Ramifications of Buddy Punching and How to Avoid It

Nearly three-quarters of U.S. small businesses are affected annually by “time theft” or buddy punching. It occurs when a coworker punches your timecard in your absence. That employee accepts pay for time they didn’t actually work, such as staying clocked in during breaks, not clocking out to run errands, or checking social media during work hours.
Think about it. You’re running late for work and there’s no time to clock in. You send a quick text to a coworker asking them to clock in for you. Or you need to duck out a few minutes early and don’t want the boss to know. You ask your coworker to clock you out at the end of your shift. Perhaps you can’t show up for your shift and you contact your buddy for the favor of punching your timecard in/out for you.
Life happens, and it may not seem consequential, but a few minutes here and there of a coworker buddy punching for another can add significantly to your payroll. The American Payroll Association states that three-fourths of employers lose money to buddy punching and employees get paid 4.5 hours’ worth of unworked wages weekly.
An employee who buddy punches for another on their timesheet may not think it’s a serious matter, but it is. It adds up in lost revenue in a year’s time, when numerous employees cover for their cohorts. It can easily go unnoticed and entails signing another employee in when that employee isn’t present. While it’s often done to aid employees who are running late, in extreme circumstances, it can also be done when the other employee is absent. These employees don’t just steal an hour here and there. More extreme cases use buddy punching to take entire days off or accrue extra overtime. Over the course of a year, the cost of buddy punching could average close to $1,560 per employee. With the majority of small businesses generally employing less than 20 people, multiple employees using buddy punching could run your payroll expenses upwards of an additional $30,000 annually.

While workers might think of this as a method of helping out one another, it causes significant loss for many companies. The money wasted through this type of fraud can lead to budget shortages, staffing issues, and even layoffs.

When running a business, payroll expenses can be difficult to manage. It’s hard to predict how many hours you need to cover payroll or what your next quarter will bring in terms of workers hired. Regular payroll issues are hard enough to deal with, but fraud can make things even more challenging. Common payroll fraud like buddy punching can wreak havoc on your bottom line. To prevent buddy punching, you need to know how to spot it in order to ultimately spend your payroll dollars more productively.
Then, too, many companies estimate work time in order to close the payroll period before the pay period ends. For example, suppose you paid your employees on the 15th of the month for the pay period covering the 1st through the 15th. In this case, you would need to estimate their time worked for the last few days prior to the close of the pay period, because your payroll service requires 2 days for processing. You would need to send your payroll hours in for processing on the 13th, with estimated hours for the 14th and 15 th. Now imagine that an employee is late for work on one or both days for which you estimated hours. Under these circumstances, you’re considered the “buddy puncher,” because you would be paying your employees for time that they didn’t work.

Here are some measures that can help you prevent employee buddy punching:

  • Create a policy that holds employees accountable.
  • Use passwords to access your system.
  • Install a biometric timeclock.
  • Enable geofencing.
  • Use GPS tracking.

To effectively stop buddy punching, you need to be thorough. It’s not a matter of just finding ways to physically stop it from happening—you need to convince your employees that it’s a real problem that can have a negative impact on them. However, changing attitudes, just like changing habits, can be difficult. But setting up systems to ensure that punching in for others is more trouble than it’s worth can send a strong message. Your goal should be to not only block your employees from signing in for one another, but to also create an environment where doing so will be seen as a major breach of your company’s policies. A solid combination of enforcing policy and prevention will be your best defense against erroneous logins and other types of payroll fraud.

Establishing/Enforcing Policy

Buddy punching may be a sign of a deeper problem if your employees are regularly taking advantage of the timekeeping system, punching in for each other, and not being able to make it to work on time. This is an opportunity for you to take a closer look at your overall attendance policy.

Address the issue of buddy punching head-on. If you haven’t already instituted a formal policy, now’s the time to issue a zero-tolerance policy for anyone touching another worker’s timecard or using your timekeeping system under a different name—for any reason.

Hold your employees accountable. As you onboard new employees and work with existing ones, take them through training that emphasizes that they should only sign themselves in and that signing in another for any reason is strictly forbidden. Both new and existing employees should clearly understand that significant penalties can be enforced not only for those who benefit from being signed in, but also for those who perform the dastardly deed.

Your policy should stress that such behavior not only puts the employee who’s asked to sign a friend in at risk, but also the employee who “benefits” from this behavior. All employees need to understand the serious consequences of this and see it as not merely performing a simple favor for a colleague. Rather, it’s something that will negatively impact their own ability to keep getting paid.

You don’t need to call out specific employees; announce the buddy punching policy to your team as a group so everyone’s aware. Then print out a copy of the new buddy punching policy and post it where all staff can see it. If you catch an employee buddy punching, make sure they understand it’ll be grounds for termination.

You can also try a few other low-cost attendance tips:

  • Check out the quarter-shift method, whereby scheduling on the :15 can reduce lateness by 50% when looking at employees who are late, thus reducing those kinds of costs times the number of employees you have.
  • Be sure you consistently enforce your attendance policy.
  • Conduct return-to-work interviews after employees’ unscheduled absences.
  • Don’t always be seen as the “payroll police.” Reward/recognize your employees for good attendance.

Set Up Passwords

To reduce the temptation to buddy punch for another employee and protect against this type of fraud, put serious obstacles in the path of your employees. Instituting passwords is one way. Instead of your employees simply signing their names or punching a card, give each their own password that gives them access to the system. Be sure to set specific standards when issuing passwords, including long sequences, numbers, symbols, and capitalizations that make them harder to share or input by another coworker. Then educate your employees re not sharing their timekeeping login, because it could ultimately mean sharing their personal data. If they give a coworker their password, they might be giving them access to their personal information.

Instituting passwords has two major benefits:

  • It makes it more difficult for employees to login under another’s name. Then, too, it allows you to track who signed in immediately before and after the “phantom” employee, making it easier to see who’s breaking the rules.
  • Insist that your employees regularly update their passwords and be sure they keep the information to themselves. This also helps to reduce the number of potential security breaches for your clock-in processes.

Install a Biometric Timeclock

A biometric timeclock is more sophisticated than simply entering a password; biometrics ensure that only the assigned person can sign into a system. This is generally done through fingerprint or facial-recognition access. Using a biometric timeclock ensures that only authorized employees can sign into your systems. In some instances, this level of security may be the only way to deal with employees who are buddy punching. You should note, though, that biometrics tend to have some issues in terms of reliability and up-time; however, addressing maintenance issues is usually preferable to handling any kind of payroll fraud.

Biometric time systems can confirm the right employee clocks in. Only 3% of employees who commit time theft use a biometric timekeeping system. These systems eliminate buddy punching by using a unique fingerprint, handprint, or even a retina scan. They can be almost a foolproof way of keeping your employees from abusing your timekeeping system.

However, biometric time clocks can come with higher upfront costs and associated legal responsibilities. And, several states have passed laws that protect employees’ biometric information and stipulate how their information can be used. In certain instances, you must have your employees’ written consent to collect and store their biometric data. Then, there are legal procedures that must be followed related to destroying data once employees leave and their biometric data is no longer needed. You could also be responsible for notifying employees if a hack or data breach occurs.

Consider Geofencing

A geofence is a virtual perimeter that identifies a real-world geographic area. It relies on GPS, WiFi, and cellular data to create an invisible “barrier” around your business. It’s a type of security technology that trips a response whenever a certain GPS- or RFID-enabled device enters an area. It lets you decide how close your employees need to be to clock in, whether it’s the parking lot or the front door. Once the barrier is set, an employee can only clock in after their device signals that they’re inside the perimeter. Employees either have to be within a certain distance to manually clock in on the app, or they’re automatically clocked in once they’ve entered the barrier. This prevents them from clocking in away from work or having someone else clock them in. Geofencing makes it impossible for anyone to punch into your system unless the computer recognizes them as being in the proper area. These systems generally make use of RFID-enabled badges or specialized phone apps to ensure that the employee signing in is where he or she is supposed to be. Geofencing isn’t perfect, however. A clever employee can defeat it, but geofencing makes it more difficult than using a traditional timeclock system. It’s a good choice for businesses that have easily defined work spaces and a limited number of employees who work remotely.

GPS Tracking

GPS tracking is an alternative to geofencing if you have employees working in remote areas. GPS tracking can tell you where an employee is located when he or she clocks in. This allows you to make sure your remote employees are at the right job site and prevents their friends from signing them in. GPS tracking generally requires special equipment or phone apps; however, it’s becoming more common among businesses where employees work at multiple satellite locations. While the technology has its pros and cons, it will help you to better deal with the problem of buddy punching.

Review the Benefits of Updating Your Timekeeping System

A web-based timekeeping service will:

  • Have your employees use a password to time punch the clock
  • Photograph employees when they punch in and out
  • Have employees electronically sign their time sheets
  • Maintain an audit trail for every punch
  • Control the hours employees are allowed to punch in

Invest in a New Time Tracking System

Forking over money for a new time tracking system means spending funds you didn’t plan on spending the month before. However, it’s an investment that will pay for itself. As mentioned earlier, based on the number of employees you have and calculating over a year’s time, the financial loss to your company can far exceed what it will cost you to put a time tracking system in place. Often, the equipment can run in the $500 range. That’s a marked contrast to the revenue you would be losing in a year’s time.

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