Human Resources Department deals with the most important and sensitive resources of any organization- People. No matter what an organization deals in, be it manufacturing, trading, etc., it requires human resources at all levels, for basic functioning. They play an integral role in completing all the projects within the stipulated time. Because of this importance, it becomes even more essential for a company to have professionals who can easily manage the people. These professionals are what we call the HR professionals. HR professionals not only hire right people for the organization but also ensure their presence at the right time at the right place with right skills.
The role of an HR professional is not limited to only taking interviews and hiring people; they are engaged in several tasks that revolve around the employees of the organization. They work towards reducing the employee turnover, providing training, motivating the employees and so on. They form the backbone of an organization and contribute towards meeting the company goals.
Companies lose an average of 5 percent of revenue annually due to payroll process inefficiencies, errors and fraud. The company assigned Ihits, to examine the payroll process with the goal of reducing risk, increasing accuracy and improving efficiency. Their charter was to Decrease the risk of payroll fraud and inaccuracies by reducing or eliminating opportunities for payroll errors.
During the defined phase of the project, the team realized that the biggest opportunity for improvement occurred during the time-collection and calculation processes used by managers for the company’s 5,000 employees to determine how many hours employees worked and thus how much they should be paid. While mapping existing processes for submitting hours to payroll, Ihits found that managers utilized a mixture of approaches for collecting employee time. Managers spent a great deal of time manually calculating hours worked and translating them.
Errors resulting from variations in the payroll process resulted in an enormous amount annually in unwarranted payroll expenses. In other words, the company was spending a significant amount of money paying employees for time when they were not working
In a survey of managers responsible for submitting time records, the responses indicated that as many as many of them did not have an effective means of tracking and reporting employee time. Many managers did not keep physical records of time worked by employees. Only very few were utilizing the payroll entry. Many of them did not deduct time for employees unless they arrived to work much late than the beginning time of the shift. Managers did not deduct any pay, even when employees arrived more than 20 minutes late. Corporate policy allowed for a 10-minute grace period. More than 50 percent of the respondents used the wrong grace period for lateness . Many state regulations require that employers maintain accurate records relative to employee lunches and breaks.
Ihits collected sample data across multiple sites and validated that the following root causes were primarily responsible for defects produced in the information submitted to payroll:
To determine the financial cost of the defects produced from the existing processes, Ihits conducted a pilot test. The pilot enabled the team to make accurate financial projections of the benefits of implementing an improved time and attendance system. The test showed that there was a 0.5 percent error rate in manual data calculations. According to the pilot projection, a reduction in the number of defects produced during the time collection, calculation and reporting processes would result in the reduction of the unwanted pay in annualized payroll expenses.
Ihits used this information to make the case for the required improvements to the time and attendance system.
Using automated Biometric attendance system linked with the Decisions Plsu HRMS addressed all of the root causes for defects, and provided standardization, automated time calculations and structured policy compliance. Additional benefits included quicker payroll processing and better reporting systems.
Prior to the change in the time-collection processes, the average number of hours paid over a two-week period was just over 80 hours per employee. Once the automated time-collection and calculation system was implemented, the average time worked per employee dropped to 78.6 hours over two weeks. In other words, by removing manual processes and time estimations, the team reduced variation and decreased the average hours paid by 1.5 hours for each payroll cycle
The HRMS linked with the biometric system was rolled out in several phases. This allowed the team to identify and correct issues as they were discovered. It also allowed the human resources department to conduct the training needed for all employees and management. All locations started using the new system. With little disruption, the team changed the way the entire company was collecting and reporting employee hours.
The implementation phase of Ihits lasted just under 2 months. In addition, the IT department worked with Ihits to ensure that the application was integrated with the HRMS & accounting systems.
The company’s payroll expenses decreased dramatically as a result of the improvements. The company realized significant benefits as the program was implemented across the organization.
Control data indicated that the team achieved its goals. The improved process and technology reduced errors associated with hours-worked calculations and the opportunity for fraud that could arise from the use of hand-written time sheets, standardized time entry systems, and created a system that enforced company policies automatically. Although the team initially projected small annual savings, the final results achieved far more than the projection. Based on current trends, the team predicts that the improvements will deliver more than 1cr annually to the bottom line.