Overlooked overtime, delayed salary adjustments, miscalculations, and other payroll issues usually haunt businesses of all sizes. Such challenges often lead to under-payments, overcompensation, or missed payments.
Improper compensation can quickly spiral into other issues such as mistrust, employee turnover, low morale, and lawsuits. While retroactive pay can help iron out these troubles, it doesn’t solve the underlying root causes of such issues. That’s where a time tracking tool can come to your rescue.
What’s Retroactive Pay?
Retroactive pay is the compensation you pay for an employee’s past work that wasn’t adequately compensated. That way, you avoid disagreeing with your employee.
Proper management of employee payments enhances fair compensation and compliance with labor laws. However, achieving this fit is difficult if you lack accurate time tracking.
Time Tracking + Payroll System = Proper Compensation
Payroll and time tracking are like your car’s front wheel – they go hand in hand. That means your system should integrate and automate the two functions for better success.
With this one-stop system, you can seamlessly convert hours worked to accurate paychecks. The system powers tracking of these components:
- Workers’ regular hours
- Shifts covered
- Overtime and vacation hours
- Both paid and unpaid leave
- Special compensation
- Team members’ attendance
This strategy helps minimize overpayments, underpayments, and missed compensations. It also boosts compliance regarding regular pay and overtime compensation.
The Role of Time Tracking in Retroactive Pay
So, how can time tracking help you achieve best-in-class employee compensation?
- Accurate time keeping
Despite remote work gaining momentum, time tracking methods are still lagging. In fact, 47% of business owners aged 50+ are reluctant to abandon paper-based timesheets. As a result, they contend with issues such as increased incidences of retro compensation, employee time fraud, payroll-related expenses, and poor productivity.
Time tracking helps record your workforce’s regular and overtime hours. This information is crucial in pinpointing pay discrepancies and enhancing accurate compensation calculation.
- Compliance with labor laws
Adhering to labor-related laws is both a moral and legal responsibility. The last thing you want is to deal with is costly lawsuits and damaged reputations arising from inaccurate overtime pay and minimum wage.
In fact, companies spent a total of $253.5 million settling top 10 wage and hour class actions in 2018. This figure doubled a year later.
Accurate tracking of worked hours allows you to evade or reduce these costs. You can quickly retrieve your records and pay every coin that you owe an employee before they knock on the labor union’s doors.
- Efficient calculations
Accurate time tracking also streamlines calculations of compensation. The precise records of overtime and regular hours make the process a breeze, giving you confidence that you haven’t missed any figure.
Ernest & Young (EY) revealed that costly miscalculations and errors are common in companies. And the worst part? Fixing one error can put your company $291 behind. The risk of noncompliance penalties plus financial and mental employee stress are other consequences that can spiral into huge costs.
Minimized errors help shove these issues aside. Plus, you won’t waste costly time doing manual calculations or correcting compensation issues.
- Employee transparency and trust
A proper time record builds and cements employees’ confidence in your compensation fairness. Trust and transparency are essential to improved morale, productivity, and reduced employee turnover.
On the other hand, inconsistent time tracking sparks mistrust and dissatisfaction. The result can be increased legal disputes and a hostile work environment.
The issue can spill over to increased employee turnover and related expenses. In fact, studies prove that replacing a worker can cost up to 9 month’s salary. For instance, if the employee’s annual salary was $120,000, you might spend up to $90,000 to find and train their replacement.
- Audit documentation
Government authorities and external auditors can pop in any time to audit employee hours worked to ensure your company complies with labor laws. Rushing to correct your records might be too late, considering how mistakes can easily hide in mountains of data.
Proactive time tracking helps avail crisp and clear documentation for this purpose. It also speeds up the auditing process and shows your commitment to compliance.
Time tracking also powers stress-free internal auditing. It helps you report taxes and compensations accurately. Other benefits include availing accurate data to workers, pinpointing errors once they crop up, and identifying fraud on time worked.
- Streamlined communication
Frictionless communication harmonizes the work ecosystem. Everyone from human resources to payroll officers and employees will be on the same page regarding hours worked and compensation. But it isn’t easy to achieve this if you’re using paper-based or spreadsheet time tracking systems.
Automated time tracking saves you this pain. You can communicate with your employees and iron out potential disputes and misunderstandings. And in case of a retroactive issue, it’s easier to address it.
- Reduced administration time
Excess manual tracking doesn’t cut it in today’s fast-paced business world. Administrative tasks can quickly build up, giving your employees a nightmare.
According to the Center for Effective Organizations, time-consuming administrative tasks gulp down about 73% of a human resource manager’s time, and failure to automate repetitive tasks can cost you 14 hours a week. The result is low productivity, which could spark human errors in employee compensation.
On the contrary, automated time tracking software capture, process, and record hours worked in real-time. Thus, they free up your time, energy, and resources, allowing you to focus on critical administrative activities.
These tools also help slash human payroll-related errors and boost employee productivity. And that’s how you can reduce retroactive pay.
Time Tracker, Your Reliable Time Tracking Solution
Retroactive pay is a critical aspect of fair compensation. But if it repeats frequently, it might eat into your time, dampen productivity, or cause further errors.
An automated time tracking tool, like Time Tracker, is the linchpin that ensures minimized errors related to employee compensation. And in case of improper compensation, it helps you retro pay your employees appropriately.
That way, it’s easy to stay compliant, streamline calculations, foster transparency, avail audit documentation, enhance communication, and reduce administrative time. But you need robust software to bring these benefits into your company. That’s where Time Tracker comes in. Try it for free and find out how you can reduce issues that may cause the need for retroactive payments.