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Looking at ROI through a different lens

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Here’s a bold claim... Organisations can cover the costs of their investment within six to twelve months after implementing effective technology solutions and an ROI of 250% to 500% can be expected after five years.

Organisations have long used ROI calculations to make decisions about what systems to implement, for which employee groups and in what time frame. However, there’s more to ROI than building a strong business case to support a new project. You can also use ROI drivers to help decide which functions within your workforce management solution to implement first, so you can successfully achieve the largest return on your investment. This article will identify those ROI drivers and highlight both the direct and indirect savings that can be made in order to help achieve those impressive ROI stats. 

Direct savings


 

Each of the following represents an opportunity to save money that organisations are already spending: 

Reduced pay calculation errors 

It’s commonly accepted that the average company is overpaying its employees by up to 1.2% due to payroll errors. These include calculation mistakes due to errant processes - like using incorrect rates to determine overtime premiums - as well as mathematical errors generated by manual payroll processes. Effective workforce management tools can help address these issues quickly by implementing consistent pay calculation rules across the entire enterprise.

Reduced data collection errors 

Furthermore, it’s estimated that inaccuracies in workforce data and related processes can lead to payroll losses of up to 3%. From relying on employee recall to determine the number of hours worked, to rekeying data incorrectly, how you collect data - and the processes around how you use it - strongly influence payroll accuracy. Even organisations already using technology to track employee hours may be vulnerable to mistakes. Capturing time worked more precisely eliminates errors, ensuring that employee pay is based on accurate data.

Elimination of time theft

In the US, The American Payroll Association estimated that time theft - in the form of clocking in for colleagues, tardiness, extended breaks, early departures and employees taking their time to get started after clocking in - costs organisations between 1.5 and 5% of their gross payroll. Implementing technologies such as simple biometric readers to prevent time theft can save significant amounts simply by ensuring that organisations pay employees accurately.

Reduced time-off leakage 

Another common issue is employees taking more paid leave than they are allotted. Organisations that track paid time off (PTO) manually may be particularly vulnerable to this type of payroll leakage.  Self-service tools for tracking time used can help, while also enabling more efficient communication processes around time-off requests and approvals. 

Reduced overtime 

Automate time and attendance processes enable a more strategic approach to scheduling and a significant drop in unplanned overtime. According to Aberdeen Group, automation drives overtime costs down by an average of 19% and unplanned or unbudgeted overtime costs down by 7%. The right functionality can drive a more intentional, strategic approach to overtime right away. For instance, some features can enable managers to call for reinforcements at the touch of a button based on the most valued criteria. They can extend overtime to employees who haven’t reached optimum hours yet or to the least expensive, but most qualified, members of the workforce.

Faster, more accurate retroactive calculations

Ensuring accuracy around complicated calculations like retroactive pay is another way to ensure ROI. The process of correcting payroll errors is, in itself, complex and error-prone. Automating retroactive pay calculations eliminates errors and allows pay corrections to be distributed more quickly and efficiently, resulting in greater accuracy and transparency - along with improved employee satisfaction.

Indirect savings

These ROI drivers represent areas where automation will help organisations increase profits, minimise costs, mitigate financial risks and/or reduce attrition. While these savings are not generally included in ROI projections, the impact on the bottom line can be sizeable.

Increased productivity

Automating time and attendance shortens the time lag between employees signing in and getting to work. Transitioning from a manual, or partially manual, system to an automated workforce management solution also provides more time for managers and HR to spend on more strategic issues.

Elimination of manual processes 

Susceptibility to errors isn’t the only problem with manual processes. In many cases, the data must be rekeyed in multiple systems leading to duplication of effort and lost time. Automation also reduces the need for those entering the data to make judgment calls or round numbers up or down - inconsistencies known to further inflate payroll costs. 

Streamlined administrative responsibilities 

Automated workforce management tools can be configured to alert managers and payroll staff to anomalies; eliminating the need to sort through all of the data each week or each pay period. Although dozens of pre-configured exceptions based on common concerns and best practices exist, the very definition of what is an anomaly is something that individual organisations can tailor.

Employee self-service 

Providing transparency around complex pay calculations like overtime and shift premiums allows employees to see for themselves how those calculations were determined. This reduces employee questions while simultaneously boosting morale. Similarly, employee self-service tools allow workers to access their own time-off balances from any web-enabled device. 

Greater consistency in payroll processes 

An automated approach ensures that policies are enforced uniformly. Not only does this result in lower payroll costs but it also stops employees from playing the system and the perception of preferential treatment due to the inconsistent application of payroll processes from department to department or, even worse, from employee to employee.  Preconfigured solutions, based on leading best practices, can take into account the consistencies that will result in the greatest and fastest ROI.

Additional strategic advantages

The rapid deployment of a total workforce management solution also provides a number of strategic advantages, including:

Improved labour planning and scheduling 

A holistic view of an organisation’s workforce management metrics allows it to better anticipate and plan for changes in demand. Real-time insight can empower managers of affected departments to alter scheduling practices, ensuring that the right resource is on hand at any given time and adding to competitive advantage.

Activity based costing 

The ability to track costs by project, task, work order, job, department, cost centre or any other factor you choose, helps better understand how internal resources are being used. This granular visibility can be synced with accounting systems and lays the foundation for a more strategic, results-oriented approach to managing your workforce, controlling project costs and enabling business performance metrics.

Reduced non-compliance risks 

Automation can also help streamline compliance tasks and reduce the risks associated with non-compliance, including fines and litigation costs. This is especially important for organisations at high risk for labour-related non-compliance. For example, time and attendance solutions should address many common wage and hour rules including overtime laws, break rules and national and local statutory leave rights. Obviously, any solution should also be configurable to quickly and easily address any leave policies specific to individual organisations.

Summary

The best way to maximise the ROI is to achieve a fast deployment which will help yield the highest returns over time. Effective solutions will help users uncover opportunities to start recouping the cost of their investment immediately with out of-the-box, preconfigured solutions. Reflecting industry best practices and a deep knowledge of the most common workforce management requirements, preconfigured options will help users get up to speed quickly and efficiently. Organisations should also look for solutions that are 100% configurable so they can achieve a faster ROI while also getting the flexibility to address additional workforce management needs in the future as the organisation grows and needs change.

Kim Lewin

By Kim Lewin

Kim is the VP sales and operations EMEA, WorkForce Software

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