Cost, and likelihood, of inaccuracy in manual data handling

In 2018 the news broke that retailer Debenhams had been paying 12,000 employees less than minimum wage. Following an investigation, the retailer paid out a combination of a £63,000 fine and settlement of owed wages to the tune of £135,000. The cost of payroll processing errors for Debenhams triggered a rapid decline in their profits leading to bankruptcy and most recently, store closure. In 2021, the retailer was acquired by the online retailer giant, Boohoo.

The ‘technical payroll error’ (as a result of manual data entry) saw the retailer at the top of a government name and shame list of businesses underpaying staff. The cost of which being a damaged reputation and customers disinclined to return the business.

Manual data entry is the task of inputting data points into documents and spreadsheets by hand. The manual task is repetitive, time consuming and has a high error rate, yet it is a necessary operational process for companies without sufficient HR technology.

Why do some companies still practice manual data entry?

Manual data entry in paper form protects data from cyber attacks, can be outsourced for a lower price and does not require software implementation. However, outsourcing data entry tasks or data entry services is riddled with data entry errors. This can cost a business not only financial reparations, but reputational risks which are challenging to return from.

With current austerity biting and ongoing conversations about a living wage, the rising living costs and the implications for low-wage employees, the cost of reputational damage is considerable. Finding solutions to overcome data entry inaccuracy is crucial.

Mistakes are inevitable

In 2008, business professor Raymond R. Panko published a paper detailing numerous examples of research into manual data entry human errors. He wrote that when manually inputting a data entry into simple spreadsheets and documents, the probability of a human error was between 18% and 40%.

In complex spreadsheets and documents, the accuracy of manual data entry decreases and the error rate within documents increases – it’s not that people are lazy or stupid, they’re just people. And doing repetitive data entry makes them susceptible to mistakes.

So we can extrapolate that processing data into any complex document put together by data entry operators will contain several data entry errors.

The cost of a misplaced decimal

In 2017, two days before his 19th birthday, a young man in Ireland was mistakenly paid 20,000 euros by an insulation firm where he’d laboured for two-days. Unfortunately for the employer, the cash was gone in just three (presumably very memorable) weeks. The youth, down on his luck at the time, had seen the windfall as a ‘gift from God’ rather than the result of an incorrect data entry.

Unfortunately for the young gentleman, it wasn’t God that had precipitated the mother of all parties, but a misplaced decimal point. And on top of that disappointment, the courts then handed him a four-year prison sentence for failing to report the error.

Why didn’t someone in the insulation firm have a colleague check their payroll numbers for stray decimals? Perhaps they did.

Manual data entry meets human error

In his paper, Professor Panko noted that people are equally bad when it comes to their ability to spot errors. In written language, they can catch up to 95% of spelling errors, though this drops to 70% when an incorrect, but correctly spelled word is mistakenly included; ‘right’ vs ‘write’, for instance.

Grammar mistakes are caught 60% of the time, while spreadsheet errors slip past checkers around 50% of the time. Missing these incorrect data points causes a high data entry error rate. To err is human – people make mistakes and they’re bad at spotting them.

But in HR, probabilistic decimal points are only part of the problem. Depending on which research you read, different studies estimate that HR teams using manual data entry spend between 15% and 50% of their time managing information by hand.

How can automated HR and Payroll Software Minimise Data Entry Costs and Inaccuracies

Real-time reporting

There’s a double-edged sword here. Even the most freakishly accurate data entry specialist can’t change the fact that time is a finite resource, a zero-sum game.

So by definition, when your HR team spends up to half their time ‘pushing paper’ (with inevitable mistakes), it means accurate, real-time reporting is virtually impossible.

Data that takes days to find its way into the right database is, by its nature, out of date before it becomes useful. We’ve worked with businesses whose information was 30 days old before it was in a state to generate any kind of strategic insight.

The automation of data processing allows real-time, up-to-data insights into changes made.

Advantages of automation

HR teams running manual data entry lose thousands of hours a year, just to be able to report on what happened a month ago with questionable accuracy.

Thankfully there is a way out: the solution is to embrace digitisation and automate data entry processes. Remove the manual elements from data processing and you remove the huge capacity for human error.

Machines handle data more effectively, the systems are cost effective and modern database management makes generating real-time reports the job of a few minutes rather than a few hours.

Improved resourcing

When HR teams are unchained from transactional processing and data entry tasks, they immediately have more time to work directly with business partners. They are able to drive strategic goals through tasks that require creative thinking and resilience – skills our machines can’t replicate (yet).

In PWC’s 2022 Human Resources Technology survey, a third of HR respondents reported an ability to play a stronger consulting role in their business, while a fifth said increased automation in their business had led to decreased HR costs.

If you’re still triple checking your decimal points by hand, Professor Panko’s report suggests there is a very real risk that human error is creeping into your data, not occasionally, but often.

If you are still manually entering or transferring employee data, it is likely that there is a dedicated team with a workload purely rectifying mistakes. Rather than data entry services processing data manually, automating the data entry process allows valuable resources and employees to spend their time elsewhere (according to PWC’s report).

Learn more below about HR technology, from cost and ROI, to the different types of systems and their benefits.

This article was first published on HRZone.com.