How to Track Employee Hours Efficiently: 5 Practical Ways

Picture this: Jane is a small business owner who works with several freelancers. She just overpaid her marketer $7,200 and underpaid her developer $14,800, and she has no way of knowing it. How did this happen?

This is the (exaggerated) reality when you rely on self-reported time tracking. Your payroll could be way off, meaning you risk non-compliance with labor laws and be none the wiser.

After implementing a purpose-built employee time tracking tool, Jane has a well-organized system where freelancers bill accurately, projects run smoothly, and productivity skyrockets.

Employee time tracking is an often overlooked part of happy, successful, and compliant teams. Here, we’ve compiled some practical solutions to streamline your time-tracking processes and start reaping the benefits in your business.

TL;DR — Key Takeaways

• Tracking time is crucial for accurate payroll, labor law compliance, effective project management, revenue growth, and preventing employee burnout.
• You can track employee time in many different ways—manual or digital timesheets, time tracking apps, geofencing, or biometric clock-ins.
• Some might advise URL tracking tools, but these can trigger unhelpful behaviors in your team. We believe in trust over surveillance, and chances are your employees do too.
• If you’re looking for time tracking software, some options include Toggl Track, QuickBooks, and Clockify. You might even use software like Google Sheets or Excel. The best fit will depend on your business needs.
• Any way you slice it, implementing a time tracking solution makes productivity management a piece of cake. This simple implementation boosts revenue, efficiency, and employee well-being.

Why it’s so important to track employee time

Before you go there—nope, we’re not talking about bosses spying on their employees. We’re really against all that Big Brother stuff (we’ve made a statement about it and everything.)

There are so many other benefits to employee timekeeping that have nothing to do with surveillance. We’ve outlined some below.

Calculating payroll accurately

Put simply, accurate time tracking allows for accurate payments.

We know the last thing you want to deal with is the headache of payroll discrepancies. Mistakes in payroll calculations can be messy and uncomfortable to deal with at the best of times and land you in hot water at the worst of times (poor Jane).

By accurately tracking time, you can avoid time theft and ensure every minute is accounted for and compensated. Now, that’s how you build trust and efficiency in your workforce!

Compliance with labor laws

In the US, businesses are legally required to track time for all hourly employees. They must have a record of billable hours, wages, and overtime to comply with the Fair Labor Standards Act (FLSA).

The FLSA protects the right of workers to overtime pay for hours worked over 40 per workweek. Willful non-compliance can land you a criminal prosecution and up to $10,000 in fines.

Detailed time entries also help business owners avoid legal issues by providing a record of paid time off, breaks for meals, and more.

Better project management

Tracking employees’ time can help small businesses better understand where the bottlenecks in processes are, how resource-intensive different projects are, and optimize overall productivity. In short—tracking employee hours leads to better project management.

Let’s consider a branding strategist who’s just landed a new client who needs a rebrand done in a week. Eager for the deal, they agree. Two days before the deadline, they’re still scrambling on artistic direction. In the end, they pull it off—but at the cost of immense stress and a sub-par result.

If they’d used a time tracker, they would’ve had better estimates of the project:

• Client meetings & correspondence = 5 hours
• Initial research = 16 hours
• Art direction = 8 hours
• Building strategy = 8 hours
• Executing deliverables = 20 hours

That’s 57 hours of flat-out work—not accounting for coffees, lunches, bathroom visits, or the breathing room needed to let creative ideas rest. The total hours calculation would have been much higher, making a one-week lead time totally unrealistic.

Increased revenue

Similar to improving resource allocation and deadline management, tracking work time also optimizes productivity and boosts a company’s bottom line.

Managers can help workers find more effective time management solutions by identifying time sinks. Minimizing bottlenecks and wasted hours directly impacts overall profitability—leading to increases in revenue, client satisfaction, and scalability.

Take Candybox Marketing as an example of a marketing agency spending too much time on unprofitable projects. By implementing time tracking, they identified any project priced under $20,000 would lead to a loss. Once they started pricing more aggressively, they turned down smaller projects and ultimately achieved 40% year-on-year growth!

Reduced burnout

53% of workers feel overworked, according to Censuswide, so monitoring working hours ensures employees can enjoy a healthy work-life balance.

Every team has a workhorse, but it’s not always obvious who it is. Tracking time can solve this mystery and ensure that the workhorse is compensated, supported, happy, and healthy.

5 easy ways to track employee hours

There are many different ways to track employee hours. Some are better suited to certain companies than others. For example, a food truck owner might consider a time tracking app overkill, while a design agency might swear by it.

Whatever kind of business you have, one of the following methods below could be a good solution.

Manual employee time tracking

Our first port of call—good old pen and paper. This can be a blank page, a table, or via punch cards. Either way, these methods have stood the test of time for a reason.

Pros ✅	Cons ❌
They’re super low-cost, portable, not reliant on technology or an internet connection, and there’s no learning curve. They’re simple and no-nonsense, just like the businesses they suit best.	On the flip side, pen-and-paper tracking is prone to human error, unable to update in real time, doesn’t have a backup (what happens if you lose the paper?), and isn’t very private or well-protected.

Digital timesheets

Digital timesheets are a modern alternative to manual tracking. They’re ideal for growing companies with a handful of employees.

Pros ✅	Cons ❌
Compared with manual tracking, they’re more efficient and accurate and don’t suffer the same storage issues. You can back them up and password-protect them for extra security.	They cannot produce sophisticated reports or draw insights from data.

Time tracking app or software

You might be after a more sophisticated solution. We get it—you’re a busy leader, and you want your team to run like clockwork.

Pros ✅	Cons ❌
Dedicated time tracking apps like Toggl Track offer next-level features like real-time tracking, automatic reports, a mobile app, and integrations with whatever else is in your tech stack.	Requires a bit more technical know-how than manually tracking time in a spreadsheet (however, most tools are intuitive and easy to use).

Geofencing

Geofencing uses GPS to make virtual boundaries around specific locations or job sites. Very “Black Mirror”—we know.

Pros ✅	Cons ❌
Most commonly used in field or remote work settings, employees clock in and out of their designated work areas as they would at a physical office. This system increases accountability and tracking accuracy while preventing time theft and false clock-ins.	Geofencing raises valid security and privacy concerns, namely the risk of exposing sensitive data.

Biometric clock-in

Once the object of sci-fi movies, the biometric clock-in is any system that uses fingerprints or facial recognition to track employee hours.

Pros ✅	Cons ❌
Obviously, they’re highly accurate and virtually impossible to falsify. They’re also more secure than geofencing, reducing time theft and buddy punching. Biometrics are fast and seamless and require minimal employee training.	They’re also the most expensive option on this list. And as they’re quite new, this might cause friction with employees who don’t want their employer to hold their biometric data.

Why we never recommend URL tracking

You might stumble upon some articles recommending URL tracking as an effective time-tracking method. These work by allowing a time clock tool or browser plug-in to track the URLs your employees visit and then deliver a breakdown of where they spend their time.

We wouldn’t recommend this as a tactic. It’s a little too Police for our liking (you know, “every move you make, I’ll be watching you”). We’re firmly anti-surveillance for a few reasons:

• 🚫 Surveillance is a waste of time: Data points with no context don’t mean much. Plus, spying breeds a culture of paranoia and dishonest behavior. Not the vibe.
• 🐙 Time management > micromanagement: Big-picture overviews of where time goes are more valuable than keeping tabs on fragmented bits of information. Ultimately, we care about employee output rather than input.
• 🫂 Trust is more powerful than surveillance: Trust makes you feel empowered in your work—you know the buck starts and stops with you, and that breeds responsibility and ownership. Surveillance is the equivalent of a greedy higher-up breathing down your neck. Again, not the vibe.

Toggl Track does what surveillance doesn’t—it empowers employees to manage their own time. They can log activities as they choose, offering a flexible and privacy-friendly approach to time tracking compared to URL tracking.

It’s all the benefits of time tracking without invasive monitoring. Cheers to that.

Do you really need employee time tracking software?

Time tracking software has some really strong use cases. Whether it’s a good fit for you boils down to your company, industry, headcount, the type of projects you want to track, and more.

If you’re considering adding time tracking solutions to your tech stack, here are four different options (some free, some paid) that might be up your alley.

Toggl Track

Toggl Track is the most user-friendly employee time tracking app on the market. Its sleek and intuitive design means employee uptake is high, and businesses can quickly get stuck in and track their employee scheduling more efficiently.

With a host of powerful features, such as automatic or manual tracking, a start/stop timer, detailed report generation, integrations with over 100+ tools, and a mobile app for Android and iOS, it slides right into your day.

Quickbooks

QuickBooks is a payroll software with a time tracking tool that automatically syncs tracked hours with financial data for a smoother payout system.

It streamlines employee payments and client billing, making it ideal for small to medium-sized businesses looking for a two-in-one solution. As it isn’t purpose-built, it might have slightly limited functionality compared to other options on this list.

Clockify

Clockify is a versatile time clock app offering features like unlimited time tracking across a myriad of projects and seamless integration with different tools. Users can access detailed employee timesheets and detailed data and insights from reports.

Google Sheets or Excel

If your time-tracking needs are basic or you’re dealing with a less tech-savvy crowd, trust spreadsheets to get the job done!

The familiar layout of a tool like Google Sheets can help older generations feel at ease while digitizing and systemizing the process. You can even implement some automation to help with calculations and accurate payroll.

Benefits of using a time tracking solution to track employee hours

Still on the fence about using a time tracking tool? Here’s a quick reminder of why you should commit:

• 🧾 More accurate billing: Tracking time prevents your emotional state from warping your perception of time. Workers often overestimate how long boring tasks take and underestimate how long exciting tasks take. Without a time-tracker, your team could be leaving money on the table.
• 💶 More revenue: You know what they say—what you can’t measure, you can’t improve. A time tracker tells you exactly where employee time is going. This lets you optimize it, boosting productivity, operations, and revenue. It also identifies high-income tasks to maximize profitability across projects and clients.
• 🧘 More employee well-being: At the end of the day, a business isn’t defined solely by its profit—it should also support the people who generate that profit. Keeping track of employee hours improves their well-being by accurately identifying who’s overworked, compensating overtime, and supporting overall work-life balance. This keeps your team motivated and set up for long-term success.

Try the best employee time tracking software for free

Overall, the best way to track employee hours depends on your company’s style and needs. Still, you have a few different options to consider, like digital timesheets, geofencing, biometrics, or purpose-built tools like Toggl Track.

Toggl Track makes it easy for everyone to track time, no matter their workflow. With start/stop timers, automatic time tracking, and manual time entry available across web, desktop, mobile, and browser extensions, you won’t find a flexi-er.

Our time tracking accuracy ensures every minute is accounted for, providing businesses with precise data that enhances payroll accuracy and operational insights.

Toggl Track’s integration capabilities across 100+ tools allow seamless connection with payroll and employee management tech stacks. It’s a no-brainer solution for any business setup.

See for yourself by creating a free account today.