Whether you want to ensure your employees are paid for every hour worked or to bill accurately for hours spent working on a project, you need to track employee hours. Tracking employee hours efficiently also has other benefits such as error-free payroll calculations and avoiding running into any potential payroll compliance issues. The way in which time can be tracked varies from business to business, so we’ve detailed how to track employee hours to help you find the best method for you.

Why Tracking Hours Is Important

Tracking employee hours enables you to know how your employees are spending their time. This in turn empowers you to implement steps that improve employee productivity, enable accurate project planning, optimize staffing costs and solutions, etc.

Calculating Payroll Accurately

If your business hires hourly employees, you need the exact hours worked to calculate payroll accurately. Tracking employee hours ensures the employees get paid for every minute they work and you do not suffer from issues such as time theft and inaccurate payroll calculations.

Automated time tracking that integrates with your payroll can further eliminate or reduce timesheet errors, thereby helping you process payroll accurately, be it wages, compensation or benefits.

Compliance With Laws

As per the Fair Labor Standards Act (FLSA), all businesses must track time for their hourly employees. Although you are free to choose the way you do this, you must have a record of hours worked on a daily and weekly basis, wages and overtime.

Besides correct record-keeping, tracking time helps you stay compliant with other laws regarding paid time off, mealtimes, minimum hours worked, etc. For more detailed information, read our comprehensive guide to payroll compliance and best practices.

Accurate Project Planning and Estimation

Employee hour tracking generates data that helps you estimate how much time is needed to complete a project. This in turn helps you estimate time and cost for each project accurately.

Benefits Both Employers and Employees

Tracking employee hours benefits not only the employers—by minimizing time thefts and payroll calculation errors—it also helps employees improve their time management skills, work behavior and overall performance.

Automated time tracking ensures that employees or their managers do not spend hours maintaining and calculating timesheets. This time is better spent on working, planning and communicating with their teams.

If you do not track employee hours, you will need to resort to other measures such as checking in on their progress regularly to ensure that work gets done. This may breed resentment among employees as they feel micromanaged. When you have data to fall back upon, you know which employees need more monitoring and which can be trusted to work independently.


5 Ways To Track Employee Hours

Now that you know how important it is for your business to track employees, let’s discuss the five most common ways to do so, from manual time tracking, manual timesheets, time tracking software, traditional time clocks and GPS clock-ins.

Here are the five key ways to track employee hours:

1. Manual Time Tracking

The easiest way to start if you’re not doing any sort of time tracking is to start manually. Keep a register where employees record their in and out times.

Although manual time tracking is a good way to start if you have a very small team, doing manual timesheet calculations can prove both time-consuming and lengthy. Errors may also be introduced while doing manual calculations, which can result in erroneous payroll calculation.

2. Manual Timesheets

Manual timesheets are just a notch above manual time tracking. Instead of making the entries using pen and paper, you record time in and out on spreadsheets such as Microsoft Excel and Google Sheets.

Due to mathematical formulas provided by these software, calculating total time worked is quicker and easier; the error that might be introduced in manual calculation is also eliminated.

Manual timesheets are best for businesses having a limited number of employees so that the time investment is not significant.

3. Time Tracking Software

Time tracking software can automate employee hour tracking for all employees—salaried, hourly or contractual. Employees can use time tracking software across devices such as desktops and mobiles as well as within work apps, making it easier to track time.

The use of time tracking software also enables you to track both billable and non-billable hours, improving workforce productivity and project expenditure. If you schedule your employees into shifts or assign them tasks, the time tracking software can also prompt them to clock their in or out time if they forget.

There are many time tracking software available on the market. Which one you use depends upon your specific requirements. Forbes Advisor evaluated multiple time tracking software on numerous parameters to arrive at the best time tracking software for your business.

4. Time Clocks

If all your employees are concentrated in one or two locations, you can choose to install a time clock where employees log their in and out times. This is especially suitable for manufacturing units where time tracking apps cannot be used because employees do not regularly access their desktops or smartphones.

Setting up a time clock station or kiosk can be an added cost but it is one time and helps you streamline the employee hour tracking process. The output can be automatically integrated to the payroll or HR system.

5. GPS Clock-In

If your employees travel frequently, a desktop or mobile employee tracking app may not suffice. You can use geo-fencing or GPS tracking apps to accurately log where your employees are working. This can then be seamlessly integrated into payroll not just for wage calculation but also for other compensations linked to their performance.

Bottom Line

Whatever tool you use, it is important to track employee hours because it gives you the necessary data required to make decisions that impact business growth. Tracking employee hours ensures better employee performance, legal compliance, accurate payroll processing and work culture transparency.


Frequently Asked Questions (FAQs)

How are working hours tracked?

Working hours can be tracked using manual timesheets, time tracking software, time clocks or fully automated time and attendance solutions. Unless you have a very small team, manual timesheets can be very difficult to track and manage. To find out which employee time tracking software or app suits your requirements best, read this list of best time tracking software.

How can I track my employees’ hours for free?

There are many free time tracking apps available on the market. Here is a list of the seven best free apps. Forbes Advisor evaluated more than a dozen providers to find the best free time tracking apps.

What are the disadvantages of time tracking software?

If you want time tracking software with robust features, you’ll likely need to pay a per-user fee in addition to a flat monthly rate. And robust features typically require a learning curve to utilize their potential. Read our guide to learn more about the best time tracking software.