HR Management & Compliance

Reducing Underreported Hours

Do your employees routinely work more hours than they record? How sure are you of your answer?

A recent survey indicated that about 22% of workers underreport their hours—and management was only aware of it about one-half of the time[i].

Reasons Employees May Not Report All Hours Worked

There are many reasons any given employee may opt not to record every hour worked. For example:

  • The employee may fear getting into trouble for unapproved overtime.
  • The employer may have incentives in place for employees to remain billable the majority of the time—and as such, the employees opt to not report unbillable work in order to make their billable hours look better.
  • There may be incentives for employees to maximize profitability—which can be achieved by hiding hours worked and not billing them to a project. This is especially relevant if profitability goals are unrealistic or if employee compensation is tied in any way to profit margins—either of which would create a greater incentive to hide hours.
  • The organization may have opted to secure a contract with low (or even negative) profitability level—yet the billing to the client must be aligned with the contractual figure. As such, some hours may not be reported on the billing in order for the billing to reflect the contracted amount—even if that amount does not match reality.

Risks of Underreported Time

When it comes to unreported hours for hourly employees, the risk for employers is huge. There is a legal requirement to pay employees for all hours worked—even if the employee is not clocked in. If it would come to light that some employees are not reporting all hours worked, there could be penalties and other legal ramifications.

For salaried employees, even though they won’t be owed more money for underreported hours, there are still problems to avoid. Here are some risks that go for both salaried and hourly workers who underreport hours:

  • The employee may be more likely to burn out, and some employees who feel burnt out may start to look for a new job.
  • The employee may feel underappreciated or resentful since he or she won’t be getting recognition for all of his or her work.
  • Employees may be frustrated that they feel they must hide some of their hours worked or that these hours are even necessary.
  • When hours don’t get billed to projects, the realistic amount of time it takes to complete a task is not shown—resulting in situations where management and clients think projects should take less time than they do, which perpetuates the cycle of underreporting.
  • Clients may not be getting your employees’ best work when employees are working too much or are feeling resentful. This could impact customer satisfaction.

How Can Employers Reduce Underreported Hours?

To reduce underreporting of time worked, there are several steps employers can take. Here are some examples:

  • Take steps to discover all unrecorded time worked. Consider using technology to see how and when an employee is working—particularly for those who work primarily on electronic devices—and see how it compares to the hours noted in the official records.
  • Consider implementing policies that encourage all hours to be reported—even for salaried workers.
  • Review your incentive schemes to see what may be prompting employees not to record hours. There is likely some reason they’re hiding the extra work they’re doing.
  • Encourage a good work/life balance among employees to reduce the likelihood of working too much.
  • Encourage employees to delegate tasks, when appropriate, to even out the workload.
  • Consider implementing policies that discourage work after work hours, whenever possible.
  • Consider investing in better tools for employees to allow them to work more efficiently.

Has your organization encountered situations where employees are not recording all hours worked? What steps did you take to reverse this behavior?


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