Your employees clock in, they clock out, and you pay them for the hours they work. It’s a simple process, right?
Not quite. What happens when they start work early, stay late, or handle certain tasks outside their regular hours? If you’re not accurately tracking and compensating them for those hours, you’re not just risking unhappy employees — you’re potentially ignoring federal and state labor laws.
That’s why an effective timekeeping policy is more than just convenient — it’s necessary. Without one, the simplicity of ‘clock in, clock out’ can become a quicksand of inaccuracies that can pull your small business down.
In this article, we’ll guide you step-by-step in creating a timekeeping policy that’s fair and compliant, so you can confidently navigate the complexities of employee timekeeping and protect your business.
One easy app to manage your hourly team.Get your team in sync with our easy-to-use, all-in-one employee app.
A timekeeping policy is a set of guidelines that a business establishes to monitor and record its employees’ working hours. It typically addresses things like regular working hours, overtime, break time at work , vacation, sick leave, and other forms of paid or unpaid time off. They also normally detail procedures for handling disputes about recorded time or instances of noncompliance with the policy.
Creating and enforcing a timekeeping policy is also required by law in many countries, including under the Fair Labor Standards Act (FLSA) in the United States. While the FLSA doesn’t require business owners to use time clocks , time cards, or any other specific timekeeping system, they’re required to maintain accurate records of hours worked by nonexempt employees for a minimum of 3 payroll years.
Every small business is different. While your timekeeping policy should be tailored to your business needs, here’s what a basic policy should include:
First off, your timekeeping policy should explain why it’s essential and how it benefits both your small business and the employees.
Consider these examples:
Focus on the benefits of having a timekeeping policy rather than the potential consequences of failing to comply.
| ⚠️ Remember : While you should mention the benefits of your timekeeping policy, don’t over-promise. Set realistic expectations that your company can consistently meet. |
This section defines who’s covered under the policy, especially if you have exempt and nonexempt employees, as defined by the FLSA.
Exempt employees
Exempt employees are those who are exempt from the overtime pay requirements of the Fair Labor Standards Act (FLSA) due to their job duties and salary levels.
Nonexempt employees are eligible for overtime pay under the FLSA.
They can be paid hourly, salary, or on a piece-rate basis.
Nonexempt employees are entitled to overtime pay for hours worked beyond 40 in a workweek, typically at a rate of one-and-a-half times their regular pay rate.
The U.S. Department of Labor (DOL) has proposed changes to the salary thresholds for exempt employees, which are expected to be finalized sometime in 2024[1][3]. The proposed rule would increase the minimum salary requirements for the executive, administrative, and professional (EAP) exemptions.
The current federal minimum salary threshold for exempt employees is $684 per week ($35,568 annually). However, the proposed rule would increase this threshold to $1,059 per week ($55,068 annually).
The minimum salary for the highly compensated employee (HCE) exemption would also increase from $107,432 per year to $143,988 per year, with the possibility of the threshold being even higher based on earnings data at the time the final rule takes effect.
It’s important to note that some states have their own salary and duties tests for determining whether an employee is exempt from overtime, and these state laws can be more protective than federal law. Employers must follow the law that provides the greater protection to employees
| 💡Tip : Having one company-wide timekeeping policy means all team members understand how their employer operates their small business. It provides clarity, helps maintain uniformity, makes for easy revisions, and reduces the risk of costly mistakes or litigation. |
This is where you’ll provide an overview of your small business’s expectations on working hours, overtime, and leave. You should also cover how the policy will be enforced and any potential consequences for noncompliance.
For example, if you’re using a tool like Homebase timesheets , you can explain to employees that they’ll be able to view their wages and overtime data before payday.
Here’s a template you can easily adapt for your own small business:
Clear guidelines for clocking and clocking out of work can prevent time theft and ensure people’s working hours are tracked accurately. For example, if an employee signs into their shift later than their allotted time but gets paid for all their scheduled hours, it will add to your labor costs unnecessarily. That’s because you’re paying for more hours than they actually worked.
To prevent this, consider using time tracking software like Homebase. The time clock tool allows employees to clock in and out of work anytime and anyplace. It also includes features like geofencing and photo check-ins to reduce time theft and buddy punching.
But the timesheet procedure for each type of employee category can be different. For example, salaried employees may be required to only log time spent working beyond their regular hours, such as overtime, or instances of paid time off, like sick leave or vacation time. On the other hand, hourly employees are typically required to record whenever they start work, take breaks, resume work, and finish for the day.
Maintaining separate processes and systems for each employee category manually can be time-consuming. With Homebase, all your employee timesheet procedures are managed in one place – they can log their hours, apply for leave, and record overtime seamlessly. This way, you can handle logs, verifications, and permissions automatically within the app, reducing the potential for errors.
One easy app to manage your hourly team.Get your team in sync with our easy-to-use, all-in-one employee app.
