5 essential time clock rules for hourly employees

Managing employee hours, payroll, and compliance with state and local regulators are crucial aspects of any small business. If hours worked or employee pay isn’t correctly tracked, employees can feel dissatisfied. On top of that, businesses are at risk if they don’t follow state labor practices, and you can actually lose money to time theft without a process to accurately track and audit employee hours—and the cost can be enormous. A whopping 43% of people admit to exaggerating the number of hours worked. 

Some key time clock rules for employees can help small businesses run this part of their operation smoothly and with accuracy. A digital time clock manages any state level employment laws, keeping you up-to-date on any changes, and helps set breaks, overtime, and even minimize errors with payroll. 

Here, we’ll go through what a time clock is, how a digital time clock can help your small business, what the benefits are of using a time clock for employers and employees, and time clock rules for employees. 

What is a time clock?

The image often conjured up for a time clock is a manual time card system with a card that employees “punch in” when their shift starts. 

Today, time clocks can be analog or digital. Whichever one you use, time clocks record when an employee starts their scheduled shift and when they end it by clocking out.

Time clocks work to track employee hours, both regular and overtime, as well as any unpaid breaks. That way employers know the total sum of everyone’s work for a specific period. With that info, they can easily (and accurately) calculate payroll and wages. 

Time clocks can be: 

• Digital. Employees use an app, or swipe or scan a card into a computer system that tracks start and end times of their shift. 
• Manual. Remember that thick piece of paper used for punching in and out on a timecard? That would be a manual way to track employee hours. 
• Biometric. Employees can use a part of their body like a fingerprint or a retina scan to clock in and out of their shift.  
• GPS. GPS-enabled time tracking is a location enabled way for employees to clock in or out of a shift wherever they may be, with no need to come back to an office to do so. 

The benefits of using a digital time clock for employees

Digital time clocks help both business and employees. They work to ensure schedules for profitability, and that employees are going to be paid fairly for the time they have worked. Digital time clocks give employees the agency and responsibility that they are indeed working the hours they are scheduled for. 

Here are some of the many benefits of using a digital time clock:

It saves employees time

Using a digital time clock takes unnecessary administrative work out of what your employees are actually there to do. There’s an abundance of risk if employees use a manual, paper system to track their hours. Paper gets lost or destroyed or mixed up, which can take time away from their actual role. A digital time clock contains an employee’s hours, freeing them up to dedicate themselves back to the job at hand. 

Improves payroll accuracy

Employees want to be paid for the hours they work. A digital time clock is going to make it easier for both employers and employees to spot any time card mistakes. With a digital clock, those mistakes can be corrected faster. For employers, that means less time running payroll and more time on other important tasks for the business. Employees can be assured that they’ll be paid for the hours they work.

Fair and precise pay

Nothing is more important to hourly workers than getting paid for the time they’ve worked. A digital time clock is an important solution for employees that guarantees their hours have been accurately scheduled, recorded as worked, and will be paid out in the next pay period. This is especially helpful when employees are working overtime hours or have unpaid breaks that need to be recorded, too. Digital time clocks contain a record of those hours worked, and are more accurate because they automatically calculate hours, wages, and overtime. The result? Way, way less math.

5 time clock rules for hourly employees

It’s important to understand that, as easy and straightforward as a digital time clock is for employers and employees, there are rules in place both federal and at the state-level to ensure records are kept accurately, rounding up or down applies fairly, and who needs to have their hours tracked at all.  

1. Which employees need to track their hours?

Bare minimum, employees who work hourly must have their hours tracked. Anyone who does shift work should be clocking in and out using a digital time clock.

Things get a bit trickier with salaried employees. Salaried employees can be categorized as exempt or non-exempt for hourly tracking. If a salaried employee is exempt and they perform any overtime work, they won’t need to track any hours because they aren’t eligible for that pay. Non-exempt employees are salaried employees eligible for pay if they work any overtime hours. This usually applies to managers or sometimes team leads. It’s important to track and maintain a record of that work to ensure accurate pay. 

2. Time clock rounding rules

It’s common for hourly employees to clock in before or after the 10 or 15 minute mark, or even at the top of the hour or half past. In that case, it’s legally okay to round up or down to the nearest increment of time. This way, payroll employees for businesses aren’t left to deal with small amounts and minute calculations. 

Say you have an employee clock in at 4:06 p.m. Rounding can occur in 10 or 15 minute increments. For 10 minute rounding purposes, employers can round up to 4:10 p.m. For the 15 minute increment, it would be rounded down to 4 p.m.

The practices of rounding differ business-to-business. Nonetheless, your business needs to comply with FLSA rounding regulations to avoid any legal issues or penalties. 

3. The 7-minute rule

While businesses may approach rounding differently, many of them do choose the 15 minute increment mark for tracking and rounding. With that said, meet the 7-minute rule that allows businesses to round depending on when employees clock in or clock out. 

If your employee clocks in or out within the first 6 minutes of a 15 minute block, that gets rounded down to the top of the hour. For example, if an employee clocks out at 3:04 p.m., that number is rounded down to 3 p.m. Where the 7-minute rule comes into play is if clocking in or out occurs at the :08 timestamp. If that same employee clocks out at 3:08 p.m., their end time is rounded up to 3:15 p.m.

Complicated? We know. That’s why working with an all-in-one system like Homebase can help keep you on track. From schedules to time clocks to payroll, skip the headaches and save yourself time, money, and major stress.

How to stay compliant with the Department of Labor’s record keeping rules

Every employer with hourly workers or non-exempt salaried employees must keep detailed records. Records to keep include but aren’t limited to:

• When an employee’s work week begins
• The hours worked each day and the total hours worked each work week
• The employee’s regular hourly pay rate
• Total daily or weekly earnings
• The total amount of overtime earnings for a work week
• Total wages for each pay period
• The date of payment and the pay period it cover

Make sure employees remain compliant with the FLSA by doing the following:

• Having everyone use the same time clock system 
• Using a time clock system that keeps accurate records
• Providing employees with state time clock laws

5. State-specific time clock rules and laws

Compliance can be challenging. There are both federal and state-level regulations businesses are required to adhere to when it comes to employment practices, especially those that require management and tracking of hours worked, and any overtime pay.

States differ on what’s required (e.g. unpaid breaks are a requirement, while other states don’t make that distinction). Let’s take a look at a few state-specific time clock rules and laws, as well as what overtime hours may need to be factored in. 

Wisconsin

Any worker in Wisconsin who exceeds 40 hours in a 7 day work week is eligible for overtime that’s 1.5 their regular pay. Additionally, employers aren’t legally required to give employees breaks. If they do, breaks are paid up to 30 minutes, and considered unpaid over that time.

Florida

Florida doesn’t have any state-specific laws on overtime work, so employers comply with federally mandated overtime rates for those exceeding 40 hours. They must be paid 1.5 their regular rate.

Florida does have a lengthy list of what non-exempt salaried employees earn for overtime, like the amounts for specific roles and salaries, and it includes those on a Fluctuating Workweek Method. You can read about those here. 

California

California is one of the more thorough examples of how employees and employers track time and payment. The state has conditions around split shifts for employees, including a premium equal to one hour of pay, which appears on a separate pay stub. Employers are required to keep track of split shifts to ensure accurate data for payment. 

The law in California states that “reporting time pay constitutes wages.” Translation? “Reporting time” can actually fall under the the following categories:

• Physically appearing at the workplace at the shift’s start;
• Presenting themselves for work by logging on to a computer remotely;
• Appearing at a client’s job site;
• Setting out on a trucking route;
• Telephoning the store two hours prior to the start of a shift

If an employee in California does any of the above, those hours need to be tracked for payment purposes. 

According to Californina’s Department of Industrial Relations, for overtime work, employers must:

• Pay 1.5x the employee’s regular rate of pay for all hours worked in excess of eight hours; and 
• Double an employee’s regular rate of pay for all hours worked for more than 12 hours in any workday, as well as hours worked if an employee has worked more than seven consecutive days 

Best practices when using an employee time clock

Digital time clocks are beneficial for both employers and employees to ensure hours worked are the ones employees are being paid for. That said, there are still a few important practices and tips to consider when using an employee time clock.

Create a time clock policy

Create clear parameters on what a time clock is for and why time-tracking methods are useful for both the business and employees. Here are some examples of what that policy can included:

• How early or late employees can clock-in and out for a shift
• What happens if they forget to clock-in or out
• Establish if employees need to clock out for breaks
• Decide what the consequences will be if an employee doesn’t clock in or out of their shift—or if they’re frequently forgetting to clock in or out at all
• What disciplinary actions occur if employees clock in and out for another employee. Otherwise known as buddy punching

Clearly communicate your time clock policies to hourly employees

Communication goes a long way in the workplace, especially when new processes or technologies are introduced. Clearly indicate your expectations to your employees around using a time clock. Make sure you reinforce the benefits of using the time clock, like minimizing manual errors that could result in pay check mistakes. 

Provide time clock training for employees

Basic training for any new tool or technology in the workplace is a must. Take the time to educate your employees, including managers, on how to use a time clock. This should live in your employee onboarding and training documentation. New employees should be expected to learn how to clock in and out for a shift so ensure there’s proper documentation. 

Use notifications as reminders for employees

A clear way for employees to develop autonomy over clocking in and out of their shift is to enable notifications. As much as time clocks are a useful tool for employers to streamline scheduling and payment tasks, a digital time clock helps create a positive environment for employees to track their own hours, expectations of pay, and autonomy at work. Automations for letting an employee know they can clock in or out via notifications or messages in-app is a helpful reminder. 

Monitor overtime and time theft 

Look over timesheets or compare previous schedules with actual time spent at work by employees. Time theft means a business can lose valuable dollars. Digital time clocks are a useful way to have this task automated to ensure an employee hasn’t remained clocked well past the end of their shift or for time they aren’t scheduled to work. 

Homebase: The best employee time clock for your small business

• Easy-to-use app. Homebase’s app is easy to use. It can track hours, breaks, and overtime worked from iOS and Android devices, point-of-sale systems, and computers. Homebase’s time clock makes clocking in and out of a shift a breeze. 
• Compliance. Laws are different state-by-state, and there are federally mandated policies businesses need to comply with when it comes to labor. Make it easier on yourself, your business, and your employees—especially if you don’t have an internal HR team. Homebase notifies you of important legal changes to make sure you’re not caught off guard.
• Performance tracking. Notifications are key so employees know when they’re working and how often, making it easier to track their performance. Send notifications on the Homebase app for when shifts are meant to begin, or get late clock-in times if an employee starts their shift later than scheduled. 
• Payroll. Use the Homebase app to minimize any payroll headaches like calculating hours worked, wage, and any breaks or overtime that need to be factored in. 

Time clock rules for hourly employees FAQs 

Do hourly and salaried employees need to track their hours?

Yes. Every hourly employee should track their hours worked, including breaks and any overtime hours. 

Only salaried employees who are categorized as non-exempt employees are eligible for pay if they work any overtime hours. It’s important for those salaried workers—depending on their salary range, and that differs from state-to-state—to track and maintain a record of that work to ensure accurate pay.

Is using a time clock legal?

Yes, using a time clock is legal, but not required ( according to the FLSA). There’s no federal requirement for a time clock to be used to track hours worked, but it can help you prevent other compliance and legal issues that could land you in hot water.

What are time clock rounding rules?

It’s legally okay to round up or down to the nearest increment of time when an employee clocks in or out for their shift. Most businesses abide by the 10 or 15 minute increment rule. For example: if an employee clocks out of a shift at 4:04 p.m., and that business is on a 10 minute incremental clock, that number would be rounded down to 4 p.m. 

The 7-minute rule allows businesses to round up or down depending on when employees clock in or clock out. If your employee clocks in or out within the first 6 minutes of a 15 minute block, that gets rounded down to the top of the hour. 

What is the best employee time clock for my small business? 

Homebase is a great time clock solution for small businesses. It minimizes time theft and controls labor costs; effortlessly tracks employee hours, and can even help you run payroll. It’s easy to get signed up and onboard your team, and Homebase also offers HR support to help with all your small business team needs.

A free time clock that frees up your time. Track hours. Prep for payroll. Control labor costs. All with our free time clock. Try Homebase time clock