Page 64 - Essentials of Payroll: Management and Accounting

Accumulating T ime W orked
of additional detail collected through the timekeeping system results in
massive jumps in the amount of data that employees must enter into the
system, as well as to be processed by it.You must review the added utility
of each level of data collected, compare this benefit to the cost of col-

lecting it, and make a determination of what level of data is sufficient
for a company’s needs.In many cases,stopping at either the first or second
level of data collection will be more than sufficient.

Timekeeping Reports
The reports issued from a timekeeping system should be directed

toward the correction of data that has just been collected, comparisons
to budgeted hours, and trends in hours.The reports should not include
pay rates or the total dollar cost of direct labor, since this information
is more appropriately reported through the payroll system, where all
direct labor costs are stored.
A good timekeeping report that is designed to correct data entry
errors should not present the entire (and, likely, voluminous) list of all
employee times recorded in the current period, but rather just those
that clearly require correction. These can be targeted at hours that are

too high, entries with missing information, overtime, or hours worked
during a weekend. A computer program can be created to sift through
all direct labor data, pick out possibly incorrect data, and present it in a
report format similar to the one shown in Exhibit 2.2.
In addition to error correction, it is also important to devise a
report that lists expected direct labor hours for various functions and
compares these hours to those actually incurred. By doing so, it is pos-

sible to see where operations are being conducted inefficiently or where
the underlying standards are incorrect.The budgeted labor information
is most easily obtained through a manufacturing resources planning (MRP
II) system, which compiles from labor routings and the production

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