Labor laws can be confusing. Even if you know the basics, you could find yourself in trouble if you don’t have a full understanding of what is required of you and your employees, including clocking in and out of work.
The Fair Labor Standards Act (FLSA) has strict guidelines to follow regarding minimum wage, overtime, and recordkeeping.
A clear understanding of time clock rules will help you avoid under- or over-paying your employees and reduce the risk of your company being fined as much as $1,000 per violation of the FLSA. In some cases, the Department of Labor’s Wage and Hour Division can even impose prison time.
What is a time clock for your employees?
Time clocks are devices used to measure the time an employee is on the clock working, and when they clock out, either for the day or for lunch breaks. Originally developed in 1888 by Willard Legrand Bundy, time clocks have evolved to include several different types with varying levels of technology:
Biometric time clocks use various methods of verification such as fingerprints, retina scans, voice recognition, or facial recognition.
These types of time clocks require a personal identification number (PIN) for each employee, ranging from four to eight numbers.
A proximity time clock works by activating when an employee puts their card or fob near the device. Each employee is assigned a unique card or fob.
Similar to a credit or debit card, swipe cards are unique to each employee and are swiped on the time clock to clock in and out.
Mobile or Web-based
Mobile time clocks are a type of software that runs on mobile devices or tablets. Smartphone clocks frequently have the option of GPS for location-specific tracking. Administrators can access time and attendance reports from their computers which simplifies accurate time tracking, job costing, and payroll if you have field or remote workers.
Traditional punch clocks
A traditional punch clock requires employees to put their time cards into the clock to punch in or out and the time is recorded on the physical time card.
Without the use of time clocks, supervisors, business owners, and administrators must either guess or rely on the memory of workers, to determine their pay. This can cause any number of problems. That’s why all businesses should establish and enforce a strict clocking in and out policy, to ensure they stay compliant, and their employees receive the compensation they are due.
The importance of clocking in and out of work
At the most basic level, you’ll be paying anywhere from 20% to 50% of your gross revenue in payroll, and that’s without considering perks like retirement accounts, or healthcare costs.
So if you have hourly workers who are not able to provide you with accurate work hours, you’re facing multiple issues.
Inaccurate job costing
Proper and precise time tracking enables you to calculate accurate job costs and prevents you from over- or under-charging your customers. If your employees are not practicing proper time clock rules, you could be losing more money than you think.
Without accurate time stamps, you risk paying your employees for hours they didn’t work or, worse, not paying them which is a violation of the FLSA.
Avoid unintentional OT
Overtime laws require most businesses to pay hourly employees 1.5 times their regular rate for any hours worked over 40. If you’re not able to easily and accurately ascertain who’s working, and when, you might end up with employees going into overtime, without warning.
However, if your employees are clear on your clocking in and out policy - and they’re following it - you’ll be able to more closely monitor their hours and, if necessary, make changes in your schedule to avoid unexpected overtime pay.
Most companies offer paid time off to different degrees. PTO is calculated by the number of hours a qualified employee works, so if you’re not clocking in and out according to labor laws, you can’t provide accurate PTO to your employees.
Proper DCAA documentation
When you’re doing government contracts, the DCAA timekeeping requirements are very stringent. If your employees clock in and out, it helps simplify this complex task so your payments for government work are not delayed or, worse, denied.
Which employees’ hours should you be tracking?
Tax and labor laws are overwhelming and confusing. Plus, you have State laws on top of Federal laws, to keep in mind. In the simplest form, when it comes to paying your direct employees, you have two categories: Salaried Vs. hourly.
Salaried vs. hourly employees
Salaried employees are usually exempt from minimum wage and overtime regulations. A salaried employee is usually one in a higher position, and they receive their pay based on the position they have, rather than the hours they work. They are usually paid a fixed amount.
Conversely, hourly employees are non-exempt, meaning they are not exempt from the regulations of the FLSA. They are entitled to overtime pay and any additional overtime specifics that your particular state may have, which vary by state, and it is your responsibility as the employer to ensure they receive proper compensation.
Clocking in and out policies for on-call employees
Employees who are on-call, should be compensated if their on-call position prohibits personal space and time.
If your employee is on call and must stay near the worksite, or if they’re not allowed to use the time they’re not actively working, for personal use, they must be paid for those hours.
Alternatively, an on-call hourly employee who is not working unless a supervisor calls them to work, but can otherwise go about their personal business, does not have to be compensated for the number of hours they were on-call; Only the time they spent actively working.
Regardless of the types of employees you have - exempt, non-exempt, or on-call - you’ll need to establish a clocking in and out policy for each to follow.
Is overtime pay mandatory?
The Department of Labor Wage and Hour Division says construction companies with two or more employees with an annual gross revenue of $500,000 are subject to the FLSA and, thus, overtime pay requirements.
You are required by Federal law to follow recordkeeping requirements and provide overtime for anyone who works more than 40 hours per week. This is true, even if you pay biweekly, twice monthly, or monthly.
Each workweek stands alone as a 40-hour workweek and that time must be used to calculate overtime pay, to stay compliant.
Can you clock someone else out at work?
If you include it in your clocking in and out policy, you can have supervisors or site managers clock your employees in or out. Labor laws indicate - as long as the exact hours worked are being recorded accurately - it’s okay for a supervisor to record the times of your employees’ hours.
Employees should not clock their colleagues in or out, and this should be clearly stated in your time clock rules. This is considered time theft and can be quite costly to businesses. One way to avoid this kind of thing, is to incorporate biometric or PIN style time clocks, so employees are responsible for recording their own times.
Save Time and Money with ClockShark
Make it a rule
Clocking in and out of work should be a part of your time clock rules. The labor laws are strict and if your employees are not clocking in and out regularly and properly, you risk violating State and Federal wage laws.
One way to avoid common clocking in and out labor law violations is to adopt a technology like ClockShark, to ensure everyone is getting paid properly for the work they’re doing, and you’re not paying for time that was not spent working. Try ClockShark free for 14 days to see what a difference it can make for your time tracking and scheduling needs.