Developing a Budget for a New Time and Attendance System
Planning and budgeting-out a time and attendance system, even for small and mid-sized companies, can sometimes take months and an entire team, depending on requirements and goals.
Equipped with the right information, however, even the most complex roll-outs can be managed by your team with confidence.
This article will help you identify important purchase considerations, best practices, and ways to save money when budgeting a new time and attendance system.
Initial Project Planning
Purchasing a new time and attendance system requires careful planning. It can be a significant investment and a complex process.
Forming a decision-making team is critical to selecting and implementing a successful and cost effective solution. The first step is to choose a team leader to coordinate your internal efforts and serve as your company contact for vendor outreach.
Next, ensure each department is represented on your team. At the very least, for small company roll-outs, solicit feedback and recommendations from each department.
Each team member should evaluate your current time and attendance processes to highlight areas of concern as well as what can be improved. It’s important to provide ample time, up to a month, for each department to evaluate current processes, systems, and limitations. We recommend a month of preparation in order to let payroll issues and other remuneration challenges come to light.
Next, your team will need to define what is required for your new system. Identifying critical versus optional functions will allow your team to determine the best, and most affordable, set of options for your company. We suggest creating a list of all of the features and rules required for your ideal system and rate the importance of each optional feature.
Let’s review some of the time and attendance budgeting considerations we recommend discussing with your team.
10 Essential Time & Attendance System Budgeting Considerations
1. Scope of System
When considering time and attendance systems, the scope can refer to the number of employees managed by the system, the number of locations, mobile support, and so forth.
First, figure out how many employees you’d like to track in the system. Most time and attendance providers charge by the number of employees in the system, so ask what discounts you might receive at your headcount. Most providers offer discounts for enrolling more employees. You will then be able to decide if you should keep all employees in the system, or limit the system to non-exempt employees only, for instance.
Minor employees must also be taken into consideration. Being mindful of labor laws is vital in minimizing legal risk. Using an automated time and attendance system enables the use of automatic scheduling, which can prevent minor employees from working past their legal limits.
If your organization employs union members, you’re probably familiar with the challenges of ensuring proper payment and working conditions for them. Many human resource managers wouldn’t believe some of the creative compensation rules union requirements necessitate.
Most time and attendance systems, however, are not robust enough to manage minor employee rules or union rules effectively. If you employ minors or union members, make sure your time and attendance software supports the management of these employees, like Acumen’s software does.
Intuitively, you probably already have a good idea of what kind of hardware you want. Based on internal buddy punching problems, you probably know if a proximity system will suffice or if you require a biometric system that verifies employees’ identities.
Regarding time clocks, your options will span from very basic to advanced biometric systems that support facility access control, bell ringing systems, job tracking, and shop floor automation. It goes without saying that you will need to budget more for each feature you want to include.
Time and attendance hardware you will need to consider purchasing includes:
- Time Clocks (Standard, Proximity, or Biometric)
- Handheld Mobile Devices
- Company Cell Phones (for Mobile Workforce)
- Access Control Systems
- Networked Wall Clocks
- Barcode Scanners
Many vendors offer rental programs for hardware. Others will sell employee time clocks and other hardware directly, reducing long-term costs. A best practice when reviewing hardware is to ask how you will be charged for hardware because it can greatly inflate the total cost of ownership to rent a time clock indefinitely.
Of course, for budgeting purposes, you’ll need to estimate costs and multiply by the quantity you’ll need. Most commodities like cell phones and barcode scanners can be found on any eCommerce site.
However, time clocks, handheld mobile devices, access control systems, and some networked wall clocks can be hard to find on eCommerce or shopping comparison sites because many offer too many options that change the pricing. You’ll need to ask vendors for quotes on these items based on your specific configuration. Biometric functionality, ethernet connectivity, and advanced functions might all influence the price of a new piece of hardware.
If you’re buying more than five or ten units of any given hardware, be sure to ask about quantity discounts. For time clocks, most vendors will offer a discount at quantities of five or more.
Each additional time clock will cost at least another $500 to $1,500 or more, depending on the model time clock you are purchasing, the amount of employees to be managed, and the desired features. Rugged time clocks and more advanced time clock systems go at a premium, so plan accordingly.
The purchase considerations for time clocks are extensive- too much for this small section. For more information about selecting and purchasing time clocks, check out our free Time Clock Buying Guide.
3. Managing Multiple Locations & Mobile Employees
Next, you need to know how many employee time clocks you will need. Most companies affix time clocks at every (primary) entrance. This provides fast and convenient punching for any and all employees.
In our experience, it’s often best to use a realistic approach regarding the number and location of time clocks. If you have 100 employees who clock-in at 8:00 sharp, it might be problematic to only have one clock. Employees who arrive on time will have to wait in line to punch-in and may ultimately complain (or sue) because of lost wages.
Another important consideration regarding locations is whether or not the system needs to manage more than one time zone. If your company has locations across the US or across the globe, you need to ensure the vendors on your short list support multiple time zones, and you also need to budget accordingly if the vendor charges a premium for this feature.
In addition, before implementing a new time and attendance system, ask yourself the question: “Do I need to track mobile and off-site employees in the system along with all other employees?”
If so, you will have to ensure the vendors on your list support this function.
Cost considerations for mobile workforce tracking include a fee for an additional module (in most cases) and/or company-issued cell phones, depending on the vendor’s implementation model.
4. Advanced Time & Attendance Functionality
Next, you will need to decide if your system requires other advanced functionality within the time and attendance system itself. Most vendors offer a basic system with the option to upgrade to fit specific needs.
If your only intention in purchasing a time and attendance system is to clock employees hours, then no additional software or programming should be needed, no matter the vendor.
If you would like your system to perform additional tasks such as advanced payment capability, benefit accruals, or a points/demerit system, almost all time and attendance vendors charge a premium. These additional features, if desired and implement, are often worth the cost and usually pay for themselves.
Time & Attendance Enhancement Modules Often Include:
- Support for Larger Company Sizes
- Support for More Administrators or Supervisors to Use System
- Benefit Accruals
- Advanced Payment Capability
- Overtime Tracking
- Shift Differentials
- Pay Classes
- Task & Labor Tracking
- Cost of Labor
- Skills & Certifications
- Points & Demerits
- Automated Alerts
- Time-Off Management
- Employee Communication
- Email Templates
- Self-Service Employee Portal
- Mobile Support
When selecting software vendors, you should start with some background research. Review their websites, and make sure they offer the functionality you are looking for. Contact the vendors who do, and check which companies charge a premium for each individual feature.
If the quotes you receive are far more than you expected and plan to budget, you should reconsider certain features to better fit your budget. Remember, the more functionality you require, the more money you will need to budget for your system. Know what features are necessary for your desired functionality, and which you can omit to fit the budget. Some providers may even be able to support advanced features after implementation, allowing your business to scale up features and services over time.
5. Adjunct Systems & HR Shared Services
An emerging HR best practice is HR Shared Services: sourcing several HR products, as well as related IT and security products, from the same vendor to reduce overall costs. It’s a similar idea to bundling services to receive a discount, only now many vendors are offering a broader range of products to help pass-on the savings to their customers.
When reviewing vendors, make note of the complementary systems and services each offers if you’re interested in expanding the scope of your project beyond typical time and attendance functionality.
Common Adjunct Systems Include
- Advanced Scheduling
- HR Management Systems
- Employee Self-Service Portals
- Access Control
- Notification Control (Signal Start and End of Shift)
- Job Tracking
- Manufacturing Automation
- Inventory Control
A best practice when considering HR shared services is to be wary of “vendor lock-in.” HR shared services are great, sure, but the largest providers make a business practice out of surprising customers with hidden fees (like perpetual hardware rental).
If you’re considering any of these adjunct HR systems, we recommend reading our full HR Shared Services Buying Guide for more information.
6. Delivery Model: Licensed or Cloud Time & Attendance
Two options are available when choosing your software model: the traditional licensed software delivery model, and the web-based cloud model (sometimes called software as a service).
Purchasing licensed software is a one-time expense that allows you to run the software on your internal systems. With a licensed system, the payment schedule will vary by vendor. Some require an up-front payment with the remainder due following implementation. Others may require 100% up-front. It’s important to learn when payments are due for budgeting (and cash flow) purposes.
Cloud service involves signing up for a service through a software provider. Cloud providers will charge a recurring fee, but this will be in return for a widely available system that is much easier to implement. Sometimes cloud systems are easier to obtain management approval with, because the costs are incurred on a predictable monthly basis. If a large payment isn’t palatable for your business, the lower monthly payments associated with cloud delivery may be a better option.
Traditional licensed systems often require specialized hardware that your business has to run itself, usually requiring dedicated IT staff and a thorough implementation of licensed software. This initial set up can take longer to establish than cloud systems that are operational soon after deployment, but on the other hand may give some businesses the direct control they need.
We encourage you to learn more about this topic with our in-depth comparison between licensed and cloud time and attendance solutions.
7. System Interoperability & Shared Database
Another line-item to consider in your budget is interoperability between business systems. This goes beyond a simple file export to your payroll system; true system integration will synch communications between your time and attendance system, payroll system, HR management system, ERP system, databases, and other manufacturing and business systems.
Ideally, your business systems should share a database to reduce data entry redundancy and eliminate errors. This synchronizes your business systems, reducing headaches and busywork.
Many vendors simply do not provide true system interoperability; they just export a file for payroll. Before creating your vendor short-list, find out which vendors offer true integration services for their time and attendance solution.
Regarding hardware, a few select vendors, including Acumen, will integrate new systems with many types of legacy hardware. This will allow you to keep any existing time clocks you may have instead of purchasing completely new hardware. Keeping your existing hardware can reduce your budget significantly when planning a new time and attendance system. Experienced vendors will be able to replace old time clocks individually instead of swapping-out entire fleets.
If your company does not have an IT team, you will also need to consider costs for having the vendor integrate the system for you. Ask how much can be done remotely and if any technical employees are required on your end.
Integration services almost always include travel expenses and per-diem labor costs, so plan accordingly based on where your potential vendors are located.
8. Regulatory Compliance
Meeting regulatory compliance regulations is vital to mitigate litigation risks for your company. If your company is subject to regulatory compliance, you will want to make sure the software you are purchasing complies with all necessary regulations. While regulations vary by city, county, and state, we encourage your to read up on our expert insights on maintaining compliance with time and attendance software:
- Learn more about regulatory compliance as it pertains to time and attendance.
- Learn more about time and attendance recordkeeping requirements.
- Learn about tip tracking requirements for tipped employees.
9. System Integration & Setup
Unless you have one set of remuneration rules for all of your employees (which is probably not the case) you will undoubtedly need at least some assistance with the initial integration and configuration of your system. Without assistance from an experienced vendor, your implementation may result in undue headaches, project timeline extensions, incorrect compensation or accruals, or even payroll failure because the system was not setup properly.
To get an idea of some of the complexity that goes into the configuration of a new time and attendance system, we’ve provided a list of some of the steps involved in a typical roll-out:
- Types of Time to be Tracked & Rates
- Labor Calculation Rules
- Labor Distribution (Departments, Groups, Positions, etc.)
- Benefit Accrual Rules
- Define System Exceptions
- Employee & Supervisor Security Profiles
- Lunch Parameters
- Holiday Rules
- Payroll Integration
- Other System Integration
- Time Clock & Hardware Communication & Integration (Network & Firewall Management)
- Web-Based Clocking Setup
- Employee Information Database Import
- Assign Employees to Appropriate Supervisor
- System Testing
Ensure that you are working with a vendor that is fully capable of integrating your system to your needs, such as Acumen.
Consider a support program as a way to insure your investment. Many vendors charge a premium for emergency service calls, sometimes up to a couple hundred dollars an hour, so the cost of support can quickly pay for itself after one incident.
If you require a licensed software roll-out, signing up for a support program will be much more cost effective in the long run. However, you’ll have to determine if the complexity of your system justifies spending 10% to 15% of the initial sale (typically) on an annual support program.
Cloud systems almost always come with built-in support. It’s built-into the costs of the service since you’re paying a monthly fee. This eliminates the need to purchase an additional support program for your software.
How to Budget Using ROI Calculations
It’s important to remember that time and attendance systems are money savers, unlike most other capital equipment expenses. This means that time clocks can often be demonstrated, when used properly, to pay for themselves with the money they save your business.
Even so, it is possible for this type of equipment to be misused. For example many small companies opt for a simple system instead of a biometric system to save a few hundred dollars on the front-end. These companies, however, are just not considering the total cost of ownership; a few unscrupulous employees with a buddy punching scheme can easily negate any savings incurred from buying non-biometric terminals.
Regarding complete time and attendance systems, including both the software and the employee time clocks, you won’t find anything decent for under $1000 these days. $1000 will buy you an integrated time clock and basic software via cloud delivery. Of course, this means you’ll be paying a fee per employee per month in addition to that upfront $1000 payment. Anything lower than that would definitely fall into the “too good to be true” or “there must be a catch” categories.
Price shouldn’t be prohibitive, though, especially at the $800 level. According to Nucleus Research, employee time and attendance systems can save approximately 2.2% of an employee’s gross yearly salary. For a company with 25 employees earning an average of $22,000, that equates to a savings of $12,100 in the first year alone. Chances are, this company’s time and attendance system will pay for itself within the first year.
It’s easy to see why it can be very valuable to calculate your time and attendance system ROI before making any decisions. So how can you get a rough idea of how much you can save each year by implementing an automated time and attendance system?
The APA estimates that the time to review each time card manually is about 7 minutes. This is seven minutes of your time per employee that can be saved by automating your time and attendance system. Add an estimated 1% to 8% of total payroll for time card calculation mistakes- and 49 minutes of wasted time per employee per day (both APA estimates)- and you will be able to calculate your actual potential savings.
For more information and a built-in ROI calculator for your unique needs, please refer to whitepaper on Calculating Return on Investment.
As a best practice, we recommend considering quotes from vendors that equate to about 6 to 12 months’ worth of savings. A basic system should cost less than the equivalent of 6 months’ savings. However, complex time and attendance systems with adjunct services like advanced scheduling or access control will require the equivalent of 12 months of projected savings.
Budgeting is only one aspect of the implementation process. You can always learn more from Acumen’s expert insights.
- Time & Attendance Software Buyer’s Guide
- Employee Time Clock Buyer’s Guide
- ROI Whitepaper with Built-in ROI Calculator
- Licensed Vs. Cloud Time & Attendance
Experts in Timekeeping and Employee Scheduling
Acumen Data Systems is a leading provider of time clock and employee scheduling software. We help organizations manage their most valuable resources, the human kind. Acumen offers robust solutions for time and attendance, scheduling and leave management.
We believe that technology is just one quarter of the workforce management pie. Employees, policy, and the environment are just as important.
Do you have questions about budgeting a new time and attendance system?