Employee Timekeeping: What Is It And Why It’s Important

Employee timekeeping involves keeping accurate records of the hours your employees work every pay cycle. It is a vital part of business operations, but it can be tricky to get right.

Something as small as not recording the time you take to respond to emails every day could cost you up to $50,000 a year, according to a report by Accelo.

So, it’s crucial to track employee time properly to ensure you don’t suffer these potential losses.

In this article, we’ll examine why employee timekeeping is important, its methods, and how to implement it effectively.

What is employee timekeeping?

Employee timekeeping is the process of tracking the hours worked by your staff. Depending on your company’s needs, this could mean tracking when employees clock in and out and take breaks or how long employees spend on daily tasks.

Effective employee timekeeping is important because it keeps your payroll accurate, gives you insight into how your employees use their work hours, provides a basis for precise client invoicing, and identifies areas where productivity can improve. 

Why is employee timekeeping important?

Employee timekeeping is important for many reasons, including higher productivity and increased morale. Here are the top benefits:

1. Labor law compliance

Employers must keep accurate records of the hours worked by nonexempt employees to comply with the Fair Labor Standards Act (FLSA). Accurately tracking employee attendance and time helps you remain compliant, avoiding legal action and potential fines.

2. More accurate payroll

Paying employees the wrong amount can expose your business to disputes and potential financial loss through overpayment or legal fees and fines.

Recording employee hours and attendance tracking ensures your employees are never under or overpaid.

3. Increased employee morale

Tracking time spent on tasks helps you prevent burnout with better resource management (more on this shortly).  

Plus, it can help identify employees who are overworked and skipping breaks. This information helps you balance employee workload for a better work-life balance.

4. Accurate invoicing

Employee timekeeping gives insights into how long tasks take to complete, which helps ensure the accuracy of invoices. It also helps come up with more accurate estimates, as you can refer to past projects’ time data and predict how long similar tasks will take.

This helps boost your business reputation and client relationships by preventing under- or over-billing.

5. Workforce management and resource allocation

Conducting a productivity audit that analyzes employee time cards helps identify bottlenecks and time sinks in your workflow. It also helps you see employees who may be struggling with certain tasks and establish areas where further training could be needed.

If you find that a certain step in your workflow consistently takes longer than it should, it could signify there are problems with the process, and it should be looked into. Addressing these problems can help boost your productivity.

Next, let’s see the different methods of employee timekeeping.

What are the different methods of keeping employee hours?

How you track employee time will depend on your business’s needs. Some options, like manual timekeeping, are better suited to individuals or small businesses, whereas time-tracking software can be used by every business, regardless of size.

Here are the key employee timekeeping methods:

1. Manual timekeeping

Manually tracking employee time typically involves a paper timesheet, Google Sheets, or an Excel spreadsheet. This flexible option is generally cost-effective. It’s also easy for your staff to learn and use.

However, manual timekeeping is tedious, error-prone, and leaves you vulnerable to time theft. 

It’s also an inefficient method for running payroll processes, as hours need to be manually tallied and carefully reviewed to ensure they align with shift schedules.

A manual timekeeping system generally makes it difficult to track breaks, overtime, or paid time off (PTO), especially at scale.

2. Swipe cards

Swipe card time clock systems read a magnetic stripe card and log employee clock-in times, breaks, overtime hours, and clock-out times. 

Here’s how the swipe card system works:

1. Each employee in an establishment is assigned a physical card.

2. A kiosk is placed at the entrances and exits of the establishment. 

3. Employees swipe their cards at this kiosk to record the in and out times.

4. Supervisors and managers download kiosk data and generate timesheets using companion software. 

While the swipe card system is simple, it has the following downsides:

• Employees must be physically present with their swipe cards at the kiosk. This system does not work for in-field or remote workers.
• Time records can be falsified with buddy-punching, where employees can ask their friends to swipe the card on their behalf.
• This system is good for tracking attendance and in/out times, but you cannot track employee productivity. 

3. Biometric timekeeping

Biometric timekeeping uses biological data, such as facial recognition or fingerprints, to let employees clock in and out. It tracks their time and attendance and verifies their identity simultaneously.

This time tracking system reduces the possibility of time theft or employees clocking in or out for each other, called buddy-punching.

Biometric timekeeping is a more reliable method of time tracking, but it’s expensive. In addition, it also has the following drawbacks:

• You can only see the check-in and check-out times, but not what happens in between.
• You’ll need extra security and legal compliance to adhere to privacy regulations related to biometric data.
• Some biometric systems will not work for employees with disabilities.
• Similarly, biometric tracking systems don’t work for employees who work from home or in the field.
• And lastly, employees may not be comfortable sharing their biometric data.

4. Time tracking software

Time tracking software is an intuitive, user-friendly, efficient, and time-saving method of employee timekeeping. It eliminates the need for manual payroll calculations, reduces the chance of time theft or buddy-punching, and records employee hours accurately.

Such software often uses web apps, browser extensions, desktop apps, mobile apps, or native integrations, so employees can easily access them and track time from anywhere, even on their mobile devices.

Toggl Track provides different options for employee time tracking. Users can track time using the start/stop timer or add time entries manually.

You can track billable and non-billable hours by clicking the $ icon and applying billable rates if one is added to the project. You can also create projects and add team members to track project time effectively.

Toggl Track is also available as a mobile time-tracking app for iOS and Android so employees can track time on the go.

However, time tracking software has its own drawbacks:

• Time tracking software can be complex and may require training for employees to use effectively compared to swipe cards or biometric systems.
• Software solutions rely on devices and internet connectivity. Any technical issues, such as software bugs or internet outages, can disrupt the time tracking process.
• Employees might forget to log their hours or make errors while entering data into the software.
• Employees may resist using time tracking software due to concerns about micromanagement or feeling monitored.

How can I implement an employee timekeeping process at work?

To reap the benefits of employee timekeeping, it’s vital to implement the process properly. There are a few steps you should take to achieve this:

Let’s look into those steps in more detail: 👇

1. Get educated on the relevant laws and regulations

All businesses must comply with local, state, and federal laws that govern payroll and timekeeping practices, like the FLSA. This includes guidelines on wages, overtime, time clock rules, recordkeeping practices, and part-time and full-time hours.

Additionally, most states have their own laws and regulations around time tracking.

We advise you to speak with an attorney who specializes in labor laws, privacy laws, and industrial laws to ensure compliance.

2. Choose your timekeeping method

Getting this step right is vital as it will affect how your employees track time and how you calculate payroll. 

Manual timekeeping methods are tedious and error-prone. Check-in/check-out systems cannot track employee productivity.  And time tracking software can be expensive.

However, time tracking software is the only solution for tracking employee hours, attendance, and productivity.  In addition, most time tracking software can also generate reports based on the time data. These reports are useful to identify productivity bottlenecks and comply with regulations.

3. Communicate with the employees

Employees typically have the following concerns when using timekeeping software:

• Excessive micromanagement
• Privacy concerns
• Time tracking as extra work

Address these concerns by communicating openly with your employees.

Here are a few best practices:

• Avoid using employee monitoring and surveillance software. Instead use the generated time data to track employee productivity, utilization, and workload.
• When evaluating employee performance, Focus on tasks delivered instead of the hours worked. Use the time data to weed out inefficient workflows and better estimate budgets.
• Conduct employee and manager training sessions on how to track time and use time data to improve performance and work-life balance. 
• Show how the time employees track drives business profitability and efficient operations, leading to better employee salaries.
• Incentivize timekeeping by rewarding employees who submit timesheets on time.

4. Provide training

Provide training on clocking in and out, what to track, how to report mistakes, and how to submit time-off requests. Document the process and store it somewhere your employees can easily find it if they need to refer back to it.

If you find some employees consistently struggle with accurate tracking or timely submissions, offer refresher training to bring them back up to speed.

5. Review reports and data

Periodically review your time data records. 

The ideal time will depend on your business and the number of employees, but it could be monthly, quarterly, or annually.

Look for errors like incorrect entries or missing time data and bring them to the employee’s attention. When done regularly, you can spot patterns and address issues before they become bigger problems.

Time tracking software like Toggl Track allows you to create automated time data reports to quickly gather all the information you need to review.

The Detailed Report shows every time data entry is within your date range, which is ideal for deep-diving into individual entries.

The Summary Report shows the workspace’s total tracked time. It can be filtered by team, client, project, tasks, billable/non-billable, tag, and description.

Users can generate and send client invoices directly from this page. 

Start tracking employee time with Toggl Track

Employee timekeeping is vital for accurate payroll calculations, effective employee scheduling, tracking labor costs, and contributing to a transparent work environment.

While manual timekeeping is inexpensive, the best way to track employee time is to use time tracking software like Toggl Track, thanks to its ease of use, payroll, and reporting functionality..Streamline your timekeeping processes by signing up for Toggl Track today.