Wage and Hour Violations are Costly and Avoidable

Business owners usually associate fraud with accounting. But did you ever think that something as simple as filling out extra hours on a timesheet could hit your bottom line pretty hard?

Lying about hours worked or consultants charging for time they didn’t spend on projects can cost small businesses thousands of dollars. And it’s not just the employer that’s impacted. When workers try to pull a fast one by misrepresenting hours worked on their time sheets, customers and co-workers end up as losers too.

The Association of Certified Fraud Examiners (ACFE) claims that the typical organization loses five percent of its revenue to fraud and abuse. Employee fraud can happen at any size or type of organization.

“Small businesses are particularly vulnerable to fraud. In general, these organizations have far fewer controls in place to protect their resources from fraud and abuse,” ACFE cautions. The question small business owners should be asking is, “How can I prevent fraud from happening in the first place?”

Automate and Stymie Employee Fraud with Automation Technology

One verifiable way to control the high costs of labor, including employee fraud and abuse, is through payroll-processing automation technology. This type of technology is also known as human resources information systems (HRIS) or human resources management systems (HRMS).Whether you employ 10 people or 5,000 people, time and attendance automation technology has come of age. Now all sectors of the economy, not just manufacturing or retail, are realizing that high-quality, time-tested software quickly pays for itself.

Of course, not all time and attendance reporting errors are due to employee fraud or abuse. Human errors or misunderstandings can also contribute to time and attendance miscalculations. Any time data entry is handled manually, especially when spread throughout organizational departments, you’ll most likely find human error. For example, when time and attendance reports are manually entered and routed around, audits will sometimes reveal duplicate entries from across departments.

Intentional or unintentional, manually-entered errors can turn out to be costly mistakes. Even worse, by its very nature, fraudulent behavior is often repeated over and over again.

The good news is that, although comprehensively integrated automation systems are not disciplinarians, these programs can prevent many fraudulent behaviors from happening in the first place. This is why you want to choose a highly-reputable vendor that provides end-to-end integrated payroll processing solutions.

For example, automated payroll processing systems can eliminate fraudulent acts such as “buddy punching,” or when co-workers agree to clock in for other co-workers, even though they are not at work. So, when workers are required to clock in by logging on to a secure online time and attendance automation system (usually with a unique ID and password), buddy punching becomes obsolete.

The Takeaway

According to the Society for Human Resource Management, automation has real cost savings. The time it takes to process payroll can be reduced as much as 75 percent by eliminating calculation errors, automating the entry of data into the payroll system, and by consistently and fairly applying pay rules to all employees.In a perfect world, employers wouldn’t have to be concerned about preventing worker fraud or mistakes. However, software and related systems can help curb dishonest practices.


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