The County's payroll system is a high transaction process touching every employee and is responsible for processing $342 million (exclusive of benefits) of payroll expenditures annually. The County processes 150,000 paper time cards each year with 4,000,000 individual time entries, 485,000 earning code transactions and 10,000 retroactive adjustments. Even a small reduction in costs would generate a large dollar savings. An Electronic Time Keeping and Scheduling Investment Analysis Report (the Report) for this project was prepared by the Controller's Office Internal Audit Division and is attached as Exhibit A. The Report was prepared in consultation with many County departments (large and small), electronic time reporting system vendors, other California counties and industry consultants such as Nucleus Research and the American Payroll Association. Other California counties (e.g., Santa Clara, Sonoma, Orange and San Diego) have either implemented or are implementing automated time keeping and scheduling systems. The Report quantifies significant savings that could be generated from implementing an electronic timekeeping and scheduling system in San Mateo County. The three offices responsible for the delivery of payroll Countywide, (the Controller's Office, Employee & Public Services Department and Information Services Department) are jointly recommending that the County proceed with this project. |
The Report divides the project into two phases. Phase I requires funding of $175,000 for the Business Requirements Analysis through Vendor Selection tasks. Phase II, requiring separate Board approval, includes the Purchase through Implementation tasks at an estimated additional cost of $1,425,000. The total cost of the project is estimated to be recouped in 2½ years. After that, the County will realize $743,000 in "hard dollar" on-going annual savings, primarily from reductions in departmental budgets for overtime, shift differentials and other costs that currently are subject to retroactive adjustments, as well as Countywide costs for payroll staffing. An estimated $318,000 in "soft dollar" (productivity) savings will also be realized. Annual hard and soft dollar gross savings of $1,061,000 less $200,000 for annual maintenance costs equals $861,000 per year in net ongoing savings. The Report is fiscally conservative; many industry experts show payback periods of as little as 5 months. However, given the complexity of the County's payroll and operating environments, a more conservative approach was deemed appropriate.
The Report outlines the benefits that can be realized with the implementation of automated time keeping and scheduling. The Report provides the cost benefit potential specific to the County and also defines high level business requirements. Primary benefits recognized by industry and other governmental entities include: significant reductions in time reporting and processing errors, reduction in processing costs, and decreased labor costs that result from improved employee scheduling and monitoring capabilities. The Report presents the costs and savings in a best, median and worst case matrix.
With the exception of two departments (Public Works and ISD) all other County departments depend on a paper-based, manual time reporting process when processing payroll. How would this electronic time keeping system work? Most employees, those with access to a County network/intranet connected PC, would use the online system to enter their time. Employees who can use exception reporting only need to enter data when they do not work their regular schedule (when using vacation or time other than regular pay). This will reduce the effort required to input and review time information.
Some employees, with no readily available access to a County PC, may use a badge-swipe reader or a remote access "collection application" to record/enter their time. The system will have the flexibility to address early arrivals to work relative to the employee's scheduled time. The system would check the validity of the time entered, at the time of entry, to reduce errors. Departments will have flexibility in choosing how their employees enter their time.
In conclusion, the Report calculates a five year net present value of $2.27 million in net savings for the County. Seventy-one percent ($1.6 million) represents hard dollar savings and the remainder ($0.67 million) represent soft dollar (productivity) savings. An automated system will provide departments with flexible ways of capturing employee time as well as the ability to plan and monitor employee resource usage. By changing to a paperless system, many processes will be eliminated (distribution and collection of time cards), other processes will be automated (validation of earning codes and accrued leave balances) and the remainder will be streamlined (exception reporting, automated review and approval). Automation of paper based payroll systems is ranked as the number one priority for cost savings by the Government Finance Officers Association; this Investment Analysis Report supports this conclusion for the County. |
