The tax season increases IRS scrutiny on your payroll and timesheets to curtail fraud. Mistakes in compiling employee wages and work time can result in serious legal consequences such as tax audits and lawsuits. This post focuses on federal regulations for non-exempt workers as defined by the Fair Labor Standards Act (FLSA). You’ll also gain tips on how your business can comply by using time tracking systems. Although states have varying requirements on employee records, the FLSA provides a reasonable starting point.
Practical Time Tracking Tips That Improve Business Compliance
The following ideas will help you reduce the hassle of keeping timesheets and ensure your company payroll is legal:
1. Pick a suitable time tracking system
The FLSA isn’t specific about how businesses record wages paid and hours worked. However, its main requirement is accurate record keeping. Small organizations may prefer physical timesheets, but they’ll require additional effort for calculation and storage. Accuracy is crucial for peace of mind and legal compliance. Online time tracking tools offer comprehensive ways of achieving these objectives.
2. It’s permissible to round off time
You may round hours to the closest 15 minutes. However, the Department of Labor recommends rounding down employee hours as much as you round them up. This precaution ensures compliance with its Wage and Hour Division. Although a meticulous HR manager can perform manual computation, digital tracking apps are more precise.
3. Make timesheet submission easy
State and federal laws require employers to pay employees by the stipulated time on payday, even if they haven’t availed a timesheet. The HR department should estimate compensation for those who don’t submit these details on time. This option can result in payroll complications such as over or underpayment.
Digital time tracking systems allow your business to streamline and simplify operations by making automatic updates. Your workers clock in and out electronically, which means they don’t have to make manual submissions for payroll purposes.
4. Only pay for productive hours
The law doesn’t require a business to offer rest or meal breaks to its workforce. However, most companies provide them, so they must comply with regulations regarding break time compensation. According to federal law, you must pay workers for non-meal breaks of up to 20 minutes. Most states recommend one break every four hours.
If your meal breaks are more than 30 minutes long and your employees are free to utilize their time as they wish, you don’t have to pay them. However, federal regulations might require wage payment and overtime if they work during lunch break for longer than 40 hours per week. It’s advisable to contact your employment lawyers for a clear interpretation of these laws.
You can eliminate the risk of excessive payments for breaks if your employees utilize time tracking software. These systems can also determine whether remuneration is necessary for particular intervals. Another benefit is allowing the HR department to monitor hourly workers to prevent them from doing overtime.
5. Keep detailed employee records
According to FLSA rules, you must maintain payroll, timesheet, and other employee records for up to three years after retirement, resignation, or termination. However, it’s advisable to do so for up to five years as protection against potential lawsuits. These details include the beginning of the workweek, daily pay rate and hours worked, total weekly output, and overtime compensation.
Others are the employee’s address, social security number, wage additions and deductions, a birth date if under 19, sex, and occupation. Although you can compile this information manually, online time tracking apps are significantly more convenient. They save time and energy by automatically capturing, sorting, and updating this data. They also store it in the cloud, where it’s easily accessible for years.
Time Tracking Mistakes to Avoid
Your timekeeping system will be more efficient if you avoid three vital mistakes. The first is failing to collect enough employee details. Apart from punching in and out, track their breaks and work hours. This coherence not only guarantees overtime pay for workers but also reduces your overtime expenses.
The second mistake is failing to make the most of your time tracking software’s features. Examples are: knowing all employees working in real-time and their location. Some apps also allow you to geofence jobs and receive alerts for crucial issues.
Finally, avoid monitoring timesheets, worker’s compensation, and payroll on different platforms. Your business will realize improved efficiency and productivity by tracking all these variables using one system.
Time tracking apps offer several benefits to your business. In addition to ensuring compliance with tax and labor laws, they help you achieve your overall objectives. You can identify the most productive employees and reward them accordingly for the organization’s long-term benefit. Their automatic features also eliminate payment disputes and other problems that could arise if you depend on manual computation. Please consult your employment lawyers for advice on how state and federal laws affect your professional relationship with employees.