Time theft occurs when employees are paid for the time they did not actually work. The American Payroll Association states that approximately 75% of businesses in the U.S. are affected by time theft, which accounts for 7% of payroll. Below are types of time theft.
Buddy punching occurs when one employee asks another employee to clock in on their behalf. For example, a common occurrence is when an employee is running late and asks another person to clock in for them. While this could be 5 minutes here or 10 minutes there, it can add up quickly. A 2017 survey states buddy punching costs U.S. Employers $373 million annually. The data shows that biometric clocks are the best way to prevent buddy punching.
Many companies find it easier to round time rather than pay time by the minute, mainly because it is easier on the payroll department. One example is companies rounding time to the nearest 5 or 10 minutes. The most common rounding is to the nearest 15 minutes with a 7/8 split. If an employee clocks out at 5:07 PM, it rounds the time to 5:00 PM. If they clock out at 5:08 PM, it rounds the time to 5:15 PM. The concept is to have ‘even increments’ of time for payroll purposes. Employees quickly figure this out and begin to ‘watch the clock’ punching right after the breakpoint. Using the example above, if a person is at the clock at 5:07 PM and waits just one minute until 5:08 PM, they will get paid for an extra 15 minutes. This additional time adds up quickly and costs companies thousands of dollars annually.
Understand that some locations have guidelines preventing rounding. For example, California companies prohibit rounding time around lunch. Instead, employees must receive a minimum of 30 continuous minutes for a lunch break.
Using Manual timesheets is an easy way for employees to track their time without using a clock. Unfortunately, like the rounding issues above, employees usually record the time to the nearest quarter-hour, half-hour, or even hour regardless of what they actually worked. This practice leads to inflated timesheets.
Some employees use the time clock loopholes, so they are not tracked. For example, employees will say,
“The time clock is off.”
“I forgot my badge.”
“My swipe card is missing.”
“The time clock would not read my card.”
“The clock would not read my fingerprint.”
In all of these instances, someone has to enter the time into the system manually. Most managers will take the employee’s word about when they arrived or left regardless of the actual time.
Paying for overtime can make sense when a deadline approaches. However, this type of overtime is usually approved by management. The Fair Labor Standards Act (FLSA) states employees must be paid time and a half for hours worked over 40 hours, even when the work is not authorized. Not being able to see employee hours daily leads to abuse with overtime. Once the hours are worked, companies are legally required to pay those wages.
Now that you know what to look for, here are some solutions to prevent employee time theft.
- Move away from paper time cards and timesheets. This action alone will save you time and money while increasing accuracy.
- Use a biometric time clock to avoid buddy punching. Biometric devices are the number one way to limit this form of time theft and will pay for themselves within months.
- Have a clear, specific, written attendance policy and communicate it often. Setting expectations is everything.
- Once you have an attendance policy, enforce it. If a policy is not enforced, it leads others to believe they get away with the same action. Automating the enforcement of the policy keeps things top of mind.
- Improve your employee engagement. Once employees care, their productivity and loyalty increase.
- Have automated time tracking software. Technology can pay for itself when measured against time theft.
Time Equipment Company offers everything a company needs to limit time theft. Our advanced time and attendance software delivers warnings for tardiness and absenteeism, provides leading indicators for overtime, and automates attendance policy enforcement. The results save your organization time and money while increasing employee engagement and satisfaction.
For more information about our industry-leading time and attendance system, contact Time Equipment Company at 800-997-8463 or firstname.lastname@example.org.