Your time clock tracks the hours your employees work, making sure they are accurately paid for their hours. But if your employee time tracking process is outdated, i.e., using paper and a punch clock, you could be giving employees an opening to steal time. Buddy punching and other types of time theft cost your company money and productivity.

What is Buddy Punching?

Buddy punching is when one employee clocks in for another who isn’t actually at work. The “buddy” is usually a coworker who uses the employee time clock to punch another employee in or out. For example, if an employee is running late on a Monday, he or she might ask a co-worker to punch them in on time. Or say an employee wants to leave the jobsite early to get a head start on Friday night plans, so he asks another employee to clock him out on a punch-clock at the correct ending time.

That buddy punching, especially if done regularly, can cost you big time. Implementing processes or technologies that nip time theft in the bud, not only saves your company money but lets any dishonest employees know fudging hours will not be tolerated.

Time Theft is Fraud

Buddy punching is one type of time theft and no matter what your employees’ think, it is fraud. Time theft is a huge, but hidden, problem across virtually all industries. The most basic definition is any instance of an employee accepting payment for time they didn’t actually work. Employees can unknowingly steal time, like forgetting the exact hours they worked, or casually steal it by fudging 10 or 15 minutes here and there. But employees can also willfully steal time. According to Fraud Magazine, that time theft can morph into more serious crimes such as payroll fraud schemes.

Other types of time theft can include:

  • Inaccurate timesheets (an employee saying they left at 5 p.m. when they left at 4:50 p.m. or writing in they started at 8 a.m. when they really got there at 8:15 a.m.)
  • Completing personal tasks at work (personal calls, social media surfing or even running another business)
  • Stopping work before they punch out (an employee wraps up early but waits until their shift ends to punch out)
  • Clocking in early to sit around or slowing down work to earn overtime
  • Taking extra time on break

How Much Money is at Stake?

The American Payroll Association estimates that time theft costs businesses up to 7% of their total payroll. For small businesses, payroll can account for more than 50% of your gross revenue and 7% is a big hit to your bottom line. Consider this example: If a small business makes $100,000 in gross revenue and $50,000 goes to payroll, time theft could cost you $3,500 a year. Now increase gross revenue to $1 million and factor a 30% to 50% payroll cost—and time theft could cost anywhere from $21,000 to $35,000 a year!

Aside from actual figures, consider how much productivity is lost when workers stop working before the day is done. For example, if an entire crew stops working 15 minutes before they clock out each day for two weeks, you’ve lost 2.5 hours per employee. Multiply that lost time by months, add in slow start times and extra long breaks, and you could be paying employees for weeks of work they don’t complete.

How Do I Stop Buddy Punching?

The good news is buddy punching and time theft can be decreased and even eliminated entirely.

  • Create a policy that hold employees accountable. A disciplinary plan that specifically lists consequences for time theft can dissuade employees from stealing a few minutes here and there or doing personal tasks on company time. Disciplinary actions can include verbal or written warnings, suspensions and even termination for more serious cases. Include your disciplinary plan in your company handbook and ensure compliance by requiring your employees sign off after reading it.
  • Use passwords to access your system. Strong passwords are an easy way to help keep your employee time tracking system secure. When employees have unique passwords or PINs for clocking in, this makes your system more secure.
  • Enable GPS tracking on employee time clock apps. GPS tracking lets employers track their workers’ exact location. Time clock apps like ExakTime’s offer optional breadcrumbing for workers who travel on the job. This feature gives insight to whether employees are taking unnecessary off-site routes and needlessly delaying travel time.
  • Use geofencing to limit where an employee can clock in or out. Time card apps may utilize geofencing to set up a virtual boundary around a location. Geofencing is a location-based service that uses GPS or Radio Frequency Identification (RFID) to create an invisible fence that alerts whoever set it up about the people coming and going. A geofence flags whether an employee is on site as they clock in or out, or may allow employees to clock in only in designated areas. For example, a construction employee might not be allowed to clock in until they are within the geofence of the job site whose GPS coordinates and radius are determined by their employer.
  • Add a biometric time clock. A biometric time clock feature, can work in various ways. ExakTime’s app snaps a photo of the employee each time they clock in and out, allowing you to verify they are who they say they are. This photo is then stored next to the clock-in in our cloud software for quick, anytime review at the office.

Time Theft, Labor Laws, & Compliance

The U.S. government’s Fair Labor Standard Act (FLSA) requires that most U.S. employees receive at least the federal minimum wage, or at least the state minimum wage—whichever is higher. It also stipulates that those who work beyond 40 hours in a workweek must receive overtime pay, or “time and a half” their usual hourly wage rate. These requirements are set out in FLSA Section 13(a)(1) rules. These non-exempt employees include mostly hourly workers. A time clock app ensures that employees get paid for every minute of overtime worked. Plus, a good time clock app requires employees to sign off on their weekly hours, including overtime, so there are no disagreements about overtime worked and overtime paid.

Enacting this type of compliance can also safeguard employers from fraud. An automated system not only eliminates human error in tracking overtime, but if an employee should ever falsely claim they haven’t been paid for extra work, you can easily check their daily, weekly and monthly hours with digitally archived records and/or overtime reporting. The best defense against fraud is excellent recordkeeping.

Time clock apps provide transparency about employee benefits. According to the American Payroll Association, time clock apps allow employees to track benefits like leave offered under the Family Medical Leave Act (FMLA) and any short-term disability provided.

Ditching paper-based employee time tracking by using ExakTime’s time clock app can eliminate buddy punching and protect your payroll. It offers a variety of features designed to ensure workers never fudge timesheets or ask a coworker to punch them in:

  • GPS tracking so you know where traveling workers are when on the job
  • Geofencing allows you to capture location of employees on clock-in and clock-out, and even bar off-site clock-ins and clock-outs
  • Photo ID capture quickly verifies employees’ identity with a photo snapped with their device at clock-in
  • Crew and job site tracking allows you to track crews with a couple of taps, and view clock-ins and updates for any job site
  • Compliance sign-off procedures save all of your employees’ responses on health, safety, breaks and digital time card hours
  • Workers can view total, Regular, Overtime 1 and Overtime 2 hours for the week in addition to daily totals. Employees can verify their time card totals for a completed period by signing or tapping “Approve” right on their mobile devices
  • Scheduling features assign shifts and tasks to workers and alerts them on times, tasks and locations
  • Equipment tracking tracks heavy equipment and tools. Employees clock in on equipment by name so you’ll know who used it, when and for how long
  • It is also easy to use; employees clock in and out from their own mobile devices with very little data used per month

ExakTime solutions collect 100% accurate time and attendance data that’s available to management instantly via ExakTime Connect, our web-based time tracking software. Ready to learn more? Contact us and we’ll find a custom-tailored time tracking solution to help you eliminate time theft and stop losing money every pay period.