Learning how to track employee time will help you avoid both overpayment and penalties due to underpayment. You can track employee attendance using a timesheet template, time clock, and more. However, you choose to track, make sure you keep an updated list of employees, log beginning and ending work times, and consider applicable labor laws.
If you’re currently using pen and paper to track your employees’ work time and want to upgrade a bit while still saving money, consider using When I Work. Employees can clock in and out from the app on their phones or through a time clock if you prefer. It’s free for up to 75 employees, the software integrates with numerous payroll providers, and you can sign up within minutes.
1. Create a List of Current Employees
Regardless of any process nuances with how you track employee time worked, you’ll always need to create and maintain an accurate list of current employees (on paper, in a spreadsheet, or within time and attendance software). If you terminate a worker tomorrow, don’t wait until the end of the month to remove them from your employee list. If you’ve automated their payroll time tracking in any way or forget to remove them later, which can happen when things get busy, you might mistakenly send them a paycheck.
Organize by Employee ID
Maintaining a list of current employees is a good first step to tracking time worked but organizing your employee list is key. The default method many employers use to do this is by name. However, assigning each worker an employee ID is safer.
If you have an employee with a common name like Mike Smith, there’s a good chance you may hire someone else with the same name; this can lead to swapping employee work hours accidentally, which can get messy. Also, you’re more at risk of creating duplicate entries for the same employee if you happen to rehire an ex-worker who you forgot to delete at a later time.
Assigning an employee ID is easy. You can start wherever you wish, 1 or 1,000, although 1 does make more sense, such as 001. Just be sure you don’t skip any numbers after the first one you assign. When an employee is terminated, don’t reuse their employee ID. If you ever undergo a payroll audit, having multiple employees, both current and ex-employees, with the same employee ID number can complicate matters.
You’ll need to attach this number wherever you house data about your employees. If you use a spreadsheet, create an Employee ID column. If you opt for time tracking software, it may assign it for you automatically. If you have to enter manually, be sure you match the correct ID with its corresponding employee.
Label Each Employee as Exempt vs Nonexempt
Another piece of information you should include in your employee list is a label identifying whether they are exempt or nonexempt employees. Exempt workers are normally salaried―although not always―and don’t receive overtime pay. The work hours for which you pay them are usually the same each week, so deciding how to track employee time for this group is simpler. Nonexempt workers are usually paid an hourly rate, and their work hours are more likely to vary depending on your business needs.
Including an employee’s nonexempt vs exempt status on your employee list will make it easy to verify if you ever have questions about it. It’s also a best practice that will help any future audits go smoothly. Auditors look for this to ensure you’re not breaking any laws by not tracking employee time for nonexempt workers who must be paid for overtime hours―usually hours worked above 40 in a week.
2. Record Employee Work Hours Every Day
Some employers don’t have strict rules about how often employee work hours should be recorded; as long as they have a total by the payroll deadline―sometimes weekly or biweekly―they think they’re OK. However, we suggest that you or your employees record these hours daily, especially if you’re managing this without software or a free online time card calculator.
It’s easy to forget what happens in a workday when you give yourself time to sleep. Employees can inflate their hours easily without you knowing or having a way to verify them if their work time regularly deviates from the schedule. You can also place your business at risk if you don’t require daily time records. Some states like California have daily overtime rules. If employees work more than 12 hours in a workday, regardless of weekly work hours, they are entitled to double-time pay.
Record Start & End Times
To record your employee’s work hours correctly, be sure to document the time they start and stop working. You can opt to record the precise time or round it to the nearest quarter per federal labor regulations. For instance, you can legally record a starting time of 10:07 as 10:00, but 10:08 can only be rounded up to 10:15. Be careful if you opt to round because rounding down when you should be rounding up can lead to overtime pay violations.
Lunch & Rest Breaks
If you give your workers lunch and rest breaks―per federal law, it’s optional, unless you employ minors―you’ll need to account for them accordingly. Lunch or meal breaks can be unpaid, so you can disregard this time when tracking employee time. Be sure to document it for transparency, showing 12:30 p.m. to 1 p.m. as a lunch break is sufficient.
A rest break is different than a lunch break. Rest breaks are usually shorter, five to 20 minutes vs 30 minutes to an hour for lunch breaks and should be paid. Check your state’s laws before finalizing any related policies because some states require you give rest breaks―remember, these are paid―after employees work a certain number of hours, such as 10 minutes for each four-hour work period.
Tracking time for employees who work split shifts is similar to tracking time for employees who work consecutive hours. A split shift is when an employee’s daily schedule is split into two or more separate parts of the day.
For instance, they may work four hours in the morning (9 a.m. to 1 p.m.) and four hours in the evening (5 p.m. to 9 p.m.). This is an eight-hour workday, and the four-hour break in between the two shifts are not considered rest or meal breaks. You don’t need to pay them or document them for that matter. Include the start and end times for each shift and document any lunch breaks that fall within the time frames.
3. Add Up Hours Worked Every Day
Before each pay period, you’ll need to add your employees’ work time so you know how much they should be paid. A good employee time tracking app will do this for you. If you need to add the time yourself, keep in mind that you’ll need to convert all minutes for payroll purposes. For instance, 10 minutes should show as .17 of an hour. This means that work time from 8:04 a.m. to 4:15 p.m. equals a total of 8.18 hours, which equals eight hours and 11 minutes.
Paid and Unpaid Leave
If an employee takes paid time off (PTO), unpaid time off, or sick leave, you should document this by day. We suggest keeping a good paper trail showing when the employee requested time off. Use a time off request form that shows the date, reason, whether it’s paid or unpaid, and so on.
You should record the hours for paid vacation and sick leave―check your state’s paid sick leave laws―and label them appropriately so that you know to include them with the employee’s paid work time for the week. It’s also a good idea to track unpaid leave so that you have good records of the employee’s attendance trends. Be sure it’s labeled as unpaid, so you don’t accidentally pay for it.
Unique Situations That Make Adding Daily Hours Tricky
As long as you or your employees are tracking their work time in an organized fashion, calculating the total work hours should be simple. However, some situations can make it a little more complicated. If your employees’ work structure doesn’t fit the traditional approach, such as if they’re remote, you may need to consider other factors, like the actual times they’re working vs the standard schedule you set for them.
Remote employees are more likely to deal with distractions in their work environment, especially if they’re operating at home. Everyone’s circumstances are different, but this can range from tending to their children’s random needs throughout the day to communicating with the delivery guy. Recording work time of 8 a.m. to 4 p.m. may not be entirely accurate. Some employees may work later to make up for distractions during the day, and some may just fall short on their expected work hours each week.
If your employees are nonexempt, it’s pivotal that they communicate their work time as accurately as possible—you’ll need to pay overtime whenever they exceed 40 hours in a week. Consider having them document their work tasks in a spreadsheet. They can track their time worked on each item from start to finish. You should encourage them to use a stopwatch or time app so that they have the most accurate information.
Employees Traveling for Work
Many service employees work directly with clients. In some cases, they may even travel to their client’s locations—think bookkeepers, consultants, and so on. Federal regulations require that you consider travel time as hours worked. If your employee travels during their regular workday, all you need to do is ensure the time isn’t excluded from their total work time. If the travel happens at the end of the day, extending their normal work hours, be sure they document it and communicate it to you.
Just a note that traveling from their home base to the workplace and vice versa doesn’t count as travel time. If an employee heads directly home after leaving a job site, you should compare the travel time from the job site to the home office vs the travel time from the job site to their home. If the actual time they spend traveling home is more than they would’ve spent had they gone back to work, you’ll only pay for the excess time.
For instance, let’s say it takes Jenny 45 minutes to travel from work to home. However, she finished her day at a client’s office and decided to go home instead of back to the office. Driving to her home from the client’s office took an hour. You are only required to pay 45 minutes, not 60.
Employees Who Are Paid by Project
When you need to track employee time by project, you need an efficient way to document their time worked. Knowing they worked eight hours today won’t help if you don’t know how to allocate it. If your team is handling their time tracking manually, you should encourage them to use a stopwatch, although an online time tracking app that has built-in time tracking would be better. They can reset it every time they switch to working on a different project.
4. Summarize Weekly Work Hours
Once you total your employees’ work time for each day in the pay period, you can summarize it. That might be a regular 40 hours a week for some employees and 25 for others. If any employees are working more than 40 hours in a week, you’ll need to consider applicable federal and state overtime rules; employees who work overtime are entitled to a higher pay rate for the overtime hours worked.
Total Regular Hours Worked
Work hours are usually labeled as regular when differentiating them from overtime hours. As a rule of thumb, you can consider any hours less than 40 hours to be regular hours. Of course, this is based on federal laws. Check your state guidelines, because it may classify regular hours based on the total hours worked in the day vs the week.
Total Overtime Hours Worked
Per federal regulations, overtime hours are any worked over 40 in a seven-day workweek. If one of your employees works 45 hours in a week, you should classify five of those hours as overtime, with the other 40 hours being regular hours. This is extremely important, mainly for nonexempt and hourly employees. You’ll need to pay any overtime hours at the time and a half overtime rate. Depending on your state, this rate could increase to double the regular pay rate and include hours worked over eight in a day.
Employee Confirmation of Total Hours Worked
This goes without saying but tracking employee time and attendance is a sensitive matter. It’s connected to employees’ pay. This makes it a target for conflict. To avoid any issues with the number of hours you add to your workers’ paychecks, include a place in your time tracking system that allows them to confirm the time for which you are approving.
If you’re using a timesheet or spreadsheet, an employee signature will work. If you’re using time tracking software, there will most likely be a self-service HR portal with a built-in electronic approval process, so that you don’t have to do anything extra. Of course, if you happen to change any work hours they submit within the system, be sure they have the opportunity to review it. It’s also a good idea to document their approval of the change.
Best Practices for Tracking Employee Time and Attendance
There are some best practices you can follow to make tracking employee time easier. These range from automating as much of the process as you can to ensuring you stay up to date on applicable labor laws.
- Be sure employees sign off on all time and attendance documentation before paying them.
- Use a time tracking tool—even free time clocks or software works—to ensure you have the most accurate time data and to automate the process.
- Use a spreadsheet to document work time vs pen and paper.
- Study federal and state regulations that govern employee time you’re required to pay for and that which can be unpaid.
- Document any events affecting employee work time that differ from the norm.
- Track work hours daily.
- Organize employee time records with pertinent information, like employee ID, name, project IDs, and so on.
The number one goal you should strive for when tracking employee time is accuracy. Creating an efficient process that saves you time is next and usually goes hand-in-hand with accuracy.
Frequently Asked Questions (FAQs) About Tracking Employee Time
Below are questions you may have when deciding how to track employee time. It can be confusing, so we answered those that we found employers ask the most.
Do I have to track time worked for salaried employees?
It depends. Some salaried employees are nonexempt, although most are classified as exempt. If your salaried employees are considered nonexempt, you should track their work time. Although salaried typically indicates employees are paid for the same number of hours each pay period, nonexempt employees are protected by federal law. They cannot work overtime—hours over 40 in a workweek—without being paid extra money for it.
What documentation do I need if someone forgets to punch in or out?
If someone forgets to clock in or out, it’s a good idea to have them sign a document confirming the time that should be recognized. Keep this in their employee file in case any questions ever arise, either from the employee or an auditor.
What happens if I misclassify an employee as salaried when they should have been hourly?
If you misclassify an employee as salaried vs hourly, you won’t face any legal ramifications as long as you paid them the correct amount and withheld the appropriate taxes. It becomes an issue when you mix exempt and nonexempt classification statuses.
Since many employers classify salaried employees as exempt and hourly as nonexempt, mixing salaried and hourly payment types might mean you mixed these classifications as well. This is when it becomes a legal matter. Nonexempt employees must be paid overtime, so misclassifying in this sense could result in fees and penalties for unpaid taxes and labor law violations.
Deciding how you’ll track employee attendance and time worked is a big decision but necessary. Regardless of which tools you choose to use or if you opt for pen and paper—there are better options out there that are free—the time tracking process will be similar. You’ll need a way to record employee work hours and add them each day. Even if you use a tool, this is required, although it will likely be done automatically and in the background.
If you need an easy way to transition from a manual time tracking system to one that’s more automated but free, consider When I Work. If you have 75 employees, you can use it at no cost to you. Employees can clock in and out using their mobile devices, and if you want to install a time clock, you have that option as well.