What Is Timekeeping | 4 mins read

What is Timekeeping? Definition & Importance

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Hanh Truong

By Hanh Truong

What is Timekeeping?

A well-defined and reliable timekeeping system will help a company effectively protect its bottom line. By definition, timekeeping is the process of tracking each minute an employee worked to ensure accurate records and compensation. Generally, a timekeeper will review data regarding when employees clocked in and out for work, as well as when they took their rest and meal breaks. This practice is highly important for making sure employers are not overpaying employees for hours they did not work.

Timekeeping is most commonly carried out by organizations that manually record work hours or use a traditional punch clock tool. These systems can oftentimes result in human errors due to instances such as poor handwriting and forgetfulness. Therefore, timekeepers are employed to ensure time data is reliable and honest. To address these issues, modern companies will also adopt advanced time tracking solutions, such as biometric time clocks. These time clock tools will ensure accurate timekeeping and prevent fraudulent activities, such as buddy punching.

Other timekeeping tools that businesses can use include proximity time clocks. These systems require employees to swipe an identification card or punch in a unique code to clock in and out. There are also web-based and mobile app time clocks that employers can use to increase convenience. Similar to the biometric time clock, these solutions help mitigate errors and time theft.

What is Timekeeping and its Importance

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There are many key advantages that organization leaders can reap with a timekeeping system. For example, they can effectively monitor their payroll spending and prevent unnecessary extra costs. Other important factors to timekeeping include the following.

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1. Federal Requirements

The Department of Labor (DOL) requires companies to have accurate records of employee work hours. The DOL has the authority to fine businesses that do not have documentation of accurate compensation and overtime. According to case studies, the DOL has fined companies millions of dollars due to this violation. Therefore, timekeeping will minimize costs and protect the business's reputation.

2. Potential Audits by the IRS

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The Internal Revenue Service (IRS) may audit a company and ask for documentation of employee work hours and compensation. Any inconsistencies or errors can result in costly fines and penalties. Companies can adopt digital time tracking solutions to streamline the process of consolidating audit reports. With just a few clicks, employers can print reports for the IRS or other tax-related necessities.

3. Ensure Accurate Pay

Employees are entitled to accurate wages and overtime pay. With a timekeeping system, employees can guarantee that each paycheck correctly reflects the hours that they worked. This is important because it will prevent accidental overpayments, which can directly impact profit margins. It will also make sure employees are satisfied, as they can rely on their paychecks each pay period.

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Try it free for 14 days.

4. Compliance with the Fair Labor Standards Act (FLSA)

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The FLSA has various guidelines on overtime, recordkeeping, youth employment, and minimum wage pay. Noncompliance with these regulations can lead to fines and backpay. It is important that managers use timekeeping methods to ensure they are paying staff correctly and fairly and to avoid FLSA violations.

5. Address Productivity or Punctuality Issues

Effective timekeeping methods will allow managers to access real-time and accurate data about when employees start or leave their shifts. They can use these insights to cross-reference the amount of work or output employees are producing throughout the day. This will highlight important trends, such as low productivity levels, that employers can address and improve on.

6. Boost Employee Morale in the Workplace

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Well-defined time recordkeeping will promote transparency and ensure accurate payments. In turn, this will improve employee morale in the workplace because staffers will be treated fairly and will feel valued. Happier employees are then more likely to work more productively and successfully.

7. Improve Efficiency and Prioritization

Robust timekeeping practices can help organizations enhance their efficiency. It enables employers to identify and prioritize important responsibilities for employees to complete throughout their shift. With better time management, teams can tackle key assignments and meet deadlines, as anticipated.

Key Takeaways for What is Timekeeping

  • Timekeeping is the practice of tracking employee work hours to make sure wage compensations are correct and fair.
  • Timekeeping is important for protecting a business's bottom line, as well as ensuring compliance with federal and state labor laws.
  • Organizations can effectively document employee work hours by incorporating digital timekeepers, such as biometric time clocks.
  • Important factors of timekeeping include preparedness for audits, meeting federal requirements, and boosting employee morale.

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