6 Ways To Track Employee Hours for Small Business
This article is part of a larger series on Time & Attendance.
There are many different methods of tracking employee hours, so you must determine which one works best for your small business. You should weigh the technology requirements, cost, legal compliance, and ease of use for your employees when making your decision.
For many businesses, simply knowing if your employees are working is not enough. You need to track employee hours to help your company understand labor costs and prepare for payroll processing. Doing so may even increase employee productivity, and it is a safe way for managers to gauge where your employees’ time is being spent.
Time tracking software is used to ease the burden of logging employee hours and ensure your staff is compensated accurately.
Using time tracking software can assist in the efficiency of payroll processing because
- Employees track their time digitally, decreasing error
- Supervisors and managers can approve time entered online with a click of a button
- HR Specialists can run reports, allowing management to see where improvements can be made
You may be interested in our list of the best time & attendance software that have a broad set of features that are adaptable. Or, read our guides to the best time tracking software and best time tracking apps to find one that suits your business’s requirements.
Recommended Time Tracking Software
What It Is
All-in-one employee scheduling, time tracking, and HR solution
Growing businesses with one physical location that employ hourly workers
Basic Plan: Free
All-in-One Plan: $70/mo per location
Cloud-based time clock solution that offers online time entry, time-off tracking, GPS tracking, and an optional webcam and device lock feature
Small businesses that need help tracking their billable project time
Time and Attendance Plan: $25.99/mo - $559.99/mo
Employee scheduling software with time clock and attendance features
Startups and employers that hire across multiple locations
Small Business (up to 100 employees): $4/user
Enterprise (100+ employees): custom priced
Monitoring your employee’s hours worked using GPS tracking software allows you to record their time and attendance from worksite to worksite. When your employees work offsite, a GPS tracking method may be the right option for your business. This works best for courier services, logistics, construction, and public transportation companies.
GPS time tracking is simple for the employee, who can log their time from any device—such as a cell phone—while they are working in the field. Additionally, it is easy for business owners and managers who maintain the time sheets from the office.
Pricing can start as low as $3 per month, per user (plus a $15 monthly base fee), with a basic service like ClockShark. Most software of this type also charge a base fee per month and offer custom packages for any business size.
Manual time tracking is as old as businesses themselves. This is referred to as pen-and-paper tracking, where employees record their own time on a handwritten piece of paper. This method can lead to errors (such as time theft, accounting errors, payroll issues, and labor law violations) and is not recommended for small businesses.
Manual time tracking does not offer the accuracy and security of a software time and attendance solution. Even though this is a free method, the following are reasons to ditch manual time tracking:
- Inefficiency: Employees can spend hours manually tracking their time.
- Inaccuracy: Mathematical mistakes can be made when adding hours up.
- Inconvenience: In this digital world of computers and cellphones, it can be problematic for an employee to track hours on paper.
- Unreliability: Tracking hours on paper is a security issue. It can result in missed hours if you lose the report.
Spreadsheet time tracking utilizes a template on tools such as Google Sheets or Microsoft Excel. We offer a simple way to do this through free templates in our time card and time sheets article. This is similar to manual time tracking, where the employee enters their time into a spreadsheet but offers mathematical features to provide better accuracy. A spreadsheet can be shared online with managers and supervisors for time checking and approval.
Both Google Sheets and Microsoft Excel offer time sheet templates that automatically calculate total hours, regular hours, and overtime hours. They can also help track the efficiency and productivity of teams within your organization.
Once you purchase Google Workspace (as low as $6 per user, per month) or Microsoft 365 ($70–$100 per year), the spreadsheets and time tracking templates are free to use.
Wall-mounted time clocks are suitable for businesses such as factories or warehouses where all employees are in-house and required to log their time when they arrive, leave for breaks or lunch, and when they leave for the day.
An advantage to the company is that it clearly understands the hours each employee physically worked, so it pays accordingly. A disadvantage is that this system only works for employees physically in an office or factory and does not account for remote employees. Wall-mounted time clocks can be purchased on Amazon or at most office supplies stores and can cost anywhere from $100 to upwards of $1,000.
“Punching a clock” is a term used by businesses wherein employees physically log their time by punching a time sheet into a wall-mounted time clock.
Biometric tracking relies on certain biological features to track time such as a fingerprint scan or facial recognition. This type of tracking verifies the employee’s identity and can prevent employees from buddy punching, which in turn cuts down on time theft by reducing the chances of employees being paid for time they did not work.
Biometric data is valuable to companies that may need to control access throughout their office or physically identify employees as they enter and leave a building. However, since biometric time clocks record specific data about employees, there are laws in place to regulate its use.
Biometric time clocks can be purchased on Amazon and at most office supply stores. Prices range from $150 to $500 or more.
We evaluated the best employee time clocks to help businesses find an option that fits their requirements.
Reasons a Small Business Should Track Employee Hours
Tracking employee hours is necessary for any business. You will need these numbers to:
- Process payroll accurately: To accurately calculate payroll, you must know each employee’s salary or time worked per pay period. Time sheets help employers by tracking work hours, paid time off, and accruals for processing payroll. Automated time tracking can streamline your payroll process by reducing time sheet errors. It can also eliminate the need for a large payroll department.
- Monitor employee attendance: Recorded time serves as an attendance-keeping method for your employees. Based on the hours logged, you will be able to determine if an employee worked their full scheduled workweek, took paid time off, or was short on hours. Time tracking can also give a clear view of how long it takes employees to get tasks completed. Managers can then better calculate future tasks and team scope.
- Stay compliant with labor laws: The Fair Labor Standards Act (FLSA) requires all employers to track the time of their hourly employees. While the FLSA does not require a particular form for record-keeping, data must be kept on all nonexempt employees showing their total hours worked daily and weekly, wages paid, and overtime earnings. A common form of noncompliance is due to inaccurate recordkeeping. Using software to track time and attendance can reduce errors and prevent costly legal issues that may arise.
- Perform specific accounting and HR duties: Employee time tracking can be used to determine whether the hours tracked are billable or non-billable, increasing the company’s productivity. As a result, accounting specialists can monitor project budgets and reprioritize tasks where needed. Additionally, tracking employee time can shed light on areas where additional resources may be necessary within the company.
Benefits of Tracking Employee Hours
It is important to understand the benefits of employee time tracking to both the employees and the business.
Benefits to Small Businesses
- Accountability: Employees are held to the hours they work.
- Clarity: Time tracking provides transparency about the tasks each worker performs.
- Morale: Tracking employee time can reduce micromanagement and increase employee satisfaction.
- Accuracy: Time tracking delivers accurate information for a streamlined payroll process.
Benefits to Employees
- Security: Assurance that they are being paid based on their actual hours worked.
- Management: By tracking their time, employees can see where they are making progress and where improvements in their time management can be made.
- Insight: Time tracking helps employees record the projects they are working on, insight into work behaviors and patterns, and their overall performance.
- Independence: Time tracking allows employees to self-manage and understand their overall capacity and workload.
Tracking Exempt vs Nonexempt Employees
Tracking the time of nonexempt employees is vital for determining their pay and whether they are owed overtime. By law, you must record the time of all nonexempt employees, whether they are salaried or hourly.
On the other hand, exempt employees are paid by salary and are not subject to overtime pay if they work over 40 hours a week. While not required, many businesses choose to track the time of their exempt employees. This helps managers find gaps in work reported and illuminate areas where employees can improve. Learn more about the differences between exempt and nonexempt employees.
Tracking employee hours is beneficial for both employers and employees. Accurate time tracking can save your business thousands of dollars by ensuring that you are only paying for the actual time your employees are working. Additionally, choosing the proper time and attendance method can mean the difference in legal compliance, efficient budgeting, reduced payroll errors, and increased employee performance.