How a Biometric Time Clock Will Increase Your Retail Profitability In 2022

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Employment Law and Compliance

Updated November 22, 2021

Retail business owners have to juggle many balls to stay profitable. These include managing inventory, competing with the e-commerce giants, handling both online and offline sales, and complying with yet another regulation. All the while, they have to satisfy customers who know as much about their products as the manufacturer. Clearly, it’s a wonder that any small retail businesses survive at all.

Remove a Barrier to Profitability Next Payroll

Today’s post describes a solution to an unnecessary barrier to profitability: employee time theft. The solution is a biometric time clock. A biometric clock makes it virtually impossible for an employee to commit hours theft.

Simply put, time theft occurs when an employee is paid for time he or she didn’t actually work.

In addition to preventing time theft, biometric clocks provide less obvious but equally valuable benefits to everyone in your organization—human resource professionals, payroll managers, supervisors, and yes, even your employees.

We will discuss those benefits after we describe how biometric time and attendance systems lower labor costs. If you are a retail SMB owner, HR associate, payroll manager, or conscientious employee, this article is for you.

Time Theft is an Avoidable Expense

When it comes to retail employee fraud, inventory shrinkage gets the most attention. For many retail businesses, however, time theft is even more widespread and costly.

Accidentally on Purpose?

Of course, time theft isn’t always deliberate. Timecard falsification can be inadvertent. For example, Ryan accidentally enters 9:00 as his clock-in time when he actually starts working at 9:03. On the flip side, time theft can be infuriatingly flagrant; Ashley punches in for Jessica who doesn’t show up until three hours later. (Fire them both!) Of course, the Ashley/Jessica buddy punching scheme obviously inflates labor costs. Consider, however, that a careless 3-5 minute padding committed by a larger percentage of employees may be even costlier, though perhaps more forgivable.

Manual Timekeeping Systems are Fraught with Error

By and large, time theft is more likely if you have a manual system. In other words, it it requires employees to recall shift punch times after the fact. And that’s not the only vulnerability. After that, of course, they have to manually enter punch times on a timecard.

In the end-of-pay-period scramble to submit timecards, do you really think your employees err in your favor when guesstimating? It’s hard for most people to recall what they ate for lunch yesterday let alone when they clocked out last Thursday. An outdated system that requires employees to fill out either a physical or digital timecard is an unnecessary time-waster and a relic of workplaces of the last century. (Come to think of it, last millennium.)

Do all the Dishonest Employees Work For You?

Did you know that wage theft is so common that business consultants routinely recommend that employers take it into account when planning labor budgets?

According to an anonymous study conducted by Kessler International: of 500 employees working in the retail and service industries, over 30% admitted to misrepresenting work time.

Moreover, it’s not hard to imagine that some don’t admit it even in an anonymous survey. So if you fire both Ashley and Jessica, the two you replace them with may be just as likely to buddy punch for each other. Unfortunately, hiring only employees who are honest 100% of the time is impossible in an imperfect world.

To recap, how do employees willfully commit time fraud?

  • Clocking in early or clocking out late
  • Not clocking out for unpaid breaks and meals
  • Buddy punching

Of course, when you are paying workers for time they didn’t actually work, you are unnecessarily inflating what is already your biggest expense—cost of labor. In addition, labor costs can be unnecessarily high due to human error.

Similarly, how are labor costs inflated non-intentionally?

  • Inability to accurately recall previous shift times
  • Miscalculations when supervisors reconcile timecards
  • Human error when HR managers calculate accruals
  • Data entry mistakes when manually entering hours

Do the Math and Cry

So what’s the financial damage if a typical percentage of your employees are padding their timecards or buddy punching? Estimates range from two to four hours a week per employee. For our example, let’s assume that you are paying an extra three hours a week per employee. If the average hourly wage in your company is $12, and you have 30 employees, the grand total is $56,160 dollars in overpayment each year!

If you have employees who leave the business on the clock to travel to another location, make deliveries, pick up supplies, or run errands, you are even more vulnerable to time theft.

Here’s Your Company Card—Have Fun!

Unfortunately, many employers don’t realize how much they are losing. Failing to prevent employees from fudging timecards makes about as much sense as leaving your stores unlocked at night or giving each employee a company credit card.

The Problems with Swipe Cards

Now, let’s discuss a common clocking method that was supposed to solve employee time theft. We’re talking about swipe or proximity cards. Unfortunately, they haven’t lived up to the promise. For one thing, they get lost. In addition, they can easily be damaged or get dirty. Just as importantly, they can be lent and borrowed. When an employee complains that the machine won’t take his card, you are back to the shaky ground of self-reporting.

Biometric Time Clocks for Small Businesses

So if swipe cards can’t prevent time theft, what is the answer for identifying your employees in a way that can’t be exploited? Enter biometrics. If you are unfamiliar with the term, take it apart. Bio (biological) + metric (measurement). Simply put, biometric technology verifies a person’s identity by analyzing a unique physical or behavioral attribute. The most common physical identifiers for biometric employee time clocks are a fingerprint, palm, iris, or the entire face.

Biometric technology is used in myriad applications such as law enforcement (particularly border control and surveillance), healthcare, and access control. It is also not limited to the hands, face and eyes. Biometric devices can use identifiers such as voice characteristics, keystroke rhythm, and personal odor (insert wisecrack here).

Biometric Employee Time Clocks

For these reasons, biometrics are a match made in heaven for tech-savvy retail business owners. But even if technology isn’t your forte, rest assured that biometric time clocks are not difficult to use. They do, however, make it nearly impossible for employees to steal time. Ashley simply can’t punch in for Jessica anymore. And Ryan can’t fudge his timecard. Derek can’t lose his iris as easy as he can lose a card or fob.

Ease the Admin Burden

Furthermore, it’s best if your timekeeping system syncs with your biometric time clocks. Firstly, your supervisors won’t have to track missing timecard information. Secondly, your payroll manager will automatically have accurate employee hours. Lastly, your HR team won’t have to manually calculate accruals.

If You Aren’t Using Biometrics, You May be Hemorrhaging Cash

Unfortunately, some small business owners think biometric technology is prohibitively expensive. In the example cited previously, however, a retail business with thirty $12/hour employees loses $56,160 a year in time theft. Talk about expensive! And just to reiterate, the estimate is for a typical retail business, not an outlier. Your business might have more time theft than the average.

Increase Profits, Not Overhead

As mentioned previously, retail businesses have many challenges, but shrinking profit margins seems to concern most every owner.  “How can you increase your profits without raising overhead?” By adopting biometric time clocks at all of your locations, you can reduce the big chunk of your overhead that is your payroll expense. Therefore, you increase profits without even touching any of your other fixed or variable costs.

What About Privacy Laws?

Of course, business owners should always pay attention to compliance. Note that many states have restricted the type of biometric information that an employer can require. Before purchasing a biometric system, make sure you know the laws that affect you. Be aware that some biometric clocks (like Swipeclock’s, for instance) have settings that help employers comply with privacy laws.

Once you choose a clock that supports compliance, the next step is reassuring your employees that you are careful with their data. Smart employers will explain the mechanisms that protect employees from the misuse of their data. We can help you educate your employees about our clocks’ data safeguards. At Swipeclock, we have discovered that most retail employers who have adopted biometric time clocks in the past few years received less employee resistance than expected. This is because they were able to adequately address their workers’ concerns.

Hopefully, we have successfully made the case that biometric time clocks lower labor costs for retail SMBs. We will now describe some additional benefits. Keep in mind that this is not an exhaustive list.

Biometric Time and Attendance Systems Increase Efficiency

Many small businesses have implemented smart tech to improve efficiency in areas of operation such as merchant transactions, inventory management, and CRM systems. Strangely enough, however, many HR departments are using outdated systems for employee time and attendance tracking. Let’s look at a typical journey for one timecard in such a system.

The Journey of a Typical Paper Timecard

Firstly, each employee enters shift start, shift end, and break times for each shift of the pay period onto his or her timecard. Secondly, when timecards are due at the end of the pay period, a manager views and approves each employee’s timecard. If there are errors, the manager has to track down the information to make corrections.

Thirdly, the manager submits the timecards to HR. Lastly, the payroll manager manually enters the data into the payroll system.

In total, at least three people touch each (physical or online) timecard in order for the payroll system to generate a paycheck. Now, imagine if each customer sale was this cumbersome.

Biometrics Boost Efficiency

Swipeclock biometric time clocks automatically capture employee punches to the minute. The data syncs with Swipeclock’s timekeeping solutions. Therefore, human error is removed from the equation. And suddenly, your HR team has 20 more hours a week. Certainly, your supervisors will not miss all that timecard detective work!

Biometric Time Clocks Bring Compliance Peace of Mind

Compliance can be a full-time job for the small business owner or HR manager. Large companies have the resources for large compliance departments and  legal teams. Regardless, billion-dollar global companies are penalized for wage hour violations every year. For example, Disney was recently ordered to pay several million in back wages due to an FLSA action.

Retail employers are subject to minimum wage, overtime, family leave, and predictive scheduling. Accurately tracking hours, schedules, PTO, and overtime is priority one when complying with the various labor laws—FLSA, ACA, FMLA—and any local or state-level laws.

For some retail employers who adopted biometrics, the compliance benefits were the greatest motivator. In some cases, even more persuasive than the reduction in labor costs. Accurate employee hours date that can be readily accessed and validated is your protection against a labor violation resulting from either an audit or employee dispute.

Biometric Time and Attendance Increases Employee Accountability and Empowerment

Retail employees who use a biometric time clock know that they will get paid for every minute worked. That type of assurance is valuable for those employees you want to keep; the ones who understand that accountability works both ways. Indeed, a biometric time clock allows you to recognize your employees who arrive on time, punch out for unpaid breaks and meals, and clock out when authorized. Giving credit where credit is due improves morale and lowers turnover. Any employer who has been in business for a while knows how employee attrition significantly increases expenses. In addition, biometric time clocks capture actual time worked for precise overtime and PTO calculations, both of which can be an administrative headache and compliance vulnerability.

In summary, retail employers have much to gain financially from a biometric time and attendance system. However, improvements to workflow, compliance security, employee accountability, and a reduction in time spent on non-billable activities are just as compelling.

Simplify HR management today.

Simplify HR management today.

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