Time Clock Rules for Hourly Employees

Working with hourly employees has numerous benefits for businesses in many industries, especially around flexibility and efficiency.

At the same time, you should be careful with the time clock rules for hourly staff for your company. It’s essential to get acquainted with the applicable time clock labor laws.

This will save you potential legal issues and possible financial damages. It will also ensure you are treating your hourly workers fairly.

Here are the basics about following the United States’ time clock rules for hourly employees.

To follow the time clock rules for hourly employees, it’s a good idea to be aware of the most common problems that come up with time clocking.

Time theft

One of the most significant issues in the modern workplace is time theft committed by employees. The American Payroll Association (APA) has found that it impacts 75% of U.S. companies. It’s widespread and affects businesses in all industries, reducing their efficiency and costing them money.

Time theft is when employees log timesheet hours for time they haven’t worked. It’s one of the most popular forms of counterproductive work behavior (CWB). Timesheets are legal documents, and your business is required to keep them for inspection by the Department of Labor. That means that, by forging timesheets, employees are committing fraud.

Buddy punching

One of the typical forms of time theft is buddy punching, but it can also be excessive breaks, unregulated personal time, and unauthorized overtime. You need to be aware of all these practices before you can prevent them. It’s also a good idea to regularly inform your employees about your time theft policy to discourage the activity before it happens.

Your business must treat different types of employees following the legal framework in the U.S. Navigating this is a bit daunting for many companies, especially small businesses.

Salaried vs. hourly employees

For salaried staff, payment is due for a specific agreed time during which they have worked for a company. Typically, the salary is based on an annual amount for a 2080-hour year. Salaried employees have the right to benefits and usually have an employment contract. They are not required to complete timesheets.

On the other hand, hourly employees are paid on the basis of the actual hours they have worked for a company. The payment is based on a wage set by the hour. Additionally, hourly staff don't need to have an employment contract. However, they do need to fill in timesheets for the hours worked.

Learn more about the differences between salaried and hourly employees.

Other issues that often arise for businesses working with hourly employees are how to handle on-call shift payment and whether non-payment for off-the-clock work is legal.

Whether you have to pay staff for on-call time or not depends on the job's specific duties. Typically, no payment is due if an employee doesn’t have to be on the company’s premises and is free to engage in personal activities while being on standby.

In some cases, you would need to pay for on-call shifts as worked time. These include situations when an employee needs to be in a specific location and doesn’t have sufficient time for their activities due to work calls or tasks. On-call pay may be due even if an employee works from home, in case their time is filled with work activities and thus their private activities are restricted.

As for off-the-clock work, under the FLSA, it is deemed illegal not to pay your staff for such work. This applies to cases when employees are forced to work off the clock and voluntarily decide to do so. Thus, you should always pay off-the-clock work to prevent potential lawsuits.

Some of the typical situations in which employees may perform off-the-clock work are:

• Work activities for preparation before a shift starts

• Cleaning or arranging at the business location before or after a shift has ended

• Transporting work equipment before or after the end of a shift

• Work emails and calls before or after a shift

• Work activities during unpaid lunch breaks (breaking employee break and lunch policies)

This is also important in terms of your missed time clock punch policy. Under federal law, you have to pay an employee for hours worked even if the person forgot to clock in at the start of work.

The federal Fair Labor Standards Act (FLSA) and state laws contain the guiding principles for setting up your time clock rules. You need to know the federal time clock laws and the specific requirements that your state imposes.

That’s how you can be safe regarding your business interests and for the sake of fair practices for your employees.

There is no legal requirement for employers to have a time clock. Nevertheless, the FLSA stipulates that businesses should have clear records of their staff's time. This includes the start date and time of a working week, hours worked every weekday, and the total number of hours for the whole week.

There are, however, specific recordkeeping requirements set forth in the FLSA. Payroll records have to be kept for at least three years. On the other hand, records on whose basis wage calculations are made should be preserved for two years. These include time cards and piecework tickets, wage rate tables, schedules, and wage additions or deductions. All these records must be ready for inspection by the Department of Labor’s Wage and Hour Division.

Timesheet rounding rules

Many businesses use timesheet rounding to handle their payroll. It’s one of the cornerstones in the time clock rules and regulations you should know.

According to the Department of Labor’s time clock rules, timesheet rounding is legal. However, there are well-defined guidelines on how it can be used so that it does not infringe on the rights of employees.

The essential need for timesheet rounding comes from the difficulty of accounting for the so-called indefinite periods of time that employees log in. They usually constitute seconds and minutes. To avoid having to deal with such small periods, businesses choose to handle logged time in certain intervals.

According to the FLSA, the maximum rounding interval is 15 minutes. Companies can also round to smaller intervals, such as 5 or 6 minutes.

In addition to sticking to the 15-minute maximum, you must comply with the 7-minute rule for payroll. It states that you have to round down if the logged time is up to the 7th minute after a 15-minute interval mark and round up if it is eight or more minutes after the last 15-minute interval.

Your time clock punch-in and out policy should, first and foremost, be fair toward employees. It’s not legal to round logged hours in a way that benefits only your business — you must set up a system that is only favorable to your staff. Alternatively, you can opt for a policy that balances the interests of your employees and your company.

Whether you have to pay employees if they clock in early will depend mainly on the exact parameters of your timesheet rounding practice. If you round down the clock-out time (which rounds it in your favor), you need to pay your staff for the time they log in before the official start of work. However, clocking in before a shift should be a maximum of a few minutes in any case in order to prevent off-the-clock work.

Time tracking rules

There is no state or federal requirement for a company's clocking system. It should simply allow complete and accurate time tracking. The options throughout the decades have been different — from punch clocks and time cards to mobile and digital systems.

Having solid timesheet and payroll management and ensuring legal compliance is easier than ever before. Instead of using old-school punch cards, today's businesses can benefit from time tracking software that provides efficiency, accuracy, and ease of use for employees.

Solutions like Hubstaff are built for the modern workplace. Besides automatic time tracking and manual input of timesheets, our tool also offers extras like GPS time tracking and geofencing technology that can meet the needs of every type of business.

Important Notice: The information in this article is general in nature and you should consider whether the information is appropriate to your needs. Legal and other matters referred to in this article are of a general nature only and are based on Hubstaff’s interpretation of laws existing at the time and should not be relied on in place of professional advice. Hubstaff is not responsible for the content of any site owned by a third party that may be linked to this article and no warranty is made by us concerning the suitability, accuracy or timeliness of the content of any site that may be linked to this article. Hubstaff disclaims all liability (except for any liability which by law cannot be excluded) for any error, inaccuracy, or omission from the information contained in this article and any loss or damage suffered by any person directly or indirectly through relying on this information.

State-specific time clock rules and laws

Time clock rules and laws vary by state, and employers need to be aware of and comply with the specific regulations in their jurisdiction.

Here are a few examples of state-specific time clock rules:

• California: California requires employers to provide accurate and itemized wage statements that include total hours worked, including regular and overtime hours. Employers must also maintain correct time records for at least three years.

• New York: New York state law mandates that employers keep records of hours worked, including when work begins and ends each day. Employers must maintain these records for at least six years.

• Texas: Texas doesn't have specific time clock laws, but employers must keep accurate records of hours worked for at least two years. Overtime rules under federal law apply.

• Florida: Florida follows federal guidelines for time clock regulations. Employers must keep accurate records of hours worked and pay overtime per the Fair Labor Standards Act (FLSA).

• Illinois: Illinois requires employers to maintain records of the hours worked each day, including the starting and ending times of work. Employers must retain these records for at least three years.

• Massachusetts: Massachusetts law mandates that employers maintain records of hours worked, wages paid, and other employment-related information for at least three years.

• Washington: Washington state requires employers to keep accurate records of hours worked, including regular and overtime hours. Employers must maintain these records for at least three years.

• Georgia: Georgia follows federal guidelines, and employers must keep records of hours worked for at least three years. Overtime rules under the FLSA apply.

It's crucial for employers to regularly check for updates to state labor laws and ensure compliance with specific time clock regulations in their respective states. Consulting with legal professionals or the state labor department can provide additional guidance on state-specific time clock rules.

Best practices for implementing time clock rules

Implementing effective time clock rules is essential for accurate payroll management and adherence to labor regulations. In this context, establishing best practices ensures employers can optimize timekeeping processes while promoting workplace fairness, compliance, and transparency.

As the creators of a tool with time tracking capabilities, we’ve learned a thing or two about how to track time legally and fairly. Here are our strategies and tips.

Strategies for fair and legal time tracking

• Establish transparent time tracking policies, clearly communicate them to employees, and ensure they understand the expectations for accurate time recording.

• Offer training sessions on time tracking procedures to employees, emphasizing the importance of compliance with legal requirements and company policies.

• Implement dependable time tracking software or systems that accurately record work hours, providing a reliable source for payroll and compliance purposes.

• Conduct periodic audits of time records to identify discrepancies or issues. Regularly review time tracking practices to ensure ongoing compliance with legal standards.

• Enforce time tracking policies consistently across all employees to avoid perceptions of favoritism and maintain workplace fairness.

Tips for efficient time clock management

• Establish a feedback mechanism for employees to report any issues or provide suggestions for improving the time clock system, promoting continuous improvement.

• Foster a culture of accountability by ensuring employees take responsibility for accurate time tracking and understand the impact on payroll and compliance.

• Monitor overtime hours closely to ensure compliance with labor laws. Implement alerts for managers when employees approach or exceed overtime limits.

• Set up notifications and alerts for employees to remind them to clock in or out, reducing instances of missed punches. Set up an alert for managers if employees clock in late or miss a shift.

Important Notice: The information in this article is general in nature and you should consider whether the information is appropriate to your needs. Legal and other matters referred to in this article are of a general nature only and are based on Hubstaff’s interpretation of laws existing at the time and should not be relied on in place of professional advice. Hubstaff is not responsible for the content of any site owned by a third party that may be linked to this article and no warranty is made by us concerning the suitability, accuracy or timeliness of the content of any site that may be linked to this article. Hubstaff disclaims all liability (except for any liability which by law cannot be excluded) for any error, inaccuracy, or omission from the information contained in this article and any loss or damage suffered by any person directly or indirectly through relying on this information.