To a person who has already taken their HR department digital, the decision feels like a no brainer. But despite this, thousands of HR professionals are still juggling holiday request forms, wrestling accrual calculation spreadsheets, and physically chasing down signatures for new contracts and company documents. If only they had the benefit of hindsight!
You see, there’s a simple reason why some smart HR professionals still handle their processes manually, using HR spreadsheets and paper files. And it’s because the hidden costs are exactly that – hidden!
But the difference between doing HR manually, and using an automated HR system, goes far beyond simply saving time. And that’s why today, we’ll be looking at some of those hidden costs. For example:
- The potential cost of human error (including the family business who accidentally paid a teenage employee €19,000)
- The potential cost of failing to protect employee data (which currently carries a maximum fine of £500,000)
- The amount of time you waste pushing paper across a desk (which is probably more than 300 hours a year)
- The talented people you fail to recruit because you’re just too slow (about 47% of refusals are from people who’ve already found another job)
- Why paper files disengage employees (and how an engaged workforce is up to 147% more productive)
The misplaced decimal that cost this company thousands
What would you do if you accidentally overpaid an employee 100 times their wage? It might sound extreme, but this is exactly what happened to family-run business Industrial Insulation Specialists last year, when a misplaced decimal point accidentally cost the company more than €19,000.
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And while you might already know what to do if you accidentally overpay an employee, getting your money back isn’t always easy. In fact, for Industrial Insulation Specialists, it didn’t happen at all! You see, the teenage employee who received the gigantic windfall blew the money almost immediately. And while he was sentenced to prison for theft, the company has still been unable to reclaim a single penny from the whole sorry affair.
But beyond the obvious payroll mistakes, human error is a ticking time bomb in many other areas of HR.
Human error is expensive in many ways – but avoiding it is not rocket science
According to research published by NASA, human error “often becomes an error after the fact” – meaning that mistakes can lie dormant for days, weeks, months or even years before they actually cause problems. Their research also states that the majority of IT security data breaches are attributed to employee errors. Considering HR is responsible for looking after employee data, this fact alone should make your ears prick up!
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But while NASA has a lot to say about human error, avoiding it is hardly rocket science. Let’s take failure to renew an employee’s contract terms as an example. Now, CIPD lists this as one of the 10 most expensive HR mistakes to make – but it’s also one of the 10 easiest HR mistakes to fix! All it takes is a simple reminder system, and you could save yourself thousands in unfair dismissal claims due to out of date contracts.
And before you suggest that I’m advocating replacing humans with robots, I’m not. You absolutely need as many strong, talented people as you can get your hands on – it’s how a good business grows. But if you’re simply hiring people to fill out boxes and push paper across a desk, then I’m afraid you’re putting your organisation at significant risk of loss due to human error.
You are responsible for protecting employee data – are your spreadsheets and paper files secure?
When a rogue Morrisons employee leaked 200,000 employee records in 2014, the supermarket giant was hit with a joint data breach lawsuit backed by nearly 6,000 people in their workforce. Why is it important to keep staff data safe? Well, because letting it fall into the wrong hands could potentially lead to identity theft, and massive financial misery for your employees.
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OK, so you’re probably not Morrisons. But even if you look after only a few employee records, you are still responsible for keeping them safe. And according to Personnel Today, companies who look after personal data – in other words, all companies – could be fined up to £500,000 for failing to protect it.
HR is already being asked to step up and do a gap analysis, to make sure their HR-related data processing practices are protected against potentially crippling misconduct fines. Are you confident that your unencrypted spreadsheets and physical paper files are kept safely under lock and key?
Besides, how much time do you want to waste processing timesheets and holiday requests?
Let’s assume your data is safe, and let’s assume you’re hiring people who never, ever make mistakes. How much time and money do you really want to spend manually processing things like timesheets and holiday requests?
US-based Alex Cohen, founder of Birch, recently switched from manual HR spreadsheets, to cloud based HR platform Zenefits.
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“We saved a lot of money after implementation” he says. “Since we don’t need anybody to spend 30 hours a month doing HR, we effectively save $7,200 a year – allowing us to invest in more strategic areas of business. I was extremely surprised and pleased with how much headache HR software saved us from, by combining all the manual bits and pieces into one, central dashboard.”
You probably spend over 300 hours per year maintaining employee records
The Center for Effective Organisations states that HR professionals spend an average of 13.6% of their time maintaining employee records. Now, you might think that this sounds like a trivial amount of time. It’s only a little over an hour a day… or about 6 hours a week… or about 300 hours a year.
But one thing that this study doesn’t specify, is how many of these HR professionals are maintaining employee records manually, and how many of them are automating employee record maintenance. It also doesn’t take into account organisations where the HR professionals have implemented an employee self-service system – allowing staff to request holidays, or update their own contact details, online.
So in reality? HR spreadsheets take way more than 300 hours per year to maintain. It’s just that the more modern professionals – those who are automating things like on-boarding, holiday request cross-checking, leave calculations and absence tracking – are spending far less time filling out forms, or adding up columns of data.
You’re losing top talent because you’re taking too long to recruit
Here’s another cost to wrap your head around. Research by Bersin & Associates puts the average cost per hire in the UK at around £5,311 – yes, recruitment is expensive (but you already knew this). So you probably want to make sure you get as much value as possible from your investment – and that means hiring top talent.
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But the trouble with running a manual recruitment process, is that it’s very, very slow. Even if you’re only hiring for one position, it takes time to sift through CVs, schedule interviews, compare scores, and send out offers. In fact, it takes an average of 48 days to fill a position in the UK!
And do you know what’s happening while you’re trying to manage all of this manually? I’ll tell you what’s happening. Your competitors with the fastest recruitment processes are snapping up the best of the bunch. Did you know that 47% of candidates who refuse a job do so because they’ve already accepted another?
Migrating your HR processes to a digital HR system could give you access to a digital recruiting platform– often called an Applicant Tracking System (ATS). If you want to improve your time-to-fill KPIs, and hire better talent, then you must speed your processes up.
Manual HR processes even impact employee engagement
Gallup research reveals that companies with a highly engaged workforce outperform their peers by 147% in earnings per share. Do you really think your employees feel engaged while they’re filling out paper-based holiday request forms, and then waiting days for them to be approved? Implementing HR technology that allows employees to self-serve, which is a great way to engage your people.
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And besides, HR managers who are stuck behind their desks are not in the best position to work on improving employee relations!
Anna Ives is an HR consultant with 10 years’ experience. She believes that people ultimately work best with people they like – and if an HR manager can forge good relationships, they’ll build a happier and more productive workforce.
“The HR system manages the data” she says, “enabling the HR manager to work on managing people, and building relationships.”
Will a digital HR system save me money?
Here’s the bottom line. Digital HR systems aren’t going to literally do your job for you. But they are absolutely going to save you money compared to manual HR spreadsheets and paper files. And in many more ways than simply saving you time.
- Going digital reduces human error, by automating repetitive but important tasks
- HR technology can help to keep employee data safe, protecting against crippling fines
- Automating some of your workload lets you invest time into more strategic areas of HR
- A fast recruitment process can reduce the cost of bad hires and help you bag top talent
- Getting your workforce actively involved in your HR system can improve engagement
Manual HR spreadsheets and paper files drag you down, and hold you back. But you might not feel the benefit until you take a leap and make the switch.