Time & Attendance and Return on Investment

Jim Courtwood
Autor of the Time & Attendance Consultant's Guide Series

Many people believe that the best way to decide whether to invest money should be based on the Return on Investment (ROI), and certainly, I would not disagree. The only caveat, of course, is whether that initial investment is within your means.

Cashflow, of course, is King, but that aside, Time & Attendance Systems have the capacity to provide a significant return on investment through the elimination of time theft, process improvement and the reduction of calculation errors but, that saving is not a significant as some would have you think.

"Industry Experts" estimate the savings between three and five per cent of your annual payroll. So, if you employee 100 staff at $800 per week that means you have an annual payroll $4.16 Million per year.

A three percent saving ( the lower end of the scale) should produce a $125,000 annual saving. A very capable attendance system for one hundred employees including two or three time clocks, full award interpretation and export to payroll can cost as little as $15,000, so that is looking like an excellent return on investment.

After implementing perhaps two and a half thousand time and attendance systems over the last 15 years and measuring the savings, I would have to say that whoever came up with the ROI figures was "dreamin'. Having said that, the real number, and by this I mean the one that actually tested, still looks very attractive.

Over the years and with help from some clients, I have measured the payroll cost savings, and on average, they would run at about 0.35% of the annualised payroll. Doing the numbers again on the same number of employees used earlier the annualised savings on a 100 employee system would be $14,560.

Clearly, this is a much more modest ROI, but, it is still a significant number, and it means that a typical system would pay for itself in twelve months or so.

The numbers used in this analysis are the measurable ones. The less tangible ones, such as less dependency on the payroll officer and the conversion to electronic data for more efficient storage and recovery, are often underestimated.

It is important to note that not all time and attendance systems are created equal. Most of the true savings are going to be achieved by implementing a system with reliable biometric hardware and a flawless award interpreter. If the payroll department is forever overriding missing clocking events or calculation errors typical in entry-level systems, then the premise on which the system will save money is lost.

This is not to say that your business won't benefit from an entry-level attendance system. That depends entirely on what you are trying to achieve. If you simply want to convert to electronic recording of attendance without award interpretation, then this is certainly a sensible approach within itself.

If you would like more independent information on time and attendance systems you can contact me by email at jimc@timeandattendance.com.au