer. If payroll errors happen repeatedly, employees often exhibit a decline in morale, motivation, and productivity.
Studies have shown that employees who experience consistent payroll issues are more likely to be disengaged from their work and less likely to go the extra mile. In fact, a survey found that 49% of American employees would consider changing their jobs after a second payroll error.
Legal and financial risks
Wage and hour lawsuits are a costly reality for many businesses. Inaccurate time tracking significantly increases the risk of legal battles.
Businesses can violate labor laws by failing to:
Classify employee overtime exemption status correctly
Employees who experience continual payroll problems are more likely to seek employment elsewhere. As you hire new employees due to turnover, your company will incur additional training and recruitment expenses.
A study by the Society for Human Resource Management (SHRM) found that the average cost to replace an employee can range from six to nine months of their salary. Not to mention, high turnover rates can negatively impact company culture and make it difficult to attract and keep top talent.
The pitfalls of manual time tracking
Manual time-tracking methods, such as paper timesheets and spreadsheets are time-consuming and prone to errors. These traditional tracking approaches are unreliable and difficult to manage, especially for businesses with a mobile or remote workforce.
Let’s look at the most popular types of manual time tracking and how they may be slowing down your payroll processes.
Paper timesheets
While they may appear simple, paper timesheets can cause many issues.
Below are some of the most commonly reported issues associated with paper timesheets that make calculating payroll more challenging.
Employees forget to clock in or out
Illegible handwriting makes it difficult for managers to report accurate work hours
Timesheets can be easily misplaced or damaged
Employees falsify hours worked or alter timesheets
Managers that oversee a large workforce find hard to collect, organize, and store paper timesheets
Spreadsheets
Although spreadsheets are step up from paper timesheets, they still present numerous challenges.
Here are some examples of the obstacles you may face if you choose to use spreadsheets to track employee time.
Data entry errors such as typos and skipped cells
Incorrect calculations due to formula errors
If multiple people have editing access to the spreadsheet, they may draw data from an older version of the document
Employees working in the field may not have an active internet connection to manually input their hours into company spreadsheets.
Common payroll errors
Even if you give attention to detail, payroll errors still occur frequently in organizations that rely on manual processes.
Some of the most common payroll errors include:
Missed payments resulting from employee misclassification
Properly classifying employees as exempt or non-exempt is an important step to determine overtime eligibility and pay rates. Misclassifying an employee’s exemption status can lead to wage and hour violations as well as legal action lawsuits.
For employees whose roles encompass a variety of responsibilities, or workers who straddle the line between exempt and non-exempt status, correctly classifying employees is one of the most important aspects of issuing accurate compensation.
For example, an employee who is incorrectly classified as exempt may not receive overtime pay for hours worked beyond the standard workweek, leading to underpayment and potential legal issues.
Failing to issue accurate compensation due to miscalculation
Payment miscalculations encompass a wide range of errors, which may include:
Underpayment or overpayment of regular wages
Incorrect calculations of retroactive pay adjustments
Errors associated with deducting benefits, taxes, and other withholdings
If an employee’s paycheck is incorrect due to an error in calculating their hourly rate or hours worked, they will either be underpaid or overpaid – both of which significantly affect your business. If payroll errors continue to occur, your company may encounter fines and suffer from legal ramifications.
Overtime calculation errors
Overtime calculations can be complex, especially if employees are paid at different pay rates. Failing to include bonuses or shift differentials in payroll calculations can lead to inaccurate compensation amounts and labor law violations.
How does time tracking software improve payroll?
There are several significant ways time-tracking software can improve your payroll processes. Through accurate data collection, automated calculations, and payroll integrations, you can transform the way you manage payroll.
Accurate data collection
With multiple time entry options available, employees don’t need to worry about accurate and efficient timekeeping.
Software solutions that offer time tracking for payroll usually provide these time entry formats:
Mobile apps. Employees can clock in and out through their mobile devices. GPS tracking logs employee location at the time of arrival, preventing time theft. This is particularly beneficial for businesses with mobile workforces, such as construction companies, delivery services, or home healthcare providers.
Web portal. Employees can access their timesheets, request time off, and view their work history from any computer with internet access.
Biometric time clocks. To eliminate buddy punching and record accurate time entries, businesses may use biometric technology to capture fingerprints and employees’ facial profiles.
Automated calculations
Software that specializes in time tracking for payroll takes the guesswork out of payroll calculations. It automatically calculates how much overtime an employee worked and then takes into account pay rate to determine estimated overtime wages.
With automated calculations, you no longer need to spend countless hours figuring employee wages. Time tracking software helps you run accurate payroll every time.
Seamless payroll integration
Time-tracking data seamlessly integrates with popular payroll systems, eliminating the need for manual data entry and reducing the risk of errors. This streamlined process ensures that accurate time and attendance data flows directly into payroll calculations, reducing processing time and improving efficiency.
Optimizing your payroll process: Best practices
Implementing time-tracking software is a significant step toward improving payroll accuracy and efficiency.
But to maximize the benefits and create a truly streamlined payroll process, consider these best practices:
Develop clear time tracking policies for payroll: Establish clear and comprehensive policies regarding time-tracking procedures. Your policy should include guidelines on clocking in and out, taking meal and rest breaks, accruing overtime, and how to submit time off requests. Communicate these policies clearly to all employees to be sure they understand the importance of accurate timekeeping and their role in the process.
Provide thorough employee training. Thoroughly train and educate your employees on how to use your company’s time-tracking system. Emphasize the importance of accurate timekeeping and how it impacts payroll accuracy, project costing, and overall business efficiency.
Regularly audit time-tracking data. Implement a system for periodically auditing time- tracking data to quickly identify and correct errors or discrepancies. This could involve reviewing timesheets for inconsistencies, comparing time-tracking data with project timelines, or analyzing labor costs for potential anomalies.
Choose the right time tracking solution. Not all time-tracking solutions are created equal. When selecting a system, consider factors such as the size of your business, the nature of your workforce (e.g., remote, mobile, on-site), and your specific business needs.
Encourage accountability. Promote a culture of accountability where employees understand the importance of accurate time tracking and take responsibility for their actions.
Transform your payroll management processes with Timeero
Timeero is a GPS powered time and location tracking software solution designed to streamline your payroll processes.
Here's how Timeero specifically addresses the challenges you face when it comes to payroll management:
Reduces payroll errors with accurate and efficient timekeeping
Timeero's mobile app allows in-office and remote employees to clock in and out from their smartphones. The app's GPS tracking feature accurately records the location from which employees clocked in to reduce instances of time theft.
In addition to Timeero’s mobile app, employees are presented with two additional time entry options:
Timeero’s web portal
Timeero’s kiosk time clock with facial recognition
Automatic processes eliminate the need for manual calculations
Timeero automatically calculates employees’ work hours based on work schedules, pay rates, and applicable regulations, ensuring accurate compensation and compliance with labor laws.
Allows you to easily transfer time-tracking data through payroll integration
Timeero offers businesses multiple payroll integration options to transfer time and attendance data. The app seamlessly integrates with leading payroll providers, such as QuickBooks, Gusto, and ADP.
Generates and stores detailed records to remain compliant
Timeero prioritizes keeping detailed records of employee time and attendance, ensuring you meet record-keeping requirements as found in the Fair Labor Standards Act (FLSA) and other relevant regulations.
A Pineywoods Home Health Care: A case for enhanced time tracking
A Pineywoods Home Health Care, a provider of in-home healthcare services, saw significant improvements in payroll accuracy, efficiency, and compliance after implementing Timeero.
Timeero allowed managers to easily track their employees’ hours and GPS location.The app’s automated time tracking features eliminated the need for manual data entry and streamlined the company’s payroll process. A Pineywoods’s staff was free to focus on team building and patient care. Timeero’s GPS tracking and geofencing capabilities improved compliance by ensuring employees only logged hours from approved on-site locations.
Timeero – Your partner for payroll management
Investing in a time tracking for can free you to focus on more strategic initiatives. Timeero offers a comprehensive solution with features designed to meet the needs of businesses of all sizes.
Improve payroll accuracy, boost efficiency, and ensure compliance
Natasa is a writer specializing in the IT and software industry with 6+ years of experience in content writing and online marketing. During that period, she wrote more than 1,000 articles and several ebooks. She majored in English language and literature and loves cats, sneakers, and candy. When she's not working, she's probably binge-watching Netflix.
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