Labor Laws | 4 mins read

How to Establish Time Clock Rules for Hourly Employees

how to establish time clock rules for hourly employees
Michelle Jaco

By Michelle Jaco

Breaking time clock rule laws can lead any business to serious penalties and fines. By including time tracking, businesses can work efficiently. The following explains time clock rules specifically for the hourly employee.

The Fair Labor Standards Act does not require employers to use a specific type of time tracking product or system. So, employers have the flexibility to choose how to track employee time and attendance as long as employees' actual working hours and breaks are accurately recorded.

When looking at time-clocking systems there are several to consider.

Types of Time Clocks

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Biometric
Biometric time clock uses scanner technology, such as fingerprint scanning, to track clock in and clock out times of employees. Benefits of a biometric time clock include heightened security, less over time, and reduction of time theft.

Proximity
This system uses different input methods such as swipe cards or key fobs to record employee time and attendance. Proximity clocks emit radio frequencies that recognize the time clock and are commonly used for access control systems. Access control systems are typically used in areas of physical and information security, and usually have restrictions to access the property unless authorized.

Computer
PC time clocks are ideal for office workers or traveling employees. It allows employees to clock in or out from their personal computers, and therefore can easily manage their time. This time clock doesn't require any installation or additional software, so it can be used anywhere that has an internet connection.

Mobile Phone
This is also another ideal time clock for traveling employees or remote workers. Employees can use their mobile phones to record time punches. All they need is cell service to clock in or out.

SMS Clocking
SMS clocking records employees' clock in/out times via text messages from their mobile phones. Every time an employee texts the virtual number provided, their punch in time is immediately entered into the system. This method only requires cell service, making this a simple time clock to use.

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Rules for Hourly Employees

Violating time clock laws could result in penalties. By complying with state and federal regulations is the first step to operating a profitable and successful business. An efficient way to be sure that a business fulfills federal and state time clock rules for hourly employees is to use a time clock system.

1. Rounding
Trying to account for employee clock in and out times to the very minute can get confusing. Thankfully, FLSA allows employers to round the number of minutes reported. Many companies follow the 7-minute rule. For example, if a company measures time in 10-minute increments, the cutoff to round down is at least 7 minutes. If it's less than 8 minutes, a company can round down to the closest 10 minutes. Electronic time clocks take the guesswork out of rounding by automatically rounding for employers and allows for accurate employee times.

The Code of Federal Regulations, however, prohibits any employer from using the rounding system to take advantage of any employee. An employer not being in favor of their employee by rounding down when they should be rounding up an employee's hours is an example of taking advantage of an employee and the rounding system.

2. Accurate Record Keeping
By law, employers are legally required to keep a record of their employees' time and attendance, via hardcopy or digital time cards, displaying how hourly wages were logged and calculated over the last two years. These two-year increments are required by the United States Department of Labor, and all employers must provide access to these records for any reason at any time.

According to the FLSA, employers must keep the following information for non-exempt employees-

  • Name and Social Security number
  • Address
  • Birthdate
  • Sex and occupation
  • Total number of hours worked daily/weekly
  • How an employee is paid
  • Hourly pay
  • Weekly overtime earnings
  • Payroll deductions
  • Total wages paid every pay period
3. Automatic Deductions
Many employers will automatically deduct employee's 30-minute meal breaks. This can be risky because employees may forget to clock out for their breaks. By automatically making the deduction and an employee forgets to clock out on break, it's an employer's responsibility to pay for the unpaid wages.

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4. Inform When to Clock In and Out
It's an employer's decision if an hourly employee can begin a shift earlier than scheduled or stay later; in both scenarios, the employee could potentially accrue overtime hours. Ideally and from a labor cost standpoint OT should only be granted for some minutes, instead of hours, and only if absolutely necessary. This helps keep costs low.

Most companies track employee time by 10 or 15-minute increments. For increments of 15 minutes, 7 minutes is the cutoff for rounding down. This is called the 7-minute rule. If an employee works at least 8 minutes of that timeframe, an employer must round down to the nearest 15.

5. Overtime
If an employee gains over time due to inaccurate rounding, the employer is responsible for paying the employee the overtime rate which is 1.5 times the rate of pay after hitting 40 hours in a workweek.

State labor laws and child labor laws must also be strictly enforced when it comes to wage overtime. Failing to abide by federal law and legal labor relations may result in lawsuits and fines.

State labor laws will vary in counties, as well, so employers must ensure all rules and regulations are being followed according to region.

6. Review and Confirm Hours
Hourly workers have the legal right to confirm and sign off on all hours worked approaching the end of each pay period, regardless if the time worked was recorded automatically via a time clock. This step is especially important, as mistakes can still be made even with automation.

7. Clarify Consequences and Enforce
All managers must inform hourly employees of the rules and procedures regarding time clock policies, which can be located in an employee handbook, as well as covered during orientation when a new employee is brought on. It should clarify the consequences for tampering with a time clock, time theft, and buddy punching.

8. Leave and Excused Time Off
Another important policy that should be covered is employee PTO, paid time off, sick/ medical leave, and personal leave. These excused days off will vary from company to company. Commonly, employers will designate x-amount of sick time annually that employees are only permitted to utilize if ill. This time off also does not roll over into the following year.

Similarly, PTO is granted to each employee. However, PTO differs, as most employers establish a set of rules specifying that this time off must be earned after working with the company for a certain amount of time.

Personal leave can also fall into either category, as emergencies, like family medical issues that may arise.

Unique Circumstances

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Being On-Call
Many industries such as retail, hospitality, or restaurants utilize on-call work to deal with shift changes. This means an employee must be available at all times to clock in if they're needed. Many states in the U.S. have banned on-call scheduling, claiming that it makes work-life balance extremely difficult to achieve.

Pay for on-call work is when an employee is paid for the time spent being available to work. This does not mean, however, that the employee on-call will always be paid. An employee could use any of the time for personal reasons while waiting to be called into work.

Working Off the Clock
Working off the clock is considered any work done for an employer that isn't compensated for. FLSA states non-exempt employees are entitled to receive overtime pay if they've reached over 40 hours in a given workweek.

Managers are the ones responsible to make sure employees are getting paid overtime if applicable, even if an employee doesn't realize they're working overtime. Employers may also have to pay employees whose work is suffered. Suffered work is when an employee completes work that isn't requested, such as working extra to help a coworker.

These are some examples of incidental working off the clock-

  • Uniform changes
  • Helping a customer while off the clock.
  • Doing tasks after the business has closed
  • Preparing for opening before a shift, such as setting up tables for a restaurant

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