Three Expensive Problems:

Taken from an article in the American Payroll Association newsletter written by Joseph Cotorno titled "The Incredible Time Machines."

EXPENSE #1: Manual Computation of Hours

Industry experts estimate it takes 2.5 minutes to manually compute hours for one employee for a biweekly time period. The following chart indicates the cost of this function.

  2.5 Number of minutes to calculate hours per employee
X Number of pay periods per year
= 0 Number of minutes per employee per year
X Average number of employees per site
= 0 Total minutes to calculate hours
/ 60 Minutes
= 0 Number of hours per year
X Calculator’s Average Hourly Rate
$0.00 (#1)TOTAL COST OF MANUAL COMPUTATION

 

EXPENSE #2: Error Factor

Errors made in manual computing time are often an overlooked cost. These errors will cost you thousands of dollars per year. When was the last time someone came to you to complain they were overpaid? While experts believe that the rate of error is 1%, we have used .5% in this illustration.

  0 Number employees
X Average number of hours per week
= 0 Number of hours per week
X 50 Weeks per year
= 0 Number of hours per year
/ Average hourly rate of all employees
= $0.00 Total yearly payroll
X 0.005 One half of one percent error rate
$0.00 (#2) TOTAL COST OF ERRORS

EXPENSE #3: Lost Time

Annual surveys on theft of time show that the average worker "steals" FOUR HOURS AND FOURTEEN MINUTES a week by coming in late, goofing off, long lunches and breaks and leaving late to get overtime pay. Much of this "lost time" cannot be "recovered" by any kind of time accounting system. However, say we can recover only five minutes per day, the cost savings are staggering. To be conservative, we will use two minutes a day!

  8.33 Hours recovered per employee per year
X 0 Average number of employees
= 0 Total hours lost
X 0 Average hourly rate
  $0.00 (#3) TOTAL COST OF LOST TIME

Total Cost:

  $0.00 Manual calculation (Expense #1)
+ $0.00 Error factor (Expense #2)
+ $0.00 Lost time (Expense #3)
= $0.00 (#3) TOTAL COST OF LOST TIME

Return on Investment

  Cost of proposed system (from Proposal)
/ $0.00 Total annual cost of manual system from above
(#1 + #2 + #3)
= 0.0000 Cost/Return ratio
X 12 X 12 months
0.0 PAYBACK (in months)