The cost of buddy punching

As organizations continue to look at ways to reduce costs during the current economic downturn, a lot of focus is turning to labor, which for many companies represents their largest variable expense.

One of the biggest ‘offenders’ when it comes to artificially increasing labor costs is "Buddy Punching".

Buddy Punching is when employees enter time for each other.  For example, employee A, punches in or out for employee B, such that employee B benefits from receiving pay when they are not physically present or working.

Some people like to call this time theft but regardless of what you call it, you can bet its costing your organization a lot of money.  And as can be expected, in times of economic uncertainty, the incidence of buddy punching increases, as employees try to gain as much advantage (i.e. money) as possible.

According to Kronos , 19 percent of employees admit to buddy punching once a year, and these costs can reach from 1.5 percent to 3 percent of gross annual payroll.   Others suggest this could be as high as 5%.

Nucleus Research , a global provider of IT advisory and research services, found that 74 percent of organizations experience payroll losses directly related to buddy punching. Nucleus found that organizations can save 2.2 percent (on average) of gross annual payroll by eliminating buddy punching.

One McDonald’s franchisee with 85 locations in Venezuela claimed to have reduced his annual payroll spend for his 3,400 employees by 22 percent!  Now that’s what I call a Real ROI.

Imagine an organization with 5,000 hourly employees each making $10.00 per hour and working an average of 20 hours per week.  This translates to an annual payroll of 52 million dollars!  So a savings of just 1 percent would equal 520,000 dollars per year.  A 2 percent savings would result in just over 1 million dollars.

And the beauty here is that all the savings go direct to the bottom line.  For many companies today, this could mean the difference between finishing in the black or the red.

Try out your own scenarios and see how much money your organization is losing at www.entrypointglobal.com/buddypunching .

The sixty-four thousand dollar question is how do you prevent buddy punching and reduce labor costs?

Well really, the only sure-fire way is to implement biometric time collection devices like punch clocks.  A number of companies sell these devices today and the technology is well proven.  Couple this with a well implemented Time and Attendance solution and you can see even more savings.

What are you doing to manage your costs?  Are you sure your labor costs are not artificially inflated? The cost of doing nothing is higher than you think!