In today’s message, I am directing my arguments to small business owners who use pen and paper timesheets.
How often do you worry about labor law compliance? I’m talking about FLSA laws that govern minimum wage, child labor, and overtime pay. There are also ACA regulations that apply to employers with over 50 full-time equivalent workers.
Other provisions that affect employers are embodied in OSHA, COBRA, Title VII, and ADA. Wow! That’s a lot of laws for business owners to comply with. However, for today’s article, we will concern ourselves with FLSA and ACA compliance.
My intent is to convince you that using an outdated or ineffective employee time and attendance system puts you in danger of being fined for noncompliance. And make no mistake: being fined for a DOL violation can completely put you out of business.
Pen and Paper Time Cards Are Not Always Accurate
To comply with standards that govern employee wages and hours, you first have to know exactly how many hours your employees are working. If your time and attendance system does not collect accurate records, any other attempts at compliance are moot. Accurate records are your most critical layer of protection.
Human Error Happens
Humans are fallible. There’s a reason mistakes are blamed on human error. Humans make errors all the time. Are your personnel suppose to add up their hours on a paper timesheet? There are ways to mess up any step of the way. They can write down the wrong shift start time. They can fail to account for an unpaid break. Maybe the employee forgot to punch out last Friday. The worker has to remember when their shift ended when filling out the time card several days later.
Then your staff members need to tally their total hours. Even simple math can prove too challenging for a tired employee who is eager to hand in his time card and punch out at the end of a long shift. If you are old enough to remember what shopping was like before cash registers automatically calculated your change, you know that men and women make simple mathematical errors all the time. (I would argue, however, that the level of basic math proficiency in the general public was higher before we started relying on machines to do every simple calculation for us.)
After a team member totals her hours on her time card, she turns it into her boss. In many small organizations, it goes to the owner or payroll manager to be entered into the payroll processing platform. In businesses that don’t outsource their payroll to a payroll provider, the owner writes out a physical check.
Manual Data Entry Is Fallible
The practice of manually entering hours into a payroll processing platform is also a weak link in the multi-step process. I urge you to do an audit of your paper time card records. Compare the hours listed on the time cards to the hours recorded in the payroll system. A statistician could tell you exactly how many errors you could expect to find, but I’ll just venture this guess: “more than you want.”
So far I have just explained honest mistakes. These could cause you to pay more or less on a paycheck depending on which way the error falls. There is another threat to time card veracity and it always causes you to pay more in labor: deliberate employee time theft.
Employees Falsify Time Cards on Purpose
If you have read some of my other messages, I am sure I sound like a broken record when I mention employee time theft. (If you are too young to even know what a broken record is, let’s just say that I have stressed this point repeatedly.)
When staff members deliberately record more time than they actually work, you are not only on sketchy FLSA grounds, you unnecessarily pay more for labor. I have addressed time theft in many other articles, so I won’t say any more about it in this update.
Inaccurate Time Cards Put You at Rick of Noncompliance
Back to the compliance implications. Suppose you are an employer with 10 part-time and 48 full-time equivalent employees. Since you don’t have 50 full-time equivalent personnel, you are not subject to some of the provisions in the Affordable Care Act. You hire a couple more part-timers. The ACA defines full-time as 30 hours per week on average or 130 hours per month.
Suppose the two part-timers you hire are authorized to work 28 hours per week. But say the manager over them is too busy to pay much attention to exactly how many hours and minutes these two workers work each shift. You have an unusually busy couple of pay cycles and everyone is in “all hands on deck” mode. These two part-timers record more than 30 hours per week. It doesn’t matter if they actually work that many hours or if they intentionally falsify hours, either way, you now have 50 full-time equivalent employees according to the ACA.
That is just one example. A similar story could put you at risk of overtime noncompliance. Suppose one of your non-exempt staff members adds two overtime hours he or she didn’t actually work on a few time cards. But no one notices this seemingly insignificant aberration of the employees’ usual forty hour per week schedule. A couple months later, the employee realizes that he or she was due overtime and files a complaint with the Department of Labor. If the can prove he or she worked overtime and you can’t prove otherwise, you will be fined.
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