The Benefits of Conducting Time and Pay Checkup Audits

Berkshire is pleased to present this guest blog, authored by our colleague, Alison Rose, a partner at Resolution Economics. 

Managing timekeeping and payroll processes is a critical function that directly impacts both employees and the organization as a whole. Ensuring fair compensation and accurate payment for hours worked is not only a legal requirement but also crucial for maintaining employee trust and organizational integrity. However, despite its significance, timekeeping and payroll processes can sometimes be prone to errors and discrepancies. Often, these are unexpected and occur despite good policy documents regarding time and pay processes. This is where an audit, or time and pay checkup, of your records comes into play.

Conducting a checkup of your rate of pay and timekeeping records is not just a best practice; it's a strategic imperative for any company committed to fairness, compliance, and operational efficiency. Further, utilizing an outside consultant and your legal department or outside counsel can ensure that the process is protected from discovery should litigation or other issues arise. Here are the major reasons why every company with non-exempt employees should prioritize these types of checkups:

Compliance with Labor Laws

One of the primary reasons for conducting rate of pay and timekeeping checkup is to ensure compliance with labor laws and regulations. Laws governing minimum wage, overtime pay, and other wage-related matters are subject to change, and non-compliance can lead to costly legal consequences. Regular checkups help identify and rectify any discrepancies, ensuring that the company remains in full compliance with the law and also ensures that policies are implemented as expected.

Prevention of Wage Theft

Wage theft, whether intentional or unintentional, can occur when employees are not properly compensated for their work. This can include underpayment of wages, failure to pay overtime at the correct rate, or inaccurate recording of hours worked. By conducting checkups, companies can detect and address any instances of wage theft promptly, thereby safeguarding employee rights and fostering a culture of fairness and transparency.

Cost Savings

Payroll errors can result in financial losses for both employees and the company. Overpayments, underpayments, and inaccuracies in tax withholdings can all contribute to unnecessary expenses. Regular checkups help identify these errors, allowing the company to rectify them and prevent future losses. Additionally, by streamlining payroll processes and reducing errors, checkup audits can contribute to overall cost savings in the long run.

Employee Trust and Morale

Employees place a great deal of trust in their employers to accurately compensate them for their work. When errors occur in payroll processing or the collecting of hours worked data, it can erode this trust and lead to decreased morale and productivity. By conducting a time and pay checkup and ensuring accurate and timely payment of wages, companies demonstrate their commitment to fair treatment and employee well-being, thereby strengthening trust and fostering a positive work environment.

Reputation Management

Payroll errors can have reputational consequences for a company, affecting its image both internally and externally. News of wage disputes or non-compliance with labor laws can damage the company's reputation and brand integrity. A well designed time and pay checkup can demonstrate the company's commitment to integrity, compliance, and fair treatment of employees, helping to safeguard its reputation in the marketplace.

In conclusion, time and pay checkups can be a cost-effective and powerful tool in achieving a company’s compliance and management goals. By ensuring compliance with labor laws, preventing wage theft, optimizing costs, fostering employee trust, enhancing operational efficiency, and safeguarding reputation, these checkups contribute to the overall success and sustainability of the organization.

Don't miss our upcoming webinar on this topic on April 2nd! Save your spot for this live event - Accuracy is Everything: How a Time & Pay Checkup can help protect your company from costly wage and hour mistakes.