Tracking Hours Worked
Employers may require exempt employees to keep track of any day in which they perform work. This may be done by swiping a timecard anytime during the day or recording days worked on a time sheet. Since a full day of wages is earned if any work is performed (regardless of the number of hours worked), there is no need to keep track of actual hours worked. This is also due to the fact that exempt employees are not paid overtime wages.
Timekeeping for hourly and salaried non-exempt employees must be more detailed. Most companies use a time clock for hourly employees. Paper timecards that are punched by a time clock are soon to be obsolete. The newer timekeeping systems work with a plastic card that an employee swipes anytime he starts or stops work, including before and after meal breaks. Other versions have employees enter the last few digits of their social security number or other identifying information.
Minutes, Quarters, or Tenths
Recorded time may be tracked by the exact number of hours and minutes worked (for example, 11:15 A.M. – 3:35 P.M. would be a total of four hours and twenty minutes), or time may be recorded by the quarter hour, in which case the hours above would total 4.25 (four hours and fifteen minutes). Time recorded this way will sometimes round down, as in this example, and sometimes round up. For instance, if the same employee clocked in early at 11:07 A.M., she would be paid for an extra quarter hour of work (e.g., 11:07 A.M. – 3:35 P.M. = 4.50 hours of work instead of 4.25).
If your timekeeping system records time in quarter-hour increments, employees who clock in more than seven minutes early or late will have an extra quarter hour added or deleted from their time worked. Although all employees should be encouraged to report to work on time, it is especially important to do so when paid by the quarter hour.
Hours worked may also be tracked by tenths, with ten increments of six minutes within an hour. A person working from 11:15 A.M. – 3:35 P.M. would be paid for 4.5 hours. If they worked an additional minute until 3:35 P.M., time reported would be 4.6 hours.
Timekeeping records are mandated by both federal and state laws. Employers are required to keep a timecard, time sheet, or electronic record for every hourly and salaried non-exempt employee. These records should clearly indicate the hours worked each day and whenever sick, holiday, or vacation pay is used. Contact your state employment or labor office to become familiar with specific requirements in your state.
The Total Package
Anyone who picks up one of your payroll files should be able to easily determine the following information:
The start and ending dates of the payroll period
The name of each employee paid
Daily number of hours each person worked each day
Total number of hours each employee worked during the period
The hours paid at straight time and the hours paid at overtime
Scheduled days missed and unpaid to the employee
Paid time off used by the employee
Any bonuses, tips, or incentives paid to the employee
Some things may be stored electronically, such as the gross earnings, tax deductions, insurance premiums, retirement plan contributions, etc. It is wise to do periodic audits of your payroll files to ensure that the company is, and remains, in compliance. This includes reviewing the duties of employees to make sure that anyone classified as exempt qualifies for the status, and ensuring the payroll records are complete. Spot check a few timecards, versus the paycheck received by the employee, at random to verify accuracy. Consider any changes in federal or state law that may change your payroll processing or records requirements.
Keep detailed records for wage garnishments. When processing a garnishment, be aware of the federal Wage Garnishment Law that limits the percentage of income that may be legally garnished from an employee's paycheck. Wage garnishment and making payments to the court or creditor to repay a debt results in extra work for an employer. However, there are federal laws that protect employees from employment termination when employers are served with a wage-garnishment order.
Unpaid Meal Breaks
Employees must clock out for a thirty-minute meal period as mandated by state law. In most states, a meal period is required during a shift of five or more hours of work. Therefore, an employee who works 4.75 hours would not need to clock out for a meal break, but if he works 5.0 hours, he does. Someone scheduled to work from 1:00 P.M. – 6:00 P.M. would actually work only 4.5 hours since they are required to take a break for thirty minutes; they would have to be scheduled from 1:00 P.M. – 6:30 P.M. in order to be paid for five full hours of work. The rules in your state may vary, and there is no federal mandate on when meal breaks are required.
There is a difference between unpaid meal breaks and on-the-clock rest breaks. Chapter 17 explains what may be required and includes tips to help stay in compliance. If an employee complains to the state labor board that breaks are handled incorrectly, your company may be subject to an audit and investigation.
If a state requires an employee to take a thirty-minute meal break after five or more hours of work, but he works only 4.75 hours, he does not need to clock out for a meal break, but if he works 5.0 hours or more, he does. Keep this in mind when scheduling full-time employees who work forty hours per week — you'll need to schedule them for five 8.5 hour workdays in order to earn their forty hours (8.5 hours on the schedule = 8.0 hours of work). If an employee works more than eight, nine, or ten hours (check the rules in your state), she may be required to clock out for two thirty-minute meal breaks during the course of the workday. There is more to read about meal and rest breaks in Chapter 17.