How (And Why) to Create a Time Tracking Policy This Year

Employees (and their managers) can struggle when they don’t have a roadmap outlining how to track their work hours. Where should workers record their time? What happens if they forget to log their hours? Are breaks included? Does anyone actually know?

If you’re unsure about the answers to these questions, you’re opening the door to low morale, inefficiencies, and even legal issues — yep, all the workplace nasties.

The solution is to implement a solid time tracking policy that clarifies everything employees and managers need to understand about recording time at work. It’s not about adding another layer of bureaucracy, but about setting up a system everyone can get on board with.

A well-thought-out policy improves payroll accuracy, maintains compliance, and even builds trust between you and your employees so they never feel you’re trying to scam them. Today, we’ll show you how to build an employee time tracking program for your business without breaking a sweat.

TL;DR — Key Takeaways

• A time tracking policy is a set of clear guidelines and procedures that dictate how employees should record and report their work hours. The policy outlines expectations for timekeeping, overtime, breaks, and time off.
• A time tracking policy has many benefits, including accurate payroll management, compliance with labor laws, better accountability, fewer disputes about overtime pay, more accurate project cost tracking, and many others.
• To create a time tracking policy, choose the right time sheet. Then, clarify the scope and explain how and when your business tracks time. Last but not least, explain your preferred timekeeping procedures.
• Roll out the time-tracking policy in three steps: preparation, communication, and onboarding.
• Pay special attention to employee surveillance and choose any creepy tools and methods that impact your workers’ privacy.

Why you need a timekeeping policy

A timekeeping policy is like a high-quality mattress — it’s one of those things that you don’t appreciate until you’ve tried it. Having a clear set of guidelines brings a wide range of benefits for both employers and employees:

• Accurate payroll management
• Fair workload distribution
• Compliance with labor laws like the Fair Labor Standards Act (FLSA)
• Prevention of time theft and unauthorized overtime
• Clear guidance on clocking in and clocking off
• Support for remote and hybrid work models
• Improved accountability
• More accurate project cost tracking
• Improved scheduling and staffing decisions
• And many, many other reasons

How to create a time tracking policy

The ideal time tracking policy is fully customized to meet the needs of your business and your team. We’ve laid the groundwork for you below; with these foundations, you can build an effective policy tailored to your needs.

Choose the right kind of timesheet

There are multiple methods for timekeeping, and you should choose the one that best suits your organizational structure, team goals, and available resources. We’ll compare three standard timesheet options: paper timesheets, spreadsheets, and automated tools for tracking time.

Paper timesheets

Best for: Small businesses with few employees or environments without practical digital solutions (e.g., remote construction sites).

Employees manually record their hours on printed sheets, typically submitting them to a manager or HR for processing.

Pros:
✔ Simple to implement — no software or training required
✔ Low upfront cost — only requires printed templates
✔ Works for businesses with minimal tech infrastructure

Cons:
✘ Prone to errors, miscalculations, or fraudulent entries
✘ Time-consuming for HR or payroll teams to process
✘ Lacks real-time visibility into employee hours and attendance

Spreadsheets

Best for: Small to mid-sized businesses that want a low-cost, slightly automated alternative to paper timesheets.

Employees enter their hours into a shared digital spreadsheet, such as Excel or Google Sheets, which can be reviewed and processed for payroll.

Pros:
✔ More organized and accurate than paper timesheets
✔ Easy to customize with formulas for automatic calculations
✔ Low-cost solution that doesn’t require specialized software

Cons:
✘ Requires manual entry, increasing the risk of errors
✘ Version control issues may arise if multiple employees edit the same sheet
✘ Not scalable for businesses with many employees or complex schedules

Automated time tracking software

Best for: Businesses of all sizes looking for accuracy, automation, and scalability, especially those with remote teams or complex scheduling needs.

Employees clock in and out using a digital tool that records hours automatically, often with features like integrations with project management apps, reporting, and mobile access.

Pros:
✔ Reduces manual errors and administrative workload.
✔ Offers real-time tracking and analytics for better workforce management.
✔ Improves compliance with labor laws by maintaining accurate records.
✔ Cloud-based options allow for remote tracking and integration with payroll.

Cons:
✘ Requires an initial investment and ongoing subscription costs.
✘ May require employee training to ensure proper use.
✘ Some employees may feel uncomfortable with increased monitoring.

Automated time tracking is the best all-around choice for businesses. With minimal investments in time (spent on onboarding) and money (spent on subscriptions), you can use it to streamline payroll, reduce manual errors, and improve compliance.

Clarify the scope of your policy

Next, determine the group to which your policy applies. Depending on how your business is set up, you’ll have:

• Salaried employees
• Hourly employees
• Part-time employees
• Freelance employees and contractors

The category they belong to is crucial for one detail: under the Fair Labor Standards Act (FLSA), employees are classified as exempt (not eligible for overtime) or non-exempt employees (eligible for overtime). Your time tracking policy should reflect these distinctions.

• Non-exempt employees (hourly, some salaried workers)
  • Must track all hours worked, including overtime.
  • Should record break times if required by law.
  • Example: “All hourly employees must log their start time, break periods, and end time daily using the company’s time tracking system.”
• Exempt employees (salaried workers who meet FLSA criteria)
  • Typically do not need to track exact hours but may be required to log workdays for project management or compliance.
  • Example: “Exempt employees are not required to clock in and out but should record workdays for PTO and attendance tracking.”
• Part-time and full-time employees
  • The policy should clarify whether different rules apply based on hours worked.
  • Example: “Part-time employees must log work hours like hourly staff, while full-time salaried employees follow the exempt employee guidelines.”
• Freelancers and independent contractors
  • Often manage their own time but may need to submit timesheets for invoicing or project tracking.
  • Example: “Contractors are required to submit a weekly timesheet detailing hours worked per project.”

Considering remote and flexible work arrangements

A modern time tracking policy should accommodate different work setups to ensure inclusivity:

• Remote employees
  • Clarify expectations for logging hours, especially if working across different time zones.
  • Example: “Remote employees must record hours in the system, adjusting for their local time zone.”
• Flexible work schedules
  • Address whether employees with non-traditional schedules need to track start and end times or just total hours.
  • Example: “Employees with flexible hours should log total daily hours rather than specific clock-in times on time cards.”
• Hybrid work models
  • Ensure policies apply consistently across in-office and remote work.
  • Example: “Hybrid employees should track hours regardless of their work location.”

Include broad, general timekeeping information

A time tracking policy should establish clear expectations in terms of work hours, break times, overtime, and paid time off.

Your team members should understand what constitutes a full workday when they should clock in and out, and how timekeeping affects their pay. Below are some of the most important elements every policy should cover.

1. Defining the workweek and full workday

• Specify the official workweek (e.g., Monday to Sunday or another schedule based on business needs).
  • Example: “The company’s standard workweek runs from Monday at 12:00 a.m. to Sunday at 11:59 p.m.”
• Set full workday expectations: Outline the expected daily work hours for full-time employees.
  • Example: “A full workday consists of 8 hours, excluding unpaid meal breaks, for a total of 40 hours per week.”

2. Clock-in and clock-out procedures

• Specify how employees should record time (e.g., using time tracking software, physical punch clocks, or mobile apps).
  • Example: “All employees must clock in at the start of their shift and clock out at the end of the workday using [System Name].”
• Addresslate arrivals and early departures and whether employees need to report these to their supervisor.
  • Example: “Employees arriving more than five minutes late must inform their manager and adjust their time entry accordingly.”

3. Breaks and meal times

• Define required break/meal periods based on local labor laws.
  • Example: “Employees working more than 6 hours must take an unpaid meal break of at least 30 minutes.”
• Clarify if breaks need to be logged in the timekeeping system.
  • Example: “Paid 15-minute breaks do not require clocking in or out, but meal breaks must be logged.”

4. Overtime eligibility and approval

• State when overtime applies and whether pre-approval is needed.
  • Example: “Non-exempt employees working over 40 hours per week will receive overtime pay at 1.5x their regular hourly rate.”
• Define how employees should request overtime and what the approval process looks like.
  • Example: “All overtime must be pre-approved by a manager and documented in the time tracking system.”

5. Holiday and vacation pay

• Define how holiday work is compensated (e.g., time-and-a-half or an alternative day off).
  • Example: “Employees who work on company-recognized holidays will receive 1.5x their standard pay rate.”
• Specify how employees should record PTO.
  • Example: “Employees must submit vacation requests at least two weeks in advance through [HR system].”

Ensuring clarity and compliance

To make the policy effective:

✅ Use clear language: Avoid legal jargon to ensure employees understand expectations.
✅ Include a summary table: A quick reference guide for work hours, breaks, and overtime rules improves accessibility.
✅ Align with labor and state laws: Ensure policies comply with federal, state, and industry regulations.

Explain timekeeping procedures (very clearly)

For the time tracking policy to be effective, the employees should know when and how to track their time. Document your specific timekeeping procedures and how they work so there are no questions regarding audits or what regular work hours entail.

Here are some examples:

Step 1: Recording work hours

All employees must accurately record their time using the designated system. This varies by role:

• Hourly employees must clock in at the start of their shift, clock out for unpaid breaks (if required), and clock out at the end of the workday.
• Salaried employees may only need to log workdays, PTO, or exceptions like overtime.
• Remote/flexible workers must follow the same procedure, ensuring accuracy regardless of location.

📌 Example: “Employees must log work hours daily using [Time Tracking System]. Failure to do so may result in payroll delays.”

Step 2: Submitting timesheets and deadlines

Time records must be submitted on time to ensure payroll accuracy. Employers should specify deadlines clearly.

• For weekly payroll: “Timesheets must be submitted every Friday by 5:00 p.m. EST.”
• For biweekly payroll: “Employees must review and approve their time records by the 15th and last day of each month.”

Managers should review submitted timesheets within one business day and approve or flag discrepancies.

📌 Tip: Automated time tracking software such as Toggl Track can streamline submissions by sending reminders and locking past entries to prevent unauthorized edits.

Step 3: Handling errors, missed punches and adjustments

Mistakes happen, so clear instructions on corrections are essential.

• Missed punches – Employees must report missing entries as soon as possible.
  📌 Example: “If you forget to clock in or out, notify your manager within 24 hours and submit a correction request in [System Name].”
• Time adjustments – Employees must not edit past entries without approval.
  📌 Example: “Employees needing to correct their timesheets must submit a formal request via email or [HR platform] before payroll processing.”
• Disputes – Employees should address any pay discrepancies with HR promptly.
  📌 Example: “If you believe your recorded hours are incorrect, report the issue within three business days of payroll distribution.”

Customization and automation for efficiency

• Hourly workers should follow strict start/end time logging, while salaried workers may only need to track PTO or overtime.
• Automated tracking tools can flag inconsistencies (e.g., early clock-outs, excessive overtime) and notify employees/managers automatically.
• Self-service portals let employees fix minor errors (e.g., a missed clock-out) without involving HR for every issue.

How to introduce your time tracking policy

The way you roll out a time tracking policy is just as important as creating it in the first place. If you don’t introduce it properly, employees may feel like it’s a lopsided rule that is more of a punishment than a way to improve collaboration and productivity.

We suggest introducing time tracking policies by rolling them out in three stages: preparation, communication, and onboarding.

The preparation stage

Before doing anything, consult with legal and HR experts in your area to check your policy aligns with local and federal laws, industry regulations, and company-specific employment contracts.

Once compliant, create materials for the employees, explaining things such as the purpose of time tracking, the dedicated time tracking software you’ll use, how data will be used, who can access it, and the potential impact on work routines and compensation.

The communication stage

Present the materials to your employees. Frame time tracking as a tool for efficiency and fairness, not as micromanagement. Explain that it helps with increasing efficiency, payroll processing, managing overtime hours, improved recordkeeping, and a host of other benefits.

Host Q&A sessions where employees can ask questions, voice concerns, and get clarification on tracking time off, managing absences and sick leave, handling overtime pay, and similar.

Encourage an open dialogue and introduce time tracking as a collaborative action, not an enforcement mechanism resulting in disciplinary action.

The onboarding stage

Once everyone is on the same page, onboard your team and explain how they should use time tracking tools. Provide training sessions and step-by-step guides with FAQs so your team can get clarity.

Before the policy is officially rolled out, have a pilot phase to try out the timekeeping system and get initial feedback.

A quick note on employee surveillance

There is a thin line between employee time tracking and spying. Some time tracking apps merely track employee work hours. Others veer into surveillance with options such as screen recording and monitoring mouse and keyboard movements.

Monitoring the activity on your team members’ devices, taking screenshots at random times, and getting access to their webcams may all be signs of distrust. Instead of improved collaboration, you may face low morale, decreased productivity, and even legal complications.

There are plenty of time tracking apps in the market, so pick one that helps with accurate time records and does not spy on your team. Toggl Track is an excellent, non-invasive tool for tracking work time while respecting employee privacy.

Great timesheet software is key to tracking employee time efficiently

Advanced time tracking tools are key to a seamless time tracking policy for all. For managers and human resources teams, they save time and keep everyone compliant. For employees, they reduce the possibility of human error and ensure accuracy and fair payment for the performed work.

Choosing a great time tracking platform can be tough. You’ll need features such as project analytics, tracking leaves, overtime, automated approvals, robust integrations, and many others. But luckily, we have just what the doctor ordered.

With Toggl Track, you can eliminate the legwork associated with tracking. You’ll increase time tracking adoption, stay compliant, and create a more efficient and organized place to work.

If you have a team with 20+ users, book a free demo to find out how to best use Toggl Track in your day-to-day work. And if you have a smaller team, get your free Toggl Track account today!