Three Ways Flsa Regulations Can Overwhelm a Spreadsheet-Based Payroll System

Franchises have many moving parts. Typically, among those are large populations of hourly wage employees whose schedules and related pay fluctuate widely. Multiple locations, often across multiple states, amplify the complexity of a franchise’s payroll, which the Fair Labor Standards Act (FLSA) further complicates. Recent growth in the reach of FLSA regulations almost guarantees problems for any franchisee who manages payroll through a spreadsheet program.

The following article explores three ways this is so and discusses compelling alternatives.

ONE : Spreadsheet Programs Are Powerful—but Complicated

It’s difficult to go to an event in the payroll industry and not hear something like this: “Is your payroll department modernized, or does your payroll technology still consist of spreadsheets?” Like most clichés, this is rooted in some truth—and in some exaggeration. Yes, spreadsheet programs really are the calling card of companies struggling to control payroll.

But this isn’t necessarily spreadsheets’ fault. Spreadsheets have their theoretical advantages – they’re powerful productivity tools. The most popular spreadsheet programs feature tremendous automation capabilities. At their limits, they can perform highly complex calculations.

The number of people who know how to program spreadsheets to their full potential, however—and build in requisite controls and comprehensive security over the data—is exceedingly small. They’re probably not working in your payroll department. The spreadsheet programs they’re running fail to account for the intricacies of FLSA rules, such as the inclusion of all applicable earnings in the regular rate of pay.

TWO : Spreadsheets Are Inaccurately Capturing Your Payroll and Related Data
They’re capturing the data too late, as well. Remember: Few people know how to use a spreadsheet to its full potential. Now, consider everything payroll-related that is affected by FLSA regulations and their state-by-state counterparts:

• Data on FLSA-mandated meal and rest periods needs to be correct.
• Minimum wage for employees must also be correct, yet is apt to be different from state to state and for minors vs. adults.
• Additional FLSA regulations govern the total number of hours a minor may work in a given week.
• During any pay period, any number of employees may have earned overtime.

Some of the overtime comes at or near the end of a pay period. In the midst of processing payroll, your payroll department runs a large risk of missing these extra hours and associated pay. The list goes on. At issue are the manual processes inherent to spreadsheets. Staff manually enters data from payroll or time and attendance. They might even have to transmit it from various locations over unsecure networks. This introduces
errors. Delays beset the workflow. Payroll becomes a race to the finish line as staff scramble to reconcile and true everything in time. Why? For payroll to be right every time, employers need real-time information about not only payroll, but time and attendance, as well as benefits administration. That’s a large amount of critical information to enter into a spreadsheet— continually. Even payroll technologies that aren’t spreadsheet-based can struggle.

Most systems can’t combine data from time and attendance with payroll in real time to produce one current view. In the time it takes to capture all data from time and attendance and run the necessary calculations for payroll, several things may happen and be left unaccounted for, in payroll. Systems that eliminate as much of this as possible contain all these processes within a single application. They also automate as much as possible.

They’re certainly not spreadsheet-based.

THREE : FLSA Regulations Are Changing Too Fast for Spreadsheets to Keep Up
FLSA regulations and the legal precedents for them are evolving quickly, along with the many changes in state-by-state regulations much like the FLSA’s. In response to an executive memorandum earlier this year, for instance, the United States Department of Labor is reviewing regulations regarding who is eligible for overtime. In a flurry of legislation, many states are revisiting their minimum wage laws. Even the seemingly straightforward question of when an hourly employee’s shift begins and ends is encountering legal ambiguity.

At your company, who monitors this information? Who makes sure a spreadsheet’s calculations are compliant with the latest, as it happens? These are the wrong questions. The franchise owner has too many other responsibilities.

Regulations change too quickly for all but the most deep-pocketed corporations to keep pace. The solution is to invest in technology for payroll (and everything associated with it) based in the cloud and delivered via software-as-a-service (SaaS)—i.e., through broadband Internet.

A reputable vendor of this type of technology for payroll will provide realtime delivery of your data and regularly update its offering to reflect relevant changes in law. Notification of regulatory changes gets sent to the user.

It’s a Question of Efficiency and Resources It’s almost guaranteed that payroll departments using them are underutilizing spreadsheets. That’s because the complexity in optimizing spreadsheets places their full potential out of most payroll departments’ reach. For this reason, spreadsheets are ill-suited to the vagaries of payroll for franchises and other organizations that employ many hourly workers across large geographic
footprints. If your franchise relies on spreadsheet programs for payroll, you risk running afoul of FLSA regulations.

Howard Tarnoff is the Senior Vice President of Customer Success at Ceridian, a leading provider of Payroll & Tax, Workforce Management, Benefits, and Human Resources solutions. In his role, Howard drives the strategy and execution of Ceridian’s critically acclaimed XOXO Customer Success Program in North America.

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