What is employee time tracking?

14 minute read

Accurately tracking employee hours is key to managing a workforce. Employee time tracking helps organizations streamline payroll, improve efficiency, and maintain compliance with labor laws. Yet, many organizations still rely on outdated or manual processes, leading to costly mistakes, inefficiencies, and unnecessary stress for employers and employees. Whether managing a small team or an elaborate team with several different roles within a large organization, tracking employee hours effectively is essential.

In this article, we’ll explore why time tracking is essential, the importance of and challenges of time tracking, standard methods, benefits, and how automation can completely transform how your organization manages employee time.

What is employee time tracking?

Time tracking is the process for how companies record the hours worked by employees and the system to ensure they’re accurately compensated for their time worked. Time tracking is a subset of time and attendance, a broad category that also includes employee attendance tracking, time off tracking, billable hours, and employee scheduling. There are three main components of time tracking: time entry, timesheet approval, and payroll & compliance.

Time entry

Commonly known as “clocking in and out” or “punching in and out,” time entry is the process of logging employees’ start times, end times, and unpaid breaks daily. These timestamps can be recorded manually on a timecard or through digital means such as spreadsheets and time tracking software. Many modern systems streamline time tracking by using employee logins and logouts to capture work hours automatically.

Timesheet approvals

To maintain accuracy and compliance in payroll processing, timesheet approvals are a critical step in the time tracking process. Managers first verify timesheet accuracy before HR calculates total work hours, including overtime, either manually or through time tracking software.

Payroll & compliance

Payroll and compliance play a critical role in time tracking by ensuring employees are compensated accurately and in accordance with labor laws and company policies. Effective time tracking helps payroll teams calculate wages, overtime, and deductions while maintaining transparency and reducing errors. In addition, organizations must maintain compliance with federal, state, and industry regulations regarding working hours, overtime pay, and record-keeping. Failure to comply can lead to legal consequences, financial penalties, and employee disputes.

The difference between time tracking and attendance tracking

While both time tracking and attendance tracking are essential for maintaining an organized workforce and enhancing operational efficiency, they have very different roles in your organization. As opposed to time tracking, employee attendance tracking focuses on the policies and procedures used to record and manage absences, employee leave, and punctuality.

Accurate attendance tracking helps organizations identify patterns in absenteeism, enforce attendance policies, and ensure workforce availability. It also plays a key role in workforce planning, allowing managers to anticipate staffing needs and reduce disruptions. When companies integrate time tracking and attendance tracking, it provides a complete picture of employee work habits, ensuring fair compensation, compliance with labor laws, and improved workforce management.

The importance of employee time tracking

Understanding employee time and hours worked can help organizations optimize scheduling, prevent payroll errors, and manage labor costs. A well-implemented employee time tracking process helps organizations maintain regulatory compliance and cost control while improving the employee experience and operational efficiency.

Legal compliance and risk management

Compliance with labor laws, company policies, and union agreements is a key reason organizations need reliable time tracking solutions. Since different regions have specific regulations regarding maximum shift lengths, required break times, and overtime rules, it’s crucial to understand how your time tracking process ensures your organization is in compliance.

Since different regions have specific regulations regarding maximum shift lengths, required break times, and overtime rules, it’s crucial to understand how your time tracking process ensures your organization is in compliance.

Failing to comply with these regulations can result in significant financial penalties. In 2023, organizations paid over $126 million in fines for violating the Fair Labor Standards Act (FLSA). An effective employee attendance tracking system ensures that organizations remain compliant, avoiding costly legal repercussions.

Improves productivity

Effective time tracking solutions provide insights into employee performance, helping managers identify trends, inefficiencies, and bottlenecks. When employees know their work hours are tracked, they are likelier to stay on task and meet deadlines.

Automated time tracking tools also reduce the administrative burden on HR teams, allowing them to focus on strategic initiatives rather than manual timesheet processing. With real-time analytics and reporting, organizations can make data-driven decisions to enhance productivity and workforce efficiency.

Reduces time theft

Time theft — including buddy punching, extended breaks, and inaccurate time entries — can cost organizations thousands of dollars annually. Implementing automated employee time tracking solutions, such as biometric scanners, geofencing, and facial recognition, minimizes fraudulent clock-ins and ensures accurate work hour reporting. With features like real-time tracking and automated alerts for suspicious activities, organizations can detect and prevent time theft, leading to fair compensation and improved accountability.

Supports workforce planning

Employee time tracking systems provide valuable data for workforce planning and resource allocation. Managers can optimize shift scheduling, balance workloads, and prevent employee burnout by analyzing work hour trends.

Accurate attendance tracking helps organizations forecast staffing needs, ensuring the correct number of employees available during peak hours while avoiding unnecessary labor costs during slower periods.

Common methods of employee time tracking

Organizations have many options for tracking employee work hours. As you look to choose the right employee time tracking solution for your business, be sure to consider your company size, industry, and workforce structure in the process.

1. Traditional pen-and-paper logs

Some small organizations still rely on manual timesheets. While this method may work for companies with a handful of employees, it becomes inefficient and error-prone as the company scales. Manual data entry increases the risk of payroll discrepancies and compliance issues, making it one of the least reliable tracking methods.

2. Electronic timesheets

Electronic timesheets, such as spreadsheet-based tracking, reduce some errors associated with manual processes. However, they still require employees to log their hours manually, leaving room for mistakes or intentional time theft. Additionally, electronic timesheets do not offer real-time workforce insights, making payroll processing more time-consuming.

3. Biometric time clocks

Biometric time clocks, such as fingerprint or facial recognition devices, provide accurate and secure employee attendance tracking. These systems prevent “buddy punching” (when employees clock in or out for each other) and confirm precise payroll calculations.

Biometric solutions are ideal for organizations with on-site employees but may not be suitable for remote or field workers. Companies with a hybrid workforce may need additional mobile tracking options to accommodate employees constantly on the go.

4. GPS tracking and geofencing

GPS tracking and geofencing provide an effective solution for organizations with mobile or field employees. These tools prevent false time entries by ensuring employees clock in and out only at designated job sites.

GPS tracking records employees’ locations when they log their hours. Geofencing restricts clock-ins to specific locations, ensuring accuracy and preventing fraudulent time entries. These features are handy for construction, home healthcare, and delivery-based industries where employees work at multiple locations.

5. Badge readers

Employees can wave or tap a badge against a device to register their time for quick, contactless clock-ins. This is particularly useful in high-traffic locations or environments with limited physical contact with terminals. Badge systems can also integrate with building access control to track where and when employees enter secure areas.

6. Web-based tools

A browser-based time tracking portal allows employees to log in through any desktop or laptop computer. Managers can review hours, handle exceptions, or approve shifts in a centralized dashboard. This approach best suits employees who primarily work on computers throughout the day.

7. Mobile apps

Mobile-based solutions are essential for remote or field employees. From logging time on a construction site to clocking in from a client’s office, a mobile app removes location barriers. Features like geofencing or geolocation affirm that employees clock in at approved sites. The app might also provide push notifications for missed punches or shift reminders.

8. Thermal sensors & health checks

Some organizations opt to connect time tracking with health and safety measures. For example, a thermal sensor can measure employee temperatures upon clock-in to detect potential health risks. While not every organization needs this screening level, industries with ongoing health regulations or close-quarters working environments may find this feature valuable.

9. Automated time tracking software and apps

The most efficient method for tracking employee work hours is through automated time tracking solutions. Robust time and attendance software provides advanced features such as:

Real-time data collection
Mobile accessibility
Integration with payroll accuracy tools
Custom reporting and analytics

Automated systems eliminate the inefficiencies of manual tracking and improve accuracy, maintain compliance, and increase employee satisfaction.

Automated systems eliminate the inefficiencies of manual tracking and improve accuracy, maintain compliance, and increase employee satisfaction.

Challenges with employee time tracking

Implementing a time tracking system comes with potential obstacles. Organizations must address these challenges to guarantee smooth adoption and effective results.

Challenge 1: Employee resistance

Some employees feel micromanaged when their work hours are tracked. Clear communication about the benefits of time tracking can help build trust and encourage adoption. Employers should position time tracking as a process that benefits the organization and employees.

Challenge 2: Technical issues with tools

Technology-based tracking solutions sometimes face glitches, connectivity problems, or integration issues with other HR and payroll systems. Ensuring a seamless implementation with reliable software, proper training, and IT support can minimize disruptions. Cloud-based automated time tracking systems with mobile compatibility can also reduce technical barriers.

Challenge 3: Inaccuracy in manual methods

Manual time tracking methods, such as paper timesheets or spreadsheets, are prone to errors, fraud, and inefficiencies. Organizations can overcome this challenge by adopting automated employee time tracking solutions that integrate with payroll and attendance systems, reducing human errors and increasing accuracy.

Challenge 4: Legal pitfalls in tracking hours

Labor laws require organizations to track employee hours accurately while respecting privacy and consent regulations. Organizations must maintain compliance with local, state, and federal labor laws to avoid legal consequences. Implementing a compliant attendance time tracking system with audit trails and automated reporting can mitigate risks.

Employee time tracking by industry

No matter the industry, managing employee time effectively is crucial for keeping operations running smoothly. From retail stores juggling part-time shifts to government agencies with complex and strict compliance needs, every organization benefits from accurate time tracking. Here’s how time tracking is used across different industries to meet their unique needs.

Retail

Retail companies manage fluctuating schedules, seasonal hires, and part-time workers. Accurate time tracking allows for fair compensation and smooth staffing during peak hours and seasonal months. Retailers can also use tracking data to determine optimal staffing levels, reduce overtime expenses, and improve customer service.

Hospitality

Hotels, restaurants, and event venues require structured scheduling to maintain service quality. Time tracking helps balance shifts, prevents burnout, and supports proper staffing levels. It also helps maintain compliance with industry-specific labor laws and helps organizations track employee overtime effectively.

Manufacturing

In a manufacturing workplace, exceptions can lead to dips in shopfloor productivity, so it is critical to understand the areas in which employees may be working outside of shift parameters. Effective employee time tracking can run reports that identify exceptions, such as schedule variances and extra overtime, so you can identify trends and see the associated labor costs.

Government agencies

Public sector organizations need to maintain accountability and meet compliance standards. Tracking employee hours helps manage workloads and leads to fair compensation. Government institutions often have strict regulations regarding employee work hours, making time tracking essential for transparency and budget management.

Small organizations

With limited staff, small organizations need efficient workforce management. Employee time tracking helps them allocate resources effectively, manage labor costs, and increase productivity. Automated tracking tools allow small business owners to focus on growth without getting overwhelmed by administrative tasks.

Top 4 benefits of effective employee time tracking

Implementing a reliable time tracking system benefits both your organization and employees. From reducing errors to improving workplace morale, an efficient employee time and attendance tracking process contributes to a well-structured and productive work environment.

Benefit 1: Boosts transparency and trust

Employees want to feel valued and fairly compensated for their work. A transparent and reliable time tracking system confirms that paychecks reflect actual hours worked, fostering trust between employees and management. Fair employee scheduling also contributes to job satisfaction, reducing turnover and improving retention rates. In industries like hospitality, where shift changes are frequent, accurate tracking prevents disputes over hours worked and allows employees to plan their personal lives with greater confidence.

Benefit 2: Simplifies payroll and invoicing

Automated time tracking eliminates manual calculations, ensuring precise payroll processing and accurate client invoicing. Organizations that bill clients based on hourly work can seamlessly track billable hours, reducing discrepancies and improving financial accuracy. Integration with payroll systems further minimizes errors and administrative overhead.

Benefit 3: Helps in measuring ROI on projects

For project-based work, tracking employee time provides valuable data on project costs and profitability. Organizations can analyze time spent on tasks, compare against project budgets, and determine each project’s return on investment (ROI). These insights help managers allocate resources more efficiently and make informed business decisions.

Benefit 4: Reduces administrative burden

Manual time tracking methods require significant administrative effort to collect, verify, and process employee hours. Automated time tracking tools streamline this process, reducing paperwork and freeing up HR teams to focus on higher-value tasks. Organizations can save time and improve overall efficiency by eliminating the need for manual timesheets.

Best practices for implementing employee time tracking

Successfully implementing a time tracking process is more than just deciding on a method for tracking employee hours. If your organization provides clear communication, fosters a culture that values accountability and efficiency, and offers thoughtful training, you can expect and benefit from continuous optimization, making your employee time-tracking process smoother and more impactful for all.

Start simple

Adopting a straightforward time tracking system helps employees ease into the process without feeling overwhelmed. For example, a small marketing agency may start with digital timesheets before transitioning to automated tracking software as the team grows. By beginning with an easy-to-use method, organizations can build a habit of compliance and promote a smoother adoption of more advanced solutions.

Communicate clearly

Transparency is key to gaining employee buy-in. Clearly explain why time tracking is being implemented and how it benefits the organization and employees. For instance, a restaurant with rotating shift workers can emphasize how accurate time tracking leads to fair pay and helps prevent scheduling conflicts. Open communication reduces resistance and encourages employees to engage positively with the system.

Train your team

Adequate training allows employees to use the time tracking system correctly and efficiently. A construction company implementing GPS-based tracking for field workers should offer hands-on demonstrations and written guides to ensure employees understand how to clock in and out correctly. Without proper training, organizations risk inaccurate records and employee frustration.

Review and optimize

Regularly analyzing time tracking data allows organizations to identify inefficiencies and refine workforce management strategies. A retail chain, for example, can use data insights to adjust staffing levels during peak shopping hours, ensuring better customer service while avoiding unnecessary labor costs. Periodic reviews allow organizations to continue to get the most value from their time tracking system and can adapt to changing needs.

Periodic reviews allow organizations to continue to get the most value from their time tracking system and can adapt to changing needs.

By following these best practices, organizations can successfully implement a time tracking system that enhances efficiency, boosts transparency, and fosters a fair work environment. Thoughtful execution allows employees and managers to see the value in time tracking, leading to better compliance, increased productivity, and smoother operations.

Transform your employee time and attendance tracking process

A practical time capture process is essential to your organization’s success, as it’s the foundation of accurate, compliant time and attendance practices and records. No matter your industry, a well-implemented time tracking system reduces payroll errors, improves employee morale, and provides valuable data for better decision-making.

Organizations that invest in the right employee time tracking tools and follow best practices create a more engaged workforce and streamline operations. By prioritizing efficient employee time tracking, organizations position themselves for long-term success, ensuring that employees and management benefit from greater efficiency, transparency, and control.

TCP Software’s employee scheduling, time, and attendance solutions are flexible and scalable to accommodate your business and employees as you grow.

From TimeClock Plus, which automates even the most complex payroll calculations and leave management requests, to Humanity for dynamic employee scheduling that saves you time and money, we have everything you need to meet your organization’s needs, no matter how unique. Plus, with Aladtec, we offer 24/7 public safety scheduling solutions for your hometown heroes.

Ready to learn how TCP Software takes the pain out of employee scheduling and time tracking? Speak with an expert today.