Many small businesses rely on employees to accurately report the time they start and stop working each day. While this simple approach may work well for some very small businesses with consistent employee schedules; most employers can derive good benefit from having a more accurate and reliable record of employee hours worked.
Business owners can tend to shy away from time clock systems to avoid added costs, but the investment may actually save you money in the long run.
Accurate Records Reduce Errors
An employee’s rough estimate of hours worked could easily be wrong, even if they have the best of intentions. Estimating the beginning and end of breaks can be especially difficult, since most people take short breaks that are paid and longer breaks that are not. Without a time clock, figuring out which is which can lead to a lot of errors. Those errors spotted take time to correct – and what about the ones that are never noticed? Time clock systems can also track employee hours down to the minute, which most people don’t do on their own. All of this eliminates the mistakes of employees being paid for time they didn’t really work or not paid for time they did work. And errors like that can add up to big penalties from the Department of Labor or damages in federal court.
Wage and Hour Law Compliance is Simplified
Federal law requires that an employer keep an accurate record of each nonexempt employee’s shift beginning and ending time, how many hours worked per day and how many hours worked per workweek. It doesn’t require an employer to use a time clock, but if there is a dispute with the Department of Labor over hours worked, actual time clock records will be your only defense.
Better Manage Overtime Costs
Many time clock systems can be programmed to help you, the employer, understand who is accruing overtime and who is getting close to hitting the overtime threshold. If overtime pay is not in your budget – you can be alerted when an employee’s hours are approaching the limit. You can then proactively decide whether to send them home early or adjust schedules accordingly. Overtime can be confusing to calculate for many employers – learn more about overtime in this wage and hour series blog post.
Mitigate Employee Schedule Adherence Problems
Many modern time clocks can be programmed with the schedule of each employee. They’ll even alert you or a manager if an employee attempts to clock in late or if an employee has not taken a required break by the end of their full shift. This will help you identify tardy employees and encourage workers to take breaks. You can also lock someone out from clocking in too early, before they’re scheduled to start.
Document Hours to Help Comply with the Affordable Care Act
The Affordable Care Act requires employers to calculate how many full-time and full-time equivalent employees they have based on hours of service during each calendar month. Also – they must calculate whether variable-hour employees qualify as full-time under the ACA. This requires a history of strong record keeping – otherwise you could miscalculate these numbers. A time clock system will easily give you the data you need to perform these important calculations – and you can avoid errors that could cause you to fall short of compliance.
Credit: Albert Estes