Ways to Benefit From a T&A Checkup
With the implementation of the Tax Cuts and Jobs Act (TCJA; Pub. 115-97), the IRS developed its Withholding Calculator to assist taxpayers in determining if they are contributing enough federal income tax each pay date. The IRS has coined it as a “Paycheck Checkup.” As heavily regulated as payroll compliance is, what other areas of payroll would benefit from a checkup? To be honest, all other areas would. Let’s start at the beginning with the input of time. When was the last time your time and attendance (T&A) system had a checkup?
Check Structure, Hardware
Look at your current T&A system and identify how time is captured. Is all employee time being captured according to federal, state, and local laws? The federal courts, under the Fair Labor Standards Act (FLSA), have regularly applied the de minimis doctrine, where as much as 15 minutes per day can fall under this category as noncompensable time if the employer shows that the record of time is administratively difficult to track. In July 2018, the California Supreme Court rejected the de minimis doctrine in Troester v. Starbucks Corporation. The court did not dismiss the doctrine altogether, which left many California employers questioning if its time policies were in compliance with the new ruling.
Other methods of capturing time may need to also be reviewed, including logging in time on mobile devices so employees can remain compliant with the ever changing local, state, and federal rules. Mobile devices may also be a necessity for a growing population of remote workers. An overall review of time clocks may also be necessary to catch up to technological advances. Biometric time clocks have improved greatly over the past few years and now include fingerprints, hand analysis, DNA, hair and facial recognition, eye (iris and retina) recognition, and voice recognition. Would your company benefit from the investment of this type of T&A system to avoid “buddy punching,” manipulation of time sheets, or other forms of time theft?
Check Good Time In/Good Time Paid Out
Is your T&A system only a tool to capture time? In today’s multi-tasked business world, employers must identify what else their companies would benefit from when capturing related data. Pay rates may be stored to allow the employee to view their ongoing calculated pay. This would be helpful as payroll moves towards a “pay now” or possibility. Employee work schedules built within the system would be helpful to compare with actual hours worked for metrics.
Is the employee responsible for reviewing their time and approving it? Are managers responsible for reviewing and approving their employee’s time? Is there a clear view of the workflow approval process leading up to the employee’s hours worked being paid out? In some T&A systems, an alert is triggered within a certain amount of days and warns employees and managers that there are errors on their time cards such as missing punches, incomplete daily hours, and no clock in/out for mandatory meals and breaks.
Check Calculations and Then Check Again
In 2018, there were four proposed Department of Labor (DOL) Wage and Hour Division (WHD) regulations:
- Tip pool under the FLSA
- Regular rate of pay under the FLSA
- Expanding apprenticeship and employment opportunities for 16- and 17-year-olds under the FLSA
- White-collar exemption under the FLSA
Each of these proposed regulations, if finalized, will affect the calculation of pay. How often does your current T&A system upgrade to incorporate new wage and hour laws and regulations?
Other work situations to consider in the capture of time for correct pay calculation:
- Shift differentials (may also be stated in a collective bargaining agreement)
- Rounding rules
- On-call time, waiting periods, compensable travel time, and donning and doffing gear or equipment
- Employee working on a company paid holiday
- Different worker classifications (drivers, medical care providers, police officers, firefighters, and some emergency medical services employees)
- Mid-pay period rate and position changes
This is definitely not an all-encompassing list of time situations to consider, but hopefully it will help identify and capture situations applicable to your company.
Check Regular Rate of Pay Calculations
This specific time and pay calculation warrants a little more of an in-depth dive due to the complexity of the calculation and heavy federal and state enforcement. When reviewing your current T&A system for accuracy of overtime premiums, it is recommended that you include several manual calculations:
- Different positions for multiple pay rates
- Schedules over the pay workweek
- Different states, bonuses, and other earnings (compensable and noncompensable time)
- Retro time (i.e., bonus earned over last quarter)
- Adherence to collective bargaining agreements
If you would like to audit your current overtime and minimum wage setup results from your T&A system, the WHD offers a program called PAID—Payroll Audit Independent Determination. This program allows employers to self-report violations with the intent to correct and true-up any back wages (typically two years) due to their employees without penalty. This program is available until April 2019. Information can be found at https://www.dol.gov/whd/PAID/.
Check Accounting Points
As some responsibilities cross over into other departments, be sure to put on your accounting hat when reviewing your T&A system. Is your accounting team having to post multiple journal entries each month to allocate salary expenses to the correct cost center? A better system would be to develop labor allocation or job costing within your T&A system. Then, ensure this data is captured in payroll for processing to export to the payroll general ledger. This metric in the T&A system can be very useful to your leadership and members of the human resources, payroll, and accounting departments.
Are paid time off (PTO) accruals currently calculating in your T&A system? This calculation is beneficial in a T&A system when the employee uses the same system for requesting time off. The employee can view their balance before requesting the time. It is also beneficial in tracking unpaid time off. One system to store the PTO balances (i.e., personal, vacation, sick, etc.) simplifies the accrual allowed and the taken process calculation. Note: Be sure to check that your exempt employees who entered a full day of unpaid time off in a prior pay period have their current salary reduced during payroll processing.
As we began with the consideration of a T&A system review due to recent legislation, compliance is a perpetually moving function. A T&A system must be proficient in maintaining compliance through quick updates. An example of proposed legislation affecting time took place last March when New York City proposed to make it unlawful for private employers to require employees to view and/or respond to emails and text messages outside of normal business hours, except in emergencies. If this time is considered compensable time when answering an email outside of normal business hours, how will your T&A system track it? The time would need to be considered under federal, state, and local time calculations.
Employees can also track their benefits by using the T&A system to track leave offered under the Family Medical Leave Act (FMLA) and any short-term disability offered. This would be transparent to the employee and aid in the tracking of paid and unpaid hours.
After reviewing your T&A system, if you decide it needs an upgrade, there are two final points to consider—reporting and training. Ensure the T&A system chosen has self-service canned and custom report writing capabilities. This will be a request across all areas of your company. Training should also be provided to instruct the end user how to get the most out of the T&A system. The system should be user-friendly and easy to adopt.
Jennifer L. Cordes, CPP, is Manager of U.S. Payroll for Rackspace. She is a member of the APA’s Strategic Payroll Leadership Task Force (SPLTF) Best Practices Subcommittee and Small Employers’ Best Practices Subcommittee, the Government Relations Task Force (GRTF) IRS Issues Subcommittee, as well as part of the APA’s Education Advisory Committee and the Board of Contributing Writers for PAYTECH. She received the APA’s Meritorious Service Award in 2017.