Time Clock Rules For Hourly Employees | 4 mins read

Understanding Time Clock Rules for Hourly Employees

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Hanh Truong

By Hanh Truong

Time Clock Rules for Hourly Employees- Exempt vs. Non-Exempt Employees

Federal, local, and state governments have guidelines that detail time clock rules for hourly employees. Before managers enforce these standards, they must first understand the concept of non-exempt and exempt employees. Most time clock rules will depend on which classification employees adhere to. The following are differentiating factors of exempt and non-exempt staff members.

Exempt Employees

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Staffers that are classified as exempt have a predetermined salary. This means their compensation does not depend on how many hours they work or the quality of their achievements. Due to this, exempt employees usually will not need to track their work hours, breaks, meal periods, or overtime.

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Non-Exempt Employees

In contrast to exempt employees, non-exempt employees are compensated with a salary, hourly wage, or commissions. Companies require non-exempt staffers to accurately track their hours worked. This goes the same for overtime hours worked, meal periods, and rest breaks.

What are Time Clock Rules for Hourly Employees?

Organizations that employ non-exempt individuals have various labor laws to follow in regard to time tracking. These regulations are enacted to ensure employees are paid appropriately and treated fairly. The following are some time clock rules that management must ensure compliance with.

1. Pay for Off-the-Clock Work

Under the Fair Labor Standards Act (FLSA), non-exempt employees are entitled to overtime pay for all hours worked in excess of 40 hours in a week. Depending on the employer, overtime must be 1.5x or more than the regular hourly pay rate. Additionally, some states will have specific laws that classify hours worked over 8 hours in a workday as overtime. It is important that managers monitor their employees and identify when they are working off the clock. This includes the following activities.

  • Changing into a uniform - Employers must pay for the time spent when staffers have to change into their uniforms before their shift or when they have to hand in gear after their shift.
  • Serving customers - Employers have to provide overtime pay when an employee stays after their shift to help serve customers.
  • Preparing or closing a shift - Employees need to be paid for the time they spend preparing before their shifts and cleaning the business after hours.

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2. Track Time

The FLSA requires employers to accurately track employee hours. However, there is leniency as to how they plan to do so. For example, management can utilize biometric time clocks. These are advanced time tracking tools that enable employees to scan their fingerprints, palm prints, or faces, to clock in and out. This helps to prevent fraudulent time tracking and overpayment.

Other time clock systems businesses can use include mobile apps or SMS. With these tools, employees can clock in and out conveniently via the mobile time clock solution. There are also trackers that utilize swipe cards, identification badges, keys, and fobs. Similar to the biometric time clock, these options ensure accurate data collection and can mitigate time fraud.

2. Rounding

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Various local and state laws will permit employers to round their employees' reported time records to the nearest full number. For example, an organization that measures work hours in 10-minute increments can round 18 minutes to 20 or 51 to 50. Most digital time tracking tools will have automated rounding that will streamline the process and eliminate guesswork.

4. 7 Minute Rule

Companies that have rounding standards can use the 7-minute rule to ensure fair calculations. According to the rule, 7 minutes is the limit for rounding down. For instance, if an employee clocks out 8 minutes past their shift, then the employer must round to 10. This standard is in favor of the employer because it prevents overpayments.

5. Maintain Records

Employers must keep records of employee work hours and wage calculations for several years. These documents must also be accessible to the Wage and Hour Division, in case the departmental entities want to conduct an audit or inspection. Having historical data on hand will also help the business with future scheduling or to show proof of compensation.

6. Allow for Verification

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Organizations should give non-exempt employees the chance to verify their work hours at the end of the pay period before their paychecks are dispersed. Modern time tracking clocks will contain accurate data, but allowing for second verification will prevent payroll mistakes. It also gives employees a chance to fix or dispute any errors that occurred as they tracked their hours.

Key Takeaways for Time Clock Rules for Hourly Employees

  • There are various federal, state, and local time clock rules that employers must adhere to.
  • These laws ensure employees are paid properly and fairly.
  • Time clock rules vary for nonexempt employees, who are paid based on their hours and work quality, and exempt employees, who are paid regardless of time worked.
  • Some time clock regulations include overtime pay guidelines and rounding.

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