Labour force time theft is killing your bottom line

Labour force time theft is killing your bottom line. Labour time theft buddy clocking effect on profits. This image was uploaded by ClockInstant at 11 Imam Haron Rd Claremont, Cape Town, 7708.

Time theft is the concept of staff receiving pay for hours they have not physically done. If you are reading this, you already know it is rife amongst companies, particularly in the labour industries. Once you stop having a personal relationship with your employees it becomes extremely difficult to prevent. Therefore, companies with greater than 15 staff are prone to time theft or as it is known in South Africa, ‘Buddy Clocking’.

There are several reasons why your staff may engage in this sort of activity. Often it is because they are late, need to leave early or that they have no leave days left. No matter the reason, malicious or not, it is cheating your company out of a significant portion of your profits.

Labour Productivity

In technical terms, it lowers your labour productivity ratio. Your productivity ratio is how much output in Rands is delivered per hour by an employee and should be monitored closely in labour intensive industries. Employees who partake in buddy clocking/punching are producing zero Rand of output but adding several hours to your payroll. Thus, lowering your productivity ratio and your bottom-line.

Labour Productivity = Total Output (Rands) / Total Man-Hours

For example, Company X may charge R100 for a particular product or service they provide. For arguments sake, it may take 5 hours to produce that product or service. In this case your labour productivity is R20. Company X generates R20 per man-hour. There is 40 hours of work per week and therefore each employee generates R800 per week. Let’s say you pay each staff member R400 per week, your profit would be R400. Let’s see what happens when you experience time theft (per week):

Hours of Time Theft Labour Productivity Revenue generated Profit
0 R20 R800 R400
5 R17.50 R700 R300
10 R15 R600 R200
15 R12.50 R500 R100
20 R10 R400 R0
25 R7.50 R300 -R100

In this example, 1 hour of time theft per day results in 1 whole product/service being produced. Over the year you are paying a staff member over a week of free pay. You can see how easily this can add up based on the size of your workforce. While one hour here and there may not seem material, your forgone profit may be the difference between a great year and an average one or, in extreme cases, the reason you need to shut down your business.

The Statistics

While we cannot compare ourselves to anything from America, the American Payroll Association conducted a pertinent study on the issue and here are some findings, bear in mind that these were only employees openly admitted to time theft:

  • 75% of companies lose money from buddy punching
  • Employees reported stealing roughly 4.5 hrs/week – 6 weeks of free pay
  • In total, buddy punching accounts for approximately 2.2% of gross payrolls.

What is 2.2% of your payroll?

The Solution

Time and attendance solutions are generally the answer to this problem. Many T&A systems still lend themselves to buddy clocking and time theft. Biometrics systems work however, they are expensive to implement, and staff get frustrated waiting in lines. Not to mention a biometric system does not work if your staff are on the move.

In 2018, smartphones are becoming a useful tool for business and this is no different when in comes to time and attendance. There are several cloud-based clocking systems which utilise apps to create convenience for staff to clock in and out. ClockInstant is one such system built in South Africa for the South African environment, it uses Bluetooth proximity beacons to ensure staff can only clock in when they are on site with the added benefit of being free from data costs. The app is unique to each employee and with no logout feature it is impossible for staff to partake in buddy clocking.

This is an exciting time in workforce management. With the technology available today, issues like buddy-clocking are starting to be solved. Which will save the market billions of Rand in stolen labour costs. It is time to use the advancement in technology to your advantage.

 

This article was produced courtesy of the ClockInstant team, 

ClockInstant is a startup that focusses on productivity growth solutions for SMME’s in emerging markets. Our simple, single feature, one-click time tracking solution allows employers to track staff anywhere ensuring they are on time, in the right place, at the right time. 

You Might Also Like…

https://clockinstant.com/how-to-get-the-most-out-of-technology-for-your-business/ 

https://clockinstant.com/can-productivity-tools-actually-make-you-money/

https://clockinstant.com/options-for-staff-time-tracking-in-2018/

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