ROI of using time and attendance software

Before buying any software, you should calculate the return on investment (ROI) of your purchase by quantifying the costs of implementation vs. the benefits it provides. In other words, ROI measures the gain or loss caused by spending time, efforts, and money on an investment important for business financial decisions.

Here under the details needed to calculate the ROI of using time and attendance softwar such as iVisionMT Suite using conservative estimates and official information provided by The American Payroll Association (APA):

Basic information

Number of employees in payroll: 100
Standard hours employees work in a pay period: 40 hours per week
Employees average hourly rate: US$10
Time to review and total each time card: 3 minutes (the APA estimates 7 minutes)
The hourly rate of the person reviewing the time cards: US$10
Percent of error in cards calculation due to rounding, calculation errors, transposition errors and improper application of payroll rules: 1% (the APA estimates 1 to 8%)
Time lost everyday per employee due to late arrivals, early departures, long lunches, and incorrect totaling: 20 minutes (the APA estimates 49 minutes)

Card audit savings:

Studies have shown that manual calculation of time cards takes approximately 7 minutes per card each pay period. Conservatively we have estimated 3 minutes per card. Automation will reduce that to 1 minute per card.

Minutes saved per card x number of cards = 2 min. x 100 cards
Total savings = 200 minutes
Total minutes saved weekly (5 days) = 1000 minutes
Total hours saved weekly = total minutes / 60 minutes = 16.6
Payroll clerk rate x hours saved weekly = savings in dollars weekly = $166
Monthly savings (4.33 weeks x weekly savings) = $718
Yearly savings (52 weeks x weekly savings) = $8,625

Savings from eliminating errors:

Studies have shown inaccuracy in the calculation of totals to be between 1 to 8%. We have used 1% which is the minimum.

Number of employees x average hourly rate x average hours worked weekly = total weekly payroll expense = $40,000
Total weekly savings from the elimination of errors is the total weekly payroll expense x the 1% human error factor = weekly payroll x 1% = $400 weekly savings
Weekly savings x 4.33 = $1,732 monthly savings.
The savings recaptured yearly is equal to the recaptured weekly saving x 52 weeks in the year = weekly savings x 52 = $20,800 yearly savings.

Savings in lost time:

Lost time or "time theft" savings consists of wages recaptured by the systems rounding and restriction capabilities. The average weekly "theft" (buddy punching, long lunches, tardiness, etc.) is 49 minutes according to the APA. We estimated a conservative 10 minutes.

Daily lost productivity = 10 min. / 60 min. = 0.16 hours
0.16 x average employee rate = average wages overpaid daily = $1.6
Multiply by 5 days = average wages overpaid weekly = $8
Multiply by number of employees = the total wages recaptured weekly = $800
Total wages recaptured monthly = total wages recaptured weekly x 4.33 = $3,464
Total wages recaptured yearly = total wages recaptured weekly x 52 weeks = $41,600

Total savings:

Weekly audit savings = $166
Weekly error savings = $400
Weekly wages recaptured = $800
Weekly payroll savings (all above) = $1,366
Weekly savings x 4.33 = $5,914 monthly savings
Weekly savings x 52 = $70,977 yearly savings

Now, if you calculate the costs of implementing time and attendance software including software license, required hardware, implementation costs, training, and annual support, the clear numbers will be as follows:

For 15 employees, ROI will be at least $5,000 per year
For 25 employees, ROI will be at least $8,000 per year
For 50 employees, ROI will be at least $15,000 per year
For 100 employees, ROI will be at least $28,000 per year
For 500 employees, ROI will be at least $120,000 per year
For 1000 employees, ROI will be at least $200,000 per year
For 5000 employees, ROI will be at least $1,000,000 per year