Timekeeping and Indirect Costs Policy

1. Timekeeping Policy

Purpose

This timekeeping policy ensures that Geviton accurately records employee hours to properly allocate labor costs, especially in an organization spread across design, manufacturing, and other operations. The policy ensures compliance with labor laws, internal procedures, and project cost management requirements.

Policy Guidelines

1.1 Employee Time Recording:

Hourly Employees: Must clock in/out for each shift using the designated timekeeping system (biometric system, timecards, or software).
Salaried Employees: While not required to clock in/out, salaried employees engaged in specific projects must track time spent on each project for cost allocation purposes.
Design Teams: Design personnel working on project-based tasks should record hours by project to facilitate the appropriate charging of design time to each project.
Manufacturing Teams: Manufacturing employees are required to record time by production batch or order to track labor costs associated with specific product runs.

1.2 Timekeeping System:

System of Record: Geviton uses an electronic timekeeping system to track hours worked, which includes features for both manual and automatic logging. All employees are required to log their time daily.
Deadlines: Timesheets must be submitted weekly by 5 PM every Friday. Any changes or corrections to timesheets must be approved by the department supervisor.

1.3 Overtime:

Overtime must be pre-approved by a supervisor. Overtime worked will be paid according to applicable laws and must be accurately recorded in the timekeeping system.

1.4 Paid Time Off (PTO) and Breaks:

PTO Recording: Paid Time Off (including vacation and sick leave) must be recorded in the system and categorized correctly.
Breaks: Employees are required to take legally mandated breaks (e.g., 30-minute lunch breaks). Breaks longer than scheduled should be recorded and justified if they affect project schedules.

1.5 Monitoring and Review:

Supervisors and department heads are responsible for reviewing and approving timesheets to ensure accuracy and compliance.
Timekeeping reports will be reviewed monthly by the finance department to assess any discrepancies or trends in labor costs.

2. Indirect Cost Policy

Purpose

The indirect cost policy outlines how Geviton allocates costs that are not directly attributable to a specific product or project but are necessary for overall operations. These include facilities, administration, utilities, and equipment depreciation, which are incurred across both design and manufacturing processes.

Policy Guidelines

2.1 Definition of Indirect Costs:

Indirect Costs are expenses that support overall company operations and cannot be directly linked to a specific project or production order. These include:

Rent and utilities for office and manufacturing spaces.
Salaries for administrative staff and management.
Depreciation of shared equipment used across multiple projects.
Maintenance and repair of machinery.
IT services, office supplies, and general overhead.

2.2 Cost Allocation:

Cost Pools: Geviton will allocate indirect costs into appropriate cost pools (e.g., design overhead, manufacturing overhead, administrative overhead).
Allocation Method: Indirect costs will be allocated based on relevant cost drivers, such as direct labor hours, machine hours, or square footage of the facility used by each department.

For design-related activities, indirect costs will be allocated based on the proportion of hours spent by design teams on different projects.
For manufacturing, indirect costs will be distributed based on production batch sizes and hours worked by the manufacturing team on different product lines.

2.3 Calculation of Indirect Cost Rates:

Overhead Rate: The overhead rate is calculated by dividing total indirect costs by the total direct labor costs or direct hours worked, depending on the department.

Example: If indirect costs for a manufacturing facility are $200,000 and direct labor costs are $500,000, the overhead rate would be 40%.

2.4 Treatment of Capital Expenditures:

Capital Expenses (e.g., new machinery, large IT systems) will not be directly charged to any single project but will be allocated over the useful life of the equipment through depreciation.

2.5 Indirect Cost Recovery:

For government contracts or project-based work, Geviton may apply the calculated indirect cost rate to recover a portion of these costs as allowed by the contract terms.

3. Monitoring and Reporting

3.1 Timekeeping Audits:

Periodic audits of timesheets and timekeeping systems will be conducted to ensure compliance with the company’s timekeeping policies and to prevent time theft or fraud.

3.2 Indirect Cost Analysis:

Finance will review indirect cost allocations quarterly to ensure that costs are being fairly and accurately distributed across projects. Adjustments will be made if the cost drivers (e.g., direct labor hours) change significantly.

3.3 Reporting to Stakeholders:

Detailed reports on timekeeping and indirect cost allocations will be provided to department heads and the executive team to assist with budgeting and project cost tracking.

3.4 Compliance with Regulations:

Both timekeeping and indirect cost management will adhere to local labor laws, tax regulations, and accounting standards. In the case of contracts with government agencies, indirect cost calculations will comply with applicable federal acquisition regulations.

4. Penalties for Non-Compliance

Failure to comply with the timekeeping and indirect cost policies can result in disciplinary actions, up to and including termination. Additionally, inaccurate or fraudulent time reporting or cost allocations may lead to legal consequences.

Approved by:
Finance Department, Geviton
Effective Date: Jan 11, 2023

This policy ensures that Geviton maintains accurate financial records, manages costs efficiently, and meets compliance obligations while supporting both design and manufacturing operations across the company.

Approved by:
Board of Directors, Geviton
Date: Jan 11, 2023