Time clock rules for hourly employees

If you own or manage a small business and have hourly employees, you know how important it is to be compliant with local laws and accurately track your team’s hours, PTO, and overtime.

But keeping track of all the necessary rules and regulations isn’t easy, especially when you’re juggling the other responsibilities that come with running a business.

Not sure what time clock rules you should be following? We’re here to help! We’ll walk you through the main time clock rules for hourly employees and show you how Homebase’s time clock can save you time and money.

Here’s what we’ll cover:

  • How non-exempt and hourly employees should clock in and out
  • 6 time clock rules that both management and staff need to follow
  • Common time clock rule violations
  • How to choose the right time clock software for your team

How non-exempt employees and hourly employees should clock in and out

Non-exempt employees typically earn less than a minimum amount determined by the Department of Labor and are therefore entitled to minimum wage and overtime pay when they work more than 40 hours a week. This gives them a different status to exempt employees who are classified as executive, professional, or administrative workers. This group earns a higher salary and therefore doesn’t qualify for the overtime provisions of the Fair Labor Standards Act (FLSA).

Hourly employees are also non-exempt employees. But while non-exempt employees can be paid on a salary or hourly basis, hourly employees receive an hourly wage for the work they do rather than a salaried amount.

Since both non-exempt and hourly employees are compensated on an hourly basis and entitled to overtime pay, it’s vital for both legal and business reasons they are clocking in and out before and after their shifts.  

If they don’t, you might not realize that they’ve worked more than 40 hours that week and are entitled to overtime pay. This typically means a higher rate of pay (no less than time and a half their regular rate of pay for US employees). You may also be paying for hours that haven’t been worked, for example, when employees arrive late or clock in early.

If you have both exempt and nonexempt employees, ensure they know that they might need to follow different sets of rules when it comes to time and compensation.

By ensuring employees are paid appropriately for their work, you won’t end up paying more for labor than what was originally budgeted for. At the same time, by correctly paying employees, you’ll avoid unnecessary legal headaches.

6 time clock rules for hourly employees

Regardless of what system or app your business uses for your employee time clock, there are some rules and best practices that both you and your staff should follow to accurately log time and keep processes running smoothly. Let’s break some of them down:

1. Have an effective time tracking system

A great way to ensure you’re following all the necessary time clock rules for your business is to have an accurate time tracking system for employee hours and time off.

While it’s possible to manually track time with a paper timesheet or punch card, this can be very slow and makes payroll and time card approval difficult to complete. You don’t want to go through the tedious process of having employees manually punch in and out only to transfer that information into your payroll software and other digital applications needed to run your business.

You can also consider using an ID badge system or scanner, but there’s always the possibility that an employee will forget their badge and need to manually clock in and out anyway. Plus, this option doesn’t work well for employees who occasionally need to work off-site and can’t physically scan in.

An image showing Homebase's time tracking feature. Each employee has a profile photo, and their hours worked for the pay period are displayed next to the photos.
Homebase makes time tracking easy and intuitive. Source: Homebase

Instead of using a physical timesheet or an ID scanner, using mobile tools to track hours and PTO saves time and money, and it’s more convenient for both business owners and staff. 

Homebase’s time tracking and timesheet features make it an ideal choice for your entire team. You can easily track hours, breaks, and overtime from your computer, iOS or Android devices, or even POS systems. And at the end of each week, the app will automatically create accurate timesheets you can use for payroll and other processes.

Homebase offers several different time clock options so you can choose which one is best for your team.

2. Prevent time theft

Time theft is when staff members take unauthorized time off without using PTO or paid sick leave. Regardless of whether employees intentionally or unintentionally do this, stealing time often directly violates company policies, and sometimes even time theft laws. While this can lead to internal discipline, your business also needs to ensure that you’re not violating any labor laws.

Unfortunately, time theft is a common reality that business owners have to deal with and try to prevent as much as possible. While most employees comply with your business processes, there are individuals who will take advantage of any flaws in your time tracking system and use them to get paid for more hours than they earned.

A biometric time clock may prevent some employers from stealing time, but they aren’t legal in every state. On the other hand, manual timesheets and punch clocks make it easy for people to commit time theft because employees can be dishonest when writing down their hours or buddy punch (punch in and out for each other).

The best way to prevent time theft is by using an online time clock, such as the one offered by Homebase. Homebase can assign a unique pin for each staff member and take a photo whenever they punch in, so there’s no way for coworkers to clock in and out for each other. It even has a GPS time clock app feature that, when enabled, prevents staff members from punching in until they’ve arrived at the location you set.

When employees clock in, they are prompted by Homebase to enter their personal pin. This prevents buddy punching.
Homebase gives each employee a personal pin they have to use to clock in and out. This can help prevent buddy punching and other forms of time theft. Source: Homebase

These features not only prevent time theft, but they can also alert you if any employees miss their breaks, which can potentially land your business in legal trouble.

3. Record all the time worked

Any time your employees spend working for your business needs to be recorded, regardless of the location. If you employ anyone that works remotely or has tasks to perform away from your main job site, it can be more difficult to track when they punch in and out. 

Having a flexible time tracking system is an easy solution to this problem. Rather than relying on a manual timesheet or punch system, an app like Homebase simplifies the process. As long as you permit clocking in and out from other locations, employees can record their time spent working from anywhere. That way, you won’t have to manually adjust or record hours worked away from your main place of business.

An image showing Homebase's GPS tracking feature, which allows employers to determine where you can and cannot clock in.
Homebase’s GPS time clock feature lets staff clock in from anywhere, while you can set geofences to prevent punches from unapproved locations. Source: Homebase

4. Round to the nearest increment

A quick way to get on the wrong side of labor laws is to round time incorrectly or unfairly. When employers pay their employees in blocks of an hour or fraction of an hour rather than minutes, they always need to round to the nearest increment. Always rounding down can result in a violation of labor laws because you’re essentially depriving staff of rightfully earned wages.

Common time clock rounding increments include rounding to the nearest 5 or 15 minutes. When you’re rounding to the nearest quarter of an hour, follow the 7-minute rule: minutes one through seven are rounded down, and minutes eight through fifteen are rounded up. Using an online tool like Homebase to track hours can make this process easier, as the software will do the rounding for you.

5. Don’t ask employees to work off the clock

You should never ask an employee to perform any tasks without also requiring them to clock in. Not only is this unethical and unfair to your staff, but it’s also a serious violation of the Fair Labor Standards Act (FLSA) and state laws.

Remind your employees that no matter how pressing a deadline is or how committed they are to getting certain tasks done, all work must be completed only during regularly scheduled shifts or with prior approval of extra hours. If employees are approved for unscheduled work, ensure that they aren’t approaching overtime hours unless this has been accounted for in your budget.

6. Employees must get permission for overtime

As mentioned in the previous section, employees should always ask for prior approval before working more than 40 hours per week. Since overtime is typically paid at 1.5x a staff member’s normal rate, it can quickly add up and affect your budget. If you plan to allow any overtime work, outline a clear policy and communicate it to your staff. Unplanned overtime work should not be a common practice.

If you’re struggling to monitor which employees are consistently coming close to overtime pay, you can use Homebase’s time clock to send you an automatic alert.  This will help you avoid accidentally overscheduling individual staff members who are nearing 40 hours in a working week.

Common time clock rule violations

While following the time clock rules and best practices listed above might seem simple, many employers violate them without even realizing it. In addition to creating a difficult work environment for employees, these issues can spell legal trouble for your business. A few common time clock rule violations include:

  • Mandating that non-exempt or hourly employees clean up the workplace before clocking in for their shift or after clocking out 
  • Requiring employees to clock out before completing unfinished tasks that were not completed during the workday 
  • Scheduling mandatory meetings during designated lunch breaks 
  • Instructing employees to clock out when work is temporarily unavailable, such as between the lunch and dinner rush at a restaurant 
  • Frequently contacting employees outside of working hours to ask non-urgent questions 
  • Requiring employees to be on-call (in parts of the US where it’s illegal) 
  • Not following specific restaurant laws and regulations if you operate in the food service industry

To ensure your business doesn’t violate any time clock rules, simply remember that if an employee is actively working on a task for your business, they need to be clocking in and compensated for their time. This is regardless of the type of work, time of day, and the number of customers you’re serving at any given time.

Choosing the right time clock app for your team

While it may seem like there are endless potential time clock violations, most of them can be summarized as simply tracking and paying your employees correctly and fairly. This means having systems in place for both managers and staff to record accurate punches and ensure no time theft is committed.

Ultimately, most teams are able to follow time clock rules and avoid common violations when the business they work for implements a simple and efficient time clock system. Homebase’s time clock has all of these functions and more. It’s easy to use, built for small businesses, and designed specifically for hourly work. 

With its intuitive features, Homebase can help businesses with hourly staff and non-exempt employees stay on top of time clock rules. Plus, unlike many other options on the market, it’s free! Homebase can help your small business stop worrying about time clock rules and instead focus on your customers and growing your business.

Remember: This is not legal advice. If you have questions about your particular situation, please consult a lawyer, CPA, or other appropriate professional advisor or agency.

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