January 17, 2022

Are Complex Calculations Wreaking Havoc on Your Payroll Processes?


Payroll accuracy is one of the hallmarks of a well-run organization and is critical for successful workforce management. Not only do employees expect to be paid fairly for their work, but delivering accurate pay on time also helps you offer a positive employee experience.

However, getting payroll right isn’t always easy, especially when you need to solve complex calculations related to employee working hours. And when your workforce works nontraditional hours or round-the-clock shifts, it can be even more challenging to classify hours and perform the calculations in time for the next payroll run.

Leading Causes of Complex Payroll Calculations

Payroll is simple when every employee works the same hours every week, but that’s not the reality in most organizations. For example, when managing a hospital or health system workforce, you may have hundreds of employees working various combinations of hours over several shifts in the payroll cycle. Employees not only work part-time and full-time schedules, but also work overtime across shifts, making pay difficult to calculate without overpayments or underpayments.

Healthcare and other 24/7 operations aren’t the only ones facing complex time and attendance calculations for payroll. The following factors can add more complexity to the payroll process in any organization:

Individual employee contractsVariations in employee shifts and pay ratesChanging labor law requirements for overtime, break times and employee leavesCollective bargaining agreements that set requirements for overtime and regular working hours

Examples of Complex Labor Calculations and How to Resolve Them

Accurate time and attendance tracking is at the heart of payroll. After all, if you can accurately calculate working hours, it’s much easier to translate those hours to the correct pay.

To achieve efficiency and accuracy in employee pay, you don’t need more powerful spreadsheet programs. You need automated payroll processes driven by employee time clock software. In fact, in a Deloitte survey of payroll professionals, respondents named time and attendance systems as the primary component of an effective workforce management strategy.

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Calculating employee pay doesn’t have to be time-consuming and fraught with errors. Here are some examples of complex time tracking calculations that employee time clock software can help simplify:

Shift Differentials
You may have employees eligible for shift differentials as an incentive for working nights, weekends, and less desirable hours. In such cases, employees who work certain hours or shifts can earn a higher pay rate for those hours. However, the challenge with calculating shift differentials is that you can confuse pay rates, depending on the hours employees work and when they work them. Adding overtime to the mix only increases the complexity.

Integrated time and attendance software simplifies shift differential calculations by automatically assigning the correct pay rate to the hours and shifts employees work. As employees clock in and out, the system performs the calculations for payroll, saving time and avoiding calculation errors.

Step-Up Shifts
Individuals in technical or specialized roles who occasionally work at a managerial level may be eligible for “step-up” shifts for extra pay. Commonly seen in healthcare organizations, step-up shifts can add complexity to payroll calculations if you cannot differentiate between regular and step-up hours and rates.

Automated time collection software can track employee step-up shifts in real time. This software gives you visibility into the impact of those hours on employee pay and any overtime hours worked at the step-up rate. By the end of the pay period, you can easily see who worked step-up shifts and how those hours translated into their pay.

Floating Pay Periods
Having some employees who work according to different pay periods can make it difficult to get an accurate picture of your total payroll expense for a given period. However, with configurable time tracking software, you can manually define pay periods and capture all the hours an employee worked in a given shift. When it’s time to run payroll, you don’t need to perform a second set of calculations for employees working on a floating pay period, as the software has already done it for you.

Workweek Finalization
When employees have a set workweek based on contractual requirements or internal policies, you can use your time tracking software to automatically complete employee working hours with a workweek finalizer.

For example, if an employee is contracted to work 40 hours in a given week but only works 38, the workweek finalizer can pull the missing two hours from the employee’s paid time off. This capability not only enables you to maintain compliance with collective bargaining agreements, but also ensures employees receive their contracted pay without surprise underpayments.

Extra-Duty Hours
In K-12 schools, it’s common for teachers and other employees to work extra hours on activities not included in their employment or labor union contracts. For example, teachers may provide after-school support for Title 1 activities, or they may coach a sports team for extra pay. Employee time clock software makes it easy to differentiate contract hours from extra-duty hours. The system can also be configured to separate the pay for extra duty from contractual pay.

Simplify Workforce Management with Payroll Integration

Given the many variables that can complicate your payroll process, you only waste time and increase the risk of errors by relying on time cards and spreadsheets. Moreover, manual payroll processes don’t help you manage the complex calculations that accompany variable work shifts and schedules.

Because time tracking and payroll go hand in hand, it’s not difficult to see how integrated solutions can help you track employee hours more efficiently for accurate, on-time payroll. With solutions to help you stay in compliance with collective bargaining agreements, contractual limits, and unique schedules, integrated time and attendance software is a game-changing solution that improves visibility into your payroll processes and labor costs.