Jul 25, 2023

Integrated Timekeeping: A Strategy for Preventing Payroll Errors

Are you capturing your employees' time and processing their wages via separate systems? This is a recipe for payroll errors because the two systems need to communicate with each other. Read through to see how integrated timekeeping can help.

Under the Fair Labor Standards Act, employers are required to maintain updated records of the hours worked by nonexempt employees. According to the FLSA, employers are also expected to pay nonexempt employees for all of the hours they work. As such, it is of utmost importance that employers ensure accurate timekeeping and payroll processes as part of their business operations. 

However, if you're separating your timekeeping and payroll processes by implementing two different technologies, you may be increasing your risk of making unintentional yet impactful payroll errors. A much better approach is to integrate software that has the ability to manage both timekeeping and payroll. 

"Organizations using a solution that has both timekeeping and payroll capabilities were 44% more likely to have a payroll error rate at 2% or less," says an article published on the American Payroll Association's website. What's more, it is said that organizations that implement both timekeeping and payroll surpassed their target revenue values by 7%. 

Below are four ways that integrating timekeeping with payroll can prevent or minimize payroll errors.

1. Transports employees' time into the payroll module

A stand-alone timekeeping system captures employees' time in that system alone. To pay employees, you must then manually enter their timekeeping information into the payroll system. This drastically raises the risk of data entry mistakes. 

An integrated timekeeping system shortens the process by capturing employees' time, allowing managers to make the necessary edits and then transporting the approved time into the payroll module. This can vastly reduce the time you spend on data entry, which also minimizes your risk of making errors. 

2. Improves payroll accuracy in many areas

Integrating timekeeping and payroll bolsters accuracy in these areas:

• Gross pay calculation, including hours worked and paid time off.
• Mandatory paycheck deductions, such as payroll taxes and wage garnishments. 
• Voluntary paycheck deductions regarding health insurance and 401(k)s.
• Payroll tax deposits and reporting to federal, state, and local agencies. 
• Timekeeping and payroll reconciliation to ensure accurate financial statements.
• Easy access to timekeeping and payroll reports to enhance decision-making. 

3. Gives you more time to focus on strategic tasks

An integrated timekeeping system can save you a lot of time, leaving you more hours in the day to prioritize payroll and focus on strategizing your payroll procedures in ways that reduce the likelihood of payroll errors.  

There are many ways to be strategic:

• Implement payroll audits to uncover payroll system strengths and weaknesses.
• Set up payroll internal controls to tighten payroll security and reduce fraud. 
• Apply payroll best practices across interrelated departments, such as HR and finance. 
• Monitor time, labor, wages, and overtime to stay within your payroll budget. 
• Establish more accurate or cost-effective ways to manage payroll, such as outsourcing. 

4. Keeps you out of the government's crosshairs

The regulations regarding both timekeeping and payroll are usually susceptible to change, meaning the rules that you must abide by one day might be different the next day, and sometimes, this can happen with little to no notice. Additionally, brand new rules and regulations are continually in the works at the federal, state, and local levels. 

This is important to remember because failure to comply with said rules and regulations may result in significant penalties imposed on you by the government. However, integrating your timekeeping and payroll processes can help you meet your legal obligations while completely avoiding unwanted and expensive penalties.

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