Timekeeping Compliance Risks: Why You Need Accurate Records

In today’s world, if you have hourly employees working remotely due to COVID-19, you’ll want to ensure you are compliant with your tracking and recordkeeping of employee time. Compliance is the top reason employers cannot afford to compromise on timekeeping accuracy. Below we explore four aspects of timekeeping compliance.

1. Payment for All Hours Worked 

The Fair Labor Standards Act requires covered employers to pay nonexempt employees for all hours worked. You must keep that in mind when rounding employees’ time.

Rounding must be done according to FLSA or applicable state standards and in a fair and consistent manner. (Always rounding down to favor your company may be a violation of the FLSA.) Also, hours worked must include any paid breaks mandated by law or authorized by your company. Accurate timekeeping records are essential to paying nonexempt employees for all hours worked, as defined by law.

2. Payroll Recordkeeping

Under the FLSA, covered employers must retain certain records for nonexempt employees. Most of these records are time related, including:

• Time and day the employee’s workweek starts.
• Total hours worked each day and each workweek.
• Basis for payment, such as hourly or salary.
• Regular hourly rate.
• Straight-time earnings for the day or the workweek.
• Overtime earnings for the workweek.
• Deductions from or additions to the employee’s pay.
• Total wages paid for the pay period.
• Payment date and pay period covered.

You do not have to track exempt employees’ work hours, but you must keep certain payroll records for them on file. Also, some states have their own payroll recordkeeping rules. Accurate timekeeping records help you meet your recordkeeping obligations.

3. Audit Shield

According to the Society for Human Resource Management, the chief reason for a U.S. Department of Labor audit “is a complaint from an employee.” That said, the DOL can perform audits at any time. During these audits, employees’ time records are often requested, and the employer is required to produce them. Accurate timekeeping records can simplify the audit process and stop the DOL from pursuing legal action.

4. Litigation Defense

Sometimes, wage and hour proceedings end up in court.  For example, in Furry v. East Bay Publishing LLC, the plaintiff sued his employer for unpaid overtime wages. After the trial judge ruled against him, he appealed the case. The California appellate court reversed the trial judge’s decision, stating that the plaintiff should have been awarded overtime wages because the defendant/employer failed to keep accurate time records — and that the burden of complying with recordkeeping statutes falls on the employer, not the employee. Accurate timekeeping records can be your savior in court.

Final Thoughts

Along with minimizing compliance risks, accurate timekeeping records can increase employee trust, improve workforce oversight and help you control labor costs.

The FLSA does not require that you use a specific timekeeping system. Any method is fine as long as it is accurate and complete. For optimal results, use an automated system, which is far less labor intensive than is a pen-and-paper approach.

Request a custom demo of our all-in-one payroll and timekeeping solution today.