TIMEKEEPING AUDIT

Steven Cesare, Ph.D.

A landscaper from California called me the other day to request that I perform an audit of her company’s timekeeping process. While initially surprised by the request, I readily acknowledge the critical value that audit procedures (e.g., OSHA, SDS, I-9s, wage fairness) serve in verifying legal compliance. After discussing the terms related to the audit (e.g., it was not part of any legal proceeding, size and scope, administrative follow-up), we agreed that I would review 50 employees’ daily timesheets for the most recent bi-weekly payroll period, from both organizational branches (i.e., 100 total employees).

Audits are fundamentally tedious, fixated only on detail, requiring complete accuracy to determine personal and procedural accountability. Based upon our agreed-upon terms, I would evaluate each automated time sheet culled from a cell phone timekeeping application for: employee name, identification number, hourly wage rate, daily shift start time, daily shift end time, daily meal period start time (i.e., California employers must offer all non-exempt employees an unpaid meal period before the beginning of their fifth hour of work each workday), daily meal period end time (i.e., California state law requires an unpaid meal period of at least 30 minutes for all work shifts longer than five hours each workday), total regular hours and overtime hours worked per day and per work week, the employee’s signature, and the supervisor’s signature.

Let the games begin!

Positioned in the main conference room, with 100 employees’ numerous timesheet records stacked in alphabetical order (per our negotiated agreement cited above), I selected the first document to examine. In keeping with standard audit procedures, all timekeeping records were reviewed and then double-checked, to minimize the likelihood of any bleary-eyed errors that any auditor can make.

Slowly, steadily, and sedulously, I used my pen as a pointer on each timekeeping record cell to ensure my attention on the isolated information being reviewed, did not wander into reverie. Eventually, with more than half a day of my life now lost forever, the records were checked, re-checked, and summarized.

I was shocked!

More than 40% of the timesheets had errors; frequently characterized by multiple errors per timesheet. The most common errors included: blank cells (e.g., no information provided for shift start time, supervisor signature, or end of meal period), miscalculations of daily/weekly work hours and overtime hours, and legal errors (e.g., meal periods starting after five hours on the job, meal periods lasting less than 30 minutes).

Upon my formal and alarming presentation to management, I inquired about the company’s actual timekeeping process: (1) At the end of each workday, the Foreman completes the timekeeping app for each of his/her Crew Members and (2) then forwards that information to the Field Supervisor who reviews, approves, and forwards that information (3) to the Department Manager who repeats the same process before forwarding it to (4) the Payroll Clerk who compiles the information as preparation for the check run that is ultimately approved by the (5) Payroll Manager.

Five employees saw the same records that I did, and did not catch a 40% error rate; five employees should be written up immediately! Of course, I’m sure this payroll period was simply an outlier with every other payroll period being error free. As you would imagine, I did not volunteer for that cross-validation study.

With a presence in 46 states (have Alabama, North/South Dakota, and Montana call me) I can attest that in most states, the employer is solely accountable for all timekeeping records, accuracy, and compliance.

To that end, I strongly recommend that companies: (1) develop a detailed timekeeping SOP, (2) train all employees associated with that SOP on their unique, sequential responsibilities and hold them directly accountable, and (3) conduct monthly timekeeping audits to verify the integrity of their timekeeping system.

While I’m sure your timekeeping process does not have a 40% error rate, what error rate do you think it is?

Oh, that’s right. The correct answer is supposed to be zero.

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