Clocking out after a hard day’s work is arguably one of the best feelings in the world. If you’ve ever had to clock in and out for a job, you know how critical time clock software is for small businesses. Like most technology, time clock software has changed immensely throughout the years; from paper time cards to biometric time clock software, and everything in between.
Hitting that ‘clock out’ button one last time before the weekend is certainly jubilating, but remembering to do it every day throughout the week can be a hassle. Not to mention, it can also make someone feel as though they are being watched. It’s a constant race to beat the clock to punch-in upon arrival, or as they are scrambling back from a lunch break that went a little long.
Even though clocking in and out doesn’t allow for much flexibility, it ensures the employee is getting paid accurately for their labor, and the business owners are in compliance with Department of Labor (DOL) regulations.
Who sets the federal time tracking standard?
The Fair Labor Standards Act (FLSA) is a federal labor law of general and national application that covers overtime rules, minimum wage laws, child labor laws, and the equal pay act. The FLSA requires overtime compensation at time plus one-half per hour over the 40-hour threshold per week for nonexempt employees.
Some government and medical employees may have different thresholds. Keeping accurate record of nonexempt employees’ hours through cloud-based time tracking systems ensures that they are paid the correct amount that can automatically adjust their pay to reflect any overtime worked.
Exempt vs. nonexempt employees.
It is important to know the difference between an exempt and nonexempt employee. The terms exempt and nonexempt refer to whether the employee is exempt or nonexempt from FLSA rules. Exempt employees may be paid a salary by their employer rather than an hourly wage. According to Monster.com, exempt employees are typically executives, supervisory, professional or outside sales positions. An employee’s salary is also a part in determining whether they are exempt or nonexempt.
In May 2016, the DOL under President Barak Obama attempted to significantly raise the minimum salary required for overtime regulation. Set back in 2004, the overtime rule exemption is $23,600 annually, or $455 a week. Obama’s ruling stated that the overtime rule exemption would be $47,476 per year, or $913 a week. The overtime ruling was delayed until March 2019, where President Trump is expected to propose a new threshold between $32,000 and $35,000.
Companies may require nonexempt employees to clock in and out to make sure that they are being paid fairly. The records produced by an automated time and attendance system can be used if the company is audited, or confronted with a wage and hour dispute claiming violation of FLSA standards.
It is also important to note that the FLSA does not have a rule that restricts companies from making exempt employees clock in and out.
The history of time clock software.
The FLSA was passed in 1938, however time clock devices have been around much longer than that. Fifty years prior, to be exact.
In Auburn, NY in 1888, Willard L. Bundy invented the first time clock. His original time recorder was devised in the 1880s and was granted a U.S. patent in 1888. This device required each employee to insert his or her own key recorder into the clock. The next year, he partnered with his brother, Harlow, and founded the Bundy Manufacturing Recording Company of Binghamton, NY to manufacture the Workman’s Time Recorder.
In just 10 years after the patent was issued, Bundy had produced nearly 9,000 time recorder machines and established accounts with the United States Postal Service and several major railroad companies at that time.
During the height of his success, Bundy merged with several other time recording companies and became the International Time Recorder Company(ITR)in 1900. In 1911, ITR became part of the newly formed Computing-Tabulating-Recording Co., which would later be renamed IBM 13 years later.
Who knew that IBM started from a time recording company?
Mid to Late 1900s
In 1979, Mark S. Ain created the first patented microprocessor-based time clock at the company he founded, Kronos Incorporated. His time clock automatically recorded, totaled, and reported employee hours. Just 6 years later in 1985, he introduced his first PC-based product.
With current powerful technology, there are many different ways employers keep track of their employees’ time. From the basic pin pad time clock system to biometric time clocks, employers have plenty of options to choose what works best for them.
Common issues with manually managing employee time cards.
It’s a common misconception that the only cost to an employer manually managing employees’ time cards is the cost of paper. However, there are many more hidden costs that can add up every week. Larry Dickinson, PrimePay’s Time and Labor Management Specialist, explains the real cost of using a manual time and attendance system in his blog article outlined below.
Whether intentional or unintentional, many employees record the wrong time when filling out their time cards. If it is only required for them to fill out a time card at the end of every two weeks, it can prove very difficult to remember the exact time they reported to work every day. If they are not able to fully remember the times, why would they intentionally mark themselves as late?
This also applies to the end of the day if an employee left minutes early to catch a baseball game. More than likely, the employee recorded perfect 9 a.m. – 5p.m. workdays to add up to the common 40-hour workweek. The few minutes here and there can add up to an hour or two each pay period for each employee. That is a lot of money wasted.
Human Error & Time
We all make mistakes. Even the employee who adds up their own time sheet or the human resource department who is accountable for adding every employees time. So much so that the American Payroll Association estimates those errors are between one percent and eight percent. This error rate doesn’t factor in the money that is lost by the hours spent manually going through and processing each employee’s time card. Besides saving time and money, time clock software helps to ensure a small business is in compliance with FLSA standards.
How time clock software can help with compliance.
The most important reason why small businesses need time clock software? Compliance and accountability. According to a recent survey, 43 percent of employees commit time theft. When paired with the rise of wage and hour litigation, accurately tracking employees’ time is more important than ever. Below are five common time tracking compliance issues and how to avoid them from our recent blog by Larry Dicksinson - Product Specialist, Time and Labor Management.
1. Improper rounding of employee time worked.
Per the DOL, it is acceptable for businesses to round their employees’ time. For example, if an employee clocks in at 7:55 a.m. and clocks out at 4:55 p.m., the system can immediately round the punches to the required eight hours from 8-5. This is a considered neutral rounding system because it can benefit both the employee and employer.
It also means that if an employee was to come in at 8:05 a.m. and still leave at 4:55 p.m., they would still be paid the full eight hours. This perk cannot be taken away from the employee as business owners can face serious charges when rounding the punches only in favor of themselves.
PrimePay's Time Clock system can make sure that only neutral rounding is applied so that you don’t run into any compliance issues.
2. Auto lunch deductions.
Many small businesses deduct time, typically 30 minutes to one hour, for an employees’ lunch. It may sound simple, but issues can arise when employees work through their lunch breaks. In the DOL’s eyes, that employee needs to be paid for that time worked. With time clock technology, the employee can elect to clock in and out for lunch depending if they take it and for how long.
Jim Martin, VP of Time and Labor Management at PrimePay stated, “In California, they even have a rule that forces the employer to make sure the employee takes every minute of what they are allowed or the employer has to pay them additional overtime.”
While not all states are this strict, it is important to know if there are any laws like this in your business’ jurisdiction, both state and local.
3. Employees working off the clock.
Work that is considered off the clock occurs when an employee comes in early or stays late to perform work on the employer’s behalf. As mentioned above, the FLSA created strict overtime rules that are very important to follow. Not keeping an accurate record of an employee’s hours worked can result in legal action for unpaid hours.
These issues can be easily avoided by having a clear time and attendance policy. Employees should know if they can work overtime or not by looking at the company’s handbook.
4. Improper card editing.
In the hustle and bustle of everyday life, it is not uncommon for an employee to forget to clock in or out from work. If the employee forgets, it is legal for the employer to go in and fix the employee’s time card for them. However, a disgruntled employee can claim that the employer was editing their time card to reduce the hours they worked or to negate overtime pay. When those allegations are made, the deck is typically stacked in the employee’s favor.
By accurately documenting all time card edits, the employer would then be able to recall why they make an edit to the employee’s timecard to prove that it was justified. With PrimePay’s Time Clock software, this information could be recalled in a matter of seconds.
5. Time card retrieval.
It is important to know that employers should make sure they keep records that date back a minimum of three to four years. This becomes important if the business is audited and needs to pull all their records, fast.
As Martin further explains, “The government sets how long you must keep time cards. Most businesses do not keep more than a year. They take up a lot of room and it is very hard to find a single time card if an employee dispute ever arises. Time clock systems not only keep virtually unlimited history, they make that history available within seconds. In addition, they keep an audit trail of any changes that were made, who made them and the date/time they were made.”
This daunting task can be simplified by having an automated time and attendance system. No more rummaging through old records, hoping to find the paperwork. By enlisting time clock technology in a small business, the time saved from no longer manually managing time can be spent in developing the business in other ways.
Say goodbye to manually managing time sheets.
If you are a small business owner, think about your current process for handling your employees’ time. How much time are you spending on managing time sheets, and tracking down employees to confirm their hours worked?
When removing those duties from your work schedule, the time gained can be spent doing things you have wanted to implement or try out for years, improving your business and well-being overall. PrimePay’s Time Clock system can help you gain back the time and money small businesses have been wasting for so many years.
Stay compliant with PrimePay's Time Clock system.
Time clock systems are integral to any business operation. PrimePay’s Time Clock, when integrated with Online Payroll, significantly decreases the time spent manually managing employees’ time. PrimePay offer’s three different Time Clock options to have the best fit for your small business needs.
Time Clock Basic
The next level of Time Clock includes everything mentioned above, plus extra features to assist with many employee requests.
Time Clock Advanced
Our most popular Time Clock model, Time Clock Advanced, is perfect for larger small businesses with employees on-the-go.
Time Clock Pro
Time Clock Pro includes everything a small business could need. Including everything listed above, this model has many extra features that are perfect for reporting and keeping your small business running smoothly.
With PrimePay’s Time Clock system, there are a few different types of time clock software that a business can choose. Today’s time clock systems allow small businesses to utilize cutting-edge technology that can directly merge with their payroll data.
Different types of Time Clock hardware.
Online Clock & Mobile App
This option lets employees punch in and out right from their desk, tablet, or smartphone. This is a wonderful option for employees who work remotely or travel for work.
The biometric clock option requires the person to be physically in-front of the hardware for them to be able to clock in/out. The biometric clock requires a fingerprint, proximity badge, or PIN to clock in and out.
A facial recognition time clock is a step into the future! The facial recognition clock is a dual infrared camera, which allows employees to punch in and out simply by looking at it.
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