Accuracy vital to overtime tracking

As complexities grow, automation makes more sense

The challenges of tracking and paying for overtime hours have been in the spotlight thanks to the recent $600-million class-action lawsuit facing the Canadian Imperial Bank of Commerce that has a bank teller claiming she was not adequately compensated for her extra hours of effort.

The case highlights the grey areas and complexities of overtime hours in Canada — thanks to variations in provincial and federal legislation and different rules among industries and worker levels. And when shift premiums, unionized environments or statutory holidays are thrown in, they all add up to a daunting task for payroll professionals.

“Payroll managers are generally aware of the challenges they have; whether they necessarily know every rule and regulation at their fingertips, I’d say that’s unlikely,” says Aaron Hudson, time and labour management products at ADP Canada in Toronto. “We’re seeing a lot more payroll departments becoming centralized and paying employees in several provinces. That greatly increases the complexities of the regulatory landscape for them.”

And employers should not assume workers are in the dark when it comes to their rights, or at least their pay. According to statistics from the Ontario Ministry of Labour, 15,950 complaints against employers were investigated in 2004-2005 and overtime was one of the top-five concerns (along with vacation pay, unpaid wages, termination pay and public holidays).

“What that tells you is employees are paying very close attention,” says Hudson. “They may not understand the regulations but if they feel they’re being treated unfairly, you can be sure they’re going to ask some questions. Whatever the reason, you’re still subject to the fines and potential loss of reputation in the eyes of current and prospective employees.”

As a result of the growing complexities and demands, many companies are automating time-tracking systems or making upgrades to improve accuracy, workflow, scheduling and costs. An industrial and safety products company in Winnipeg, for example, is in the midst of rolling out a new system that uses electronic time sheets created in-house, which are sent in to payroll every two weeks.

The national company sees frequent overtime on its time sheets as warehouses and retail outlets deal with volume and inventory. The overtime is already rolled up for the pay period, so it’s a matter of educating the branches on overtime policies, says Mark Betcher, payroll team lead at the 2,300-employee company.

“It’s the most efficient I’ve seen,” he says. “It’s a lot better than having everybody send in a time sheet or having multiple pages of stuff come in. The biggest challenge is getting them to submit the information on time because any overtime you incur in the current pay period doesn’t get processed until the following pay period.”

At previous companies, the hard part was getting employees to complete the overtime sheets properly, in compliance with provincial legislation, says Betcher.

“I remember making lots of changes to overtime when manual sheets were coming in. It was just trying to get them to understand — Manitoba’s got very confusing legislation around the overtime. If we were federally regulated, it would be much easier. One thing it’d be nice to see is a little more consistency across the country.”

Many companies are unaware they have policies that actually go above and beyond legislative requirements, says Michelle Wilhelm, senior account executive at TimeTech in Mississauga, Ont., a provider of workforce management solutions. Bringing in a new system is a good time to analyse current processes and requirements and, if needed, change policies.

“Overtime is a major factor for most companies and an increasing factor,” says Wilhelm. “People want to be able to view how much overtime is being worked by each department, by the company as a whole and by each site. They’re trying to reduce the amount of overtime.”

The automated approach can also alleviate hours, especially in manufacturing, she says, as people spend a lot of time adding time cards up before they go to payroll, taking them out of their core functionality.

“Nothing is standard in manual companies so they have different areas of business handling things differently, such as overtime. One does a spreadsheet one way, another another way, so information is hard to find. We like to streamline the process and make one central database.”

To help with improved measurement, biometric scanners are becoming more popular to accurately record employee arrivals and exits. In 2003, retailer Holt Renfrew introduced a new time and attendance system from Workbrain that features biometric scanners to track employee hours on to a time sheet. The 12-store chain was looking for greater accuracy, says Jackie Jorgensen, payroll manager at Holt Renfrew in Toronto.

“It’s a very innovative system. There are rules and regulations built within the system that would kick into overtime if criteria are met for employment standards. It’s all very complex but it’s all built into the background and it works like a dream.”

Employees required considerable training to get up to speed with the new product, she says, particularly as the 2,500-employee company accounts for different types of hours, such as jewelry duty, selling and non-selling hours and attendance at product-knowledge seminars. But since switching from a manual system, the chain has seen far less manual intervention and enjoyed cost savings.

“The other benefit of this system is we’re now rolling out a scheduling system. It looks at historical data and figures out what kind of staff you need on the floor at certain hours. It’s a very sophisticated system; it also takes into account people’s preferences for work — certain hours or days off.”

An automated approach also helps reduce fraud and allows supervisors to put an electronic stamp on a time sheet, so there’s no need for payroll to take the time to check back, says ADP’s Hudson.

“The closer to the people who did the work, the greater likelihood it’s going to be embedded appropriately. The most important customer of the solution is the payroll department because, for them, it’s all about getting the hours already totaled so they can process the payroll quickly.”

ADP’s ezLaborManager allows employees to enter their time into the system in a variety of ways, such as online, time clocks, biometric scanners or by phone. And if the government has questions, electronically stored data is easily provided, he says.

“A lot of demand is driven by larger organizations that may be subject to financial regulatory controls where they need to be very clear about labour costs, particularly if it’s a U.S. company governed by SOX (Sarbanes-Oxley) legislation; suddenly the payroll department is under so much more scrutiny than they were before in terms of the accuracy of their data,” says Hudson.

But in the end, a good business shouldn’t want any overtime at all and an automated solution provides management with better insights into the issues driving overtime and labour costs, he says.

“It means you’re adequately staffed, it means you know what your payroll costs will be on a consistent basis and it means your employees are working a healthy number of hours.”

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