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Rise of the Project Workforce, Chapter 5: Complying with Labor Laws and Accounting Regulations

March 12, 2008 | Author: admin | Filed under: Project Workforce Management

Rise of the Project Workforce, Chapter 5: Complying with Labor Laws and Accounting Regulations (#5 in the series Rise of the Project Workforce)
By Rudolf Melik

Despite the widespread availability of information in the flat world–which minimizes barriers and increases the velocity of business—the increasing burden of government compliance threatens to slow things down. Heavy requirements for accounting and documentation, spanning multiple departments, are too extensive to be met with spreadsheets and email. Point solutions (such as separate software tools for HR, finance, project management, and IT) increase the operational load, especially when they require custom integration or data warehousing. High-performing companies demand true enterprise-wide systems, and this is the promise of Project Workforce Management.

Here, we illustrate just a few of the compliance issues (in addition to SOX) that North American companies face, and the ways that Project Workforce Management helps not only to lighten the burden, but also increase agility and performance.

U.S. Federal and Local Labor Laws

Laws such as the Fair Labor Standard Act (FLSA), which establishes minimum wages and overtime pay, and the Family Medical Leave Act (FMLA), which establishes unpaid leave for families, are just two of the many labor laws that require companies to keep strict records and accounts. In addition to these, state/province and local governments may have additional laws, and companies have their own policies and rules.

Companies must track which people are eligible for what pay, leave, and hours, and which of the tasks they perform, in various situations, applies to various regulations. When workers of varying eligibility participate in different types of work, the compliance issues can get too complex for spreadsheets or even many time-tracking programs.

Project Workforce Management automates business rules, and implements differentiated time tracking so that time entries are attributed to the proper tasks, locations, rates, overtime, and leave regulations. It greatly reduces the amount of time required to calculate compensation, reduces disputes, and even saves companies from legal fees and fines.

GAAP and Software Investments

In the U.S., Generally Accepted Accounting Principles (GAAP) Statement of Position (SOP) 98-1 standardizes how companies report revenue earned, expense, capitalize, depreciate, and amortize their software investments. Software investments fall into four distinct categories, each subject to different accounting guidelines.

Because not all software development activities can be accounted for in the same way, and because it is common for workers to spend time on different projects, SOP 98-1 requires companies to carefully differentiate the time their workers spend on developing software for each of these categories of use.

Project Workforce Management provides the differentiated time capabilities required to comply with SOP 98-1. Organizations can track all development costs by project, stage, activity, and person, and then capitalize and expense these items appropriately, without the additional complexity and overhead of siloed, non-automated data.

Government and Defense Contracts

The Defense Contract Audit Agency (DCAA) reviews contracts between vendors and the U.S. Department of Defense, to ensure that costs are legitimate and allowable. Contractors must not only submit routine reports, but are also subject to audits. They must keep stringent timekeeping records, and accurate accounting records showing direct and indirect costs. Failure to comply has significant penalties and risks.

Project Workforce Management differentiates time and cost data appropriately, deploys time and expense recordkeeping to employees, and assures adherence to federal standards. Because data collection and reporting are automated, it dramatically decreases the burden of on-demand audits.

Scientific Research and Exploratory Development

Canadian-controlled companies can earn significant investment tax credits for their research and development efforts under the Scientific Research and Exploratory Development (SR&ED) program. Allowable expenses include salaries and wages, materials, contracts performed on the company’s behalf, lease costs and other overhead—as long as these costs can be directly related to qualified research and development activities.

Eligible work must be planned and documented as such; personnel working on these activities must be properly qualified; all time and expenses must be reported accurately; and all project activities must be documented. Without proper records and documents, qualifying for SR&ED can result in burdensome audits.

Project Workforce Management simplifies compliance with SR&ED by providing processes for project initiation and definition; managing resource allocation and skill matching; tracking time and expenses accurately; providing workflows for scope change and risk management; and collecting and consolidating data for reports.

Conclusion: Fringe Benefits of Compliance

Project Workforce Management offers the automation and integration of time and expense tracking, cost and revenue accounting, workforce planning, project management, and analytics that makes compliance with these and other laws and regulations much less cumbersome. Moreover, as laws change, Project Workforce Management provides the flexibility to adapt to change quickly.

Like the gold miner who gave up drilling and stopped three feet away from a rich vein that would be discovered years later, companies that work hard to comply with government regulations might be “stopping three feet from gold” in their efforts. Forward-thinking organizations don’t stop at minimum compliance. They also drill for the agility and responsiveness that will lead them to success in the flat world.

For more details about project management and Sarbanes-Oxley, see Rise of the Project Workforce.

Rudolf Melik is the author of The Rise of the Project Workforce: Managing People and Projects in a Flat World, and is the CEO and a founder of Tenrox. In his writings and speeches, Melik explores the ways that companies can thrive in a world where rapid technological advances and globalization are changing how we get work done and manage the people who do it. Rudolf’s professional blog can be found at: http://www.talentontarget.com/talent_on_target.

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