Overview • Time & Attendance • Tracy ASP • ID Production • Data Collection • Guard Tours • Synchronized Wall Clocks

Return On Investment Analysis

This is a cost analysis for updating to an automated time and attendance system from Tracy. The results from this analysis may be used to cost justify an automated system as well as calculate the pay back period.

A correctly designed automated time and attendance system will quickly pay for itself by eliminating repetitive manual calculations and procedures. This will significantly reduce labor hours and eliminate the errors inherent to a manual system.

A. ELIMINATE MANUAL PROCEDURES

PAYROLL DEPARTMENT
Eliminate timecard preparation
Eliminate distributing and collecting timecards
Eliminate manually separating hours by shift/department/jobcode
Eliminate manually computing total time card hours
Eliminate key punching total hours into payroll software
Reduce time spent reviewing total hours
Average weekly savings of 7.0 minutes per employee (see note below)

PERSONNEL DEPARTMENT
Eliminate manually entering occurrence incidents
Eliminate manually calculating occurrence points
Eliminate manually determining employees requiring discipline
Automatically issue daily written occurrence slips
Average weekly savings of 2.0 minutes per employee

SUPERVISORS
Reduce time spent reviewing timecards for exceptions
Reduce time spent reviewing timecards for overtime
Reduce time spent editing timecards for shift/department/jobcode transfers
Average weekly savings of 0.5 minutes per employee
Example: The time savings in the above areas add up to significant cost savings over the course of a year. The following example is based on 450 employees, a payroll overhead factor of 1.5 (see note below) and an average pay rate of $8.25 per hour for the employees in payroll, personnel and supervisor positions.

(450 employees)(9.50 min./employee)(52 weeks/year) Yearly Time Savings = 3705 hours (60 mins. per hour)

Yearly Cost Savings (A) = (3705 hours/year)($8.25/hour)(1.5 overhead) = $45,849.38

Note: 1) The American Payroll Association (APA) claims that the average time to manually add and audit a timecard is 5 minutes per employee. Additional timesaving are derived from the elimination of timecard preparation, distribution and keypunch entry. 2) The overhead factor determines the actual cost to pay an employee for one hour of work. Overhead includes insurance costs, social security costs and benefits. Actual overhead rates vary from 1.5 to 3.0 depending on the company.

B. REDUCE CALCULATION AND KEY ENTRY ERRORS

General industry guidelines depict a one to eight percent error rate from manually calculating timecards and key entering the payroll information. If an automated system reduces the error rate by only one percent of the payroll dollars, this can save a company thousands of dollars a year.

Eliminating these errors also reduces the time spent correcting improperly paid employees. This is a direct saving in labor hours for employees, supervisors and the payroll department.

The average total time saved by not having to correct an improperly paid employee, including all personnel involved, is approximately eighteen minutes. Total average cost savings are hard to determine, because employees typically only complain when they have been underpaid, not when they have been overpaid.

Example: The following example is based on 450 employees with an average pay rate of $8.25 per hour and an average error rate of one percent. At an error reduction of one percent, two employees per week would no longer need to be corrected.

Error Savings = (450 emp.)(40 hrs/emp.)($8.25/hour)(.01 error rate)(52 weeks/year)= $77,220.00

(2 emp)(18.00 min./emp)($8.25/hr)(1.5 overhead)(52 wks/yr)
Correction Savings = $386.10 (60 mins. per hour)

Yearly Savings (B) = 77,220.00 + 386.10 = $77,606.10 per Year

C. ELIMINATE CONSUMABLE COSTS

The consumables that will no longer be required include timecards and ribbons for the mechanical time recorders. These savings are partially offset by the computer printer paper that replaces the timecards.

Example: The following example is based on 450 employees, a weekly pay period, two time recorders and a single ribbon change per year.

Time Card Savings = (52 weeks/year)(450 timecards/week)($35.00/1000 timecards) = $819.00
Ribbon Savings = (2 time recorders)($17.95 per ribbon) = $35.90
Cost of Printer Paper = (52 weeks/year)(500 sheets/week)($26.00/2700 sheets) = $250.37
Yearly Savings (C) = 819.00 + 35.90 - 250.37 = $604.53 per Year

Total Yearly Savings - Example For 450 Employees

The following summary is based on the savings from the previous examples. These savings normally produce a pay back period of under one year.

Total Yearly Savings = 45,849.38 (A) + 77,606.10 (B) + 604.53 (C) = $124,060.00