As tax season wraps up, timesheets and payroll are likely getting more attention than usual. And as they should! Errors in employee work time and wages can have significant legal repercussions, either through tax audits or lawsuits. In this post we’ll focus on federal timesheet and payroll requirements for non-exempt (ie. hourly) employees outlined in the Fair Labor Standards Act (FLSA), and how you can use time tracking systems to keep on the right side of the law. It’s important to note that states have varying laws on what records must be kept and how employees should be compensated, so be sure to check your state laws for further guidance. But in general, the FLSA is a good starting point for building company policy. To help, here are five tips for how employee time tracking systems can keep your company payroll legal and cut out the headache of maintaining timesheets.
Choose a time tracking system that works for you
The FLSA doesn’t stipulate how companies keep records of hours worked and wages paid, but does require that they are kept accurately. Paper and pen timesheets may work for small companies, but require extra effort in organization, storage, and manual payroll computation. Since accuracy is key for legal compliance, online time tracking systems provide a convenient, comprehensive solution for tracking work hours and wages.
Rounding time is fine, if you do it fairly
It’s permissible to round employee hours to the nearest 15 minutes. However, employers must round up as much as they round down to stay in compliance with the U.S. Department of Labor. A diligent HR manager can do this successfully with careful manual computation, but why not save time and effort by switching to digital time tracking software that keeps precise records of all hours worked?
Make submitting timesheets easy
Employers must pay employees on time whether they submit a timesheet or not. That means HR managers must estimate payments for employees who are late or negligent with timesheet submission, which can result in over- or under-payments and further payroll complications. Employees are much more likely to submit timely and accurate timesheets when the whole system is streamlined and simple, as with digital time tracking software. In fact, with online time trackers, the employee simply clocks in and out and doesn’t need to submit anything at all for payroll – the system takes care of it automatically!
Do pay for breaks. Don’t pay for time not worked.
Federal law does not require employers to provide meal breaks or rest breaks to employees. Most companies do provide these breaks, though, and so must adhere to laws on compensation for break time. Federal law says employers must pay wages for non-meal rest breaks of 20 minutes or less, and many states allow for a rest break once every four hours. By federal law, meal breaks that are longer than 30 minutes and in which the employee is free to use time as he or she wishes do not need to be paid. However, if the employee works through the lunch break, the employer is likely to be obliged to pay wages and even overtime if the employee runs over 40 hours for the week.
If employees punch in and out through time tracking software, there’s no risk of paying for excessive breaks or for employees working through lunch without HR’s awareness. Time tracking systems can compute whether the break is wage-worthy, and HR managers can monitor breaks in real time to keep hourly workers from running into overtime.
Maintain accurate employee records
The FLSA states that employers must keep employee records, including timesheets and payroll, for at least three years after the employee is terminated or leave the company. However, to protect themselves from potential lawsuits it’s smart for companies to preserve records for at least five years. This includes time and day the employee’s work week begins, hours worked per day, total hours worked per week, hourly pay rate, and overtime earnings, along with a sizable list of other employee information. This could all be done with pen and paper, with time sheets filed and stored in cabinets. On the other hand, online time tracking systems are massive time and energy savers by recording and organizing all this information automatically, and then storing it in the cloud where it can be accessed at any time for years to come.