December 15, 2015

With Video: 4 Payroll Pitfalls for Manufacturing Companies

With Video: 4 Payroll Pitfalls for Manufacturing Companies

By Kit Dickinson on December 15, 2015

With Video: 4 Payroll Pitfalls for Manufacturing Companies

Manufacturing companies are finding it harder and harder to manage employee job rates and other production-based incentive policies while also complying with the Fair Labor Standards Act (FLSA) and union requirements. New complexities are continually added to the mix and payroll practitioners have to perform additional contortions in their calculations.

In today’s demanding environment, shop floor managers and payroll teams need to be equipped to know what pitfalls lie in their way and how to meet each challenge. Here are four of the greatest payroll challenges of manufacturing companies—and one solution to meet them all.

1) Varying Job Rates

Many manufacturing companies pay different rates based on the type of work performed, where employees worked, their union or department, and other factors. On top of that, workers may be assigned to several different jobs and shifts throughout the pay period, which means payroll has to manually calculate several pay rates for each employee. Managing the different variables that influence pay rates can be very time-consuming—and overwhelming.

2) Unique Incentive Policies

To attract and retain the most productive employees, or to stay in compliance with union contracts, manufacturers often provide company-specific incentives based on seniority, work performed, or other factors as part of employees’ compensation. These incentives often factor in multiple variables (years of service, job rate premiums, step/progression pay, etc.). The policies are also company-specific and usually can’t be configured in a commercially available time-and-attendance or payroll system.  

3) FLSA Compliance

For manufacturing companies with complex job rates and incentive plans, it can be extremely challenging to accurately calculate each employee’s proper overtime earnings and comply with FLSA. Calculating a production employee’s overtime rate isn’t usually a clean “time and a half” pay on a single base rate like many industries.

4) Incorporating Production into Employee Compensation

Many manufacturers have production-based pay policies as incentives (such as piece rate), so employees can earn more for performing more efficiently. These incentives need to be accurately entered and calculated—often by hand or with cumbersome spreadsheets that create rounding errors.

The opportunity for human error is huge, and that can result in FLSA violations or employee disputes. You’ll hear from the union steward, your employees, or the Department of Labor.

Eliminating the Stress of Job Rate Calculations

There’s a faster, easier, reliable way to calculate job rates and incentives. Integrated Design’s Time Bank application does all the heavy lifting for you, with just the click of a button.

Check out this quick video to see how easy payroll can become.

IDI Manufacturing Video

Time Bank automatically retrieves all of your timecard data and applies the correct job rate for each employee, calculates the incentives and piece production rates, checks seniority rules, and integrates it with payroll to guarantee the right pay for every employee, every payday.

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