Time clock software. A guide for small business.
Time clocks and time clock software have changed over the years, but the need to track employee hours for payroll remains the same.
If your company runs payroll, it might be good to understand what is currently available and what the benefits are. It is possible to save time, lower expenses, and reduce mistakes, just by switching to a time clock software provider.
In this guide we aim to help anyone who handles payroll hours, whether an experienced pro, or new to the task. We won't focus on Webtimeclock, just an overview of what is generally available.
Here is what we cover:
- What is time clock software?
- A brief history of time clock software
- Who uses time clock software?
- What does time clock software do?
- Why is time clock software important to business?
- How much does time clock software cost?
What is time clock software?
Time clock software is an application used for tracking employee hours for payroll. Its purpose is to automate tasks that used to be handled manually, such as time tracking hours, calculating overtime, and scheduling work hours. It provides everything you need to ensure work hours are correct before running payroll.
Generally, time clock software includes features to help collect employee punches, provide time card and timesheet reports, allow you to edit time when necessary, and finally report total work hours to your payroll system.
Consider it a tool that helps get your job done, it provides a combination of an employee time clock, along with automation features that handle your reporting. Once you become familiar with the software, payroll processing will be easier, more productive, with less mistakes.
A brief history of time clock software
Time clock machines were invented many years ago as a way to record time records of employees, however for payroll, the process required manual effort. It wasn't until the introduction of personal computers in the 1970s that manual entry started to be reduced.
Later, spreadsheets provided a way to track time and calculate hours, followed by shrink-wrapped, Windows-based time clock software in the 1990s. Although there are still vendors that offer Windows-based time clock software, for the most part, they are no longer in active development.
Now with the internet, and more advanced technology, time clock software is provided as web-based (aka cloud-based) services. The advantage is allowing employees to clock time from anywhere with an internet connection along with real-time hours reporting.
Modern solutions also offer more advanced features with clocking options such as biometric fingerprint or facial recognition, web-based kiosk apps, and clocking in/out from any mobile phone or tablet. Those features, in combination with modern software interfaces and reporting, have greatly improved the process and reliability of employee time tracking.
Who uses time clock software?
There are a variety of people who use time clock software. It could be a business owner, an advisor such as a CPA or bookkeeper, an office manager, an HR director, or anyone tasked specifically as a payroll specialist or clerk. It can also be someone who simply manages employee hours while someone else runs payroll.
Whatever your role, it is important to understand how to handle time tracking, as payroll and time tracking are tightly linked together. Payroll, in most cases, is about turning time into employee paychecks, for both hourly and salary employees.
Every situation is different, but in a nutshell, time tracking software can be used by anyone wanting to: run payroll, stay compliant to labor laws, avoid costly mistakes, save time, and lower business expenses.
What does time clock software do?
Time clock software handles your employee time tracking, and reports it for payroll. Here are several specific features that may be included.
Web clocking
Most providers typically offer the ability for employees to clock in/out from a web browser. This can be convenient for office employees who use desktop computers or laptops. Employees simply log in to clock time.
Kiosk app clocking
Some offer kiosk apps for employees to clock in/out. This allows you to have a centralized location for employees to clock from. For example, you can dedicate an android tablet or desktop computer as a time clock station. Some kiosk apps are web-based, while some require a download from an app store for their time clock app.
Phone clocking
Some allow employees to clock from a phone, which is very convenient for any employee who has a personal phone. This can also be convenient for companies with remote field workers that could benefit from GPS tracking. As with kiosk apps, some are offered as web-based, while some require a mobile app download from an app store.
Time clocks
Some, not most, offer the ability to use web-connected employee time clock hardware such as fingerprint, facial-recognition, RFID badge swipe, or PIN entry time clocks. These can be a convenient way to provide a time clock station without dedicating a tablet or computer. In addition, the optional biometric features will prevent time theft from buddy punching. Further, time clock hardware offers the ability to collect employee punch data even if you lose internet connection.
Multiple locations
Since providers are web-based, and depending on the provider, there should not be any limitation on the number of locations. This makes it possible for businesses to manage multiple locations from one account.
Multiple administrators
All providers include the option of multiple administrators. This is also an improvement from Windows-based software of the past. Any extra costs depend on your chosen provider.
Time card editing
All providers allow you to edit employee work hours. This is essential for administrators and supervisors to make corrections, adjustments, or adding PTO hours to an employee's timesheet.
Time card editing by employees
Some providers have the ability for employees to edit their time. This is a convenient feature for exempt employees and contractors, or anyone that does not need to clock in/out.
Calculations
Most providers, at least paid versions, provide a way to calculate regular hours and overtime hours based on the employee's in/out punches. Depending on the system, there are several tools that can help even further such as custom overtime rules, punch rounding, auto lunch deduction, paid breaks, employee scheduling, and assigned shift rules.
Scheduling
Most providers include employee scheduling. It can serve in two ways, first by letting the employee know when they start work each day, and second by defining shift rules that can help control excessive hours and overtime.
Pay periods
Most clock systems provide a way to match your payroll pay periods such as weekly, bi-weekly, semi-monthly, or monthly. This feature will allow you to run reports for timesheets, time cards, and summaries based on your pay period date ranges.
Security
Some offer ways to limit employee location if they clock in/out from the web. This feature will help ensure employees are clocking from authorized work locations.
PTO accruals
Some providers include a way to keep a bank of paid time off (PTO) hours for each employee. Since PTO hours are typically tracked on timesheets and time cards, having time clock software handle the accruals is very convenient.
PTO requests
Some, not most, offer the ability for employees to formally request time off using a web browser. This feature can be a time saver for anyone who handles HR for your company.
Paid holiday hours
Some providers include a way to manage paid holidays. Typically this allows you to enter holiday hours for all eligible employees at one time, rather than entering them individually.
Departments
Some providers include a way to manage lists of employees based on departments. This feature allows an easy way to manage groups of employees and separate them for payroll processing.
Projects and jobs
Some providers include job costing. Employees can be given the option to select jobs (or department) as the clock in for work. This, in turn, helps track both payroll hours and job hours on one time card or timesheet.
Payroll exports
Some providers include exports formatted for specific payroll providers. Depending on who your payroll provider is, they may allow you to import time data via CSV or tab delimited files.
QuickBooks Online integration
Some, not most, include direct integration with QuickBooks Online accounting. Instead of importing QuickBooks time, your work hours can be transferred without using export files.
Why is time clock software important to business?
Here are three reasons:
- Time records are required by law
- Time records determine employee earnings
- Time records help control costs
1. Time records are required by law
The US government established laws through what is known as The Fair Labor Standards Act, or FLSA. It is not new, as it was signed into law by President Franklin D. Roosevelt on June 25, 1938 and became effective on October 24th of the same year. In a nutshell it establishes minimum wage, overtime pay, tipped employees, hours worked, recordkeeping, and child labor.
In regards to the recordkeeping mandate, the FLSA requires several items to keep record of, but for the purpose of time tracking, the following records are the most important.
- Time and day of week the employee's workweek begins
- Hours worked each day
- Total hour worked each workweek
The first item establishes the basis of weekly overtime calculations, the second item determines the basis of any daily overtime, and the third item determines the basis of any weekly overtime.
When keeping records, federal law requires all records on which wage computations are based should be retained for two years such as time cards, timesheets, piecework tickets, wage rate tables, work schedules, and additions or deductions from wages. These records must be made available to a federal auditor if requested.
The FLSA allows you to choose any method you wish, for example a time clock, or handwritten timesheets. In other words, it doesn't matter to them as long as your time records are complete and accurate. You are not required to use time clock software, it is just a way to keep you compliant.
2. Time records determine employee earnings
For the most part, payroll earnings are based on the number of hours worked multiplied by an employee's base rate. So the more accurate your time tracking is, the more accurate your payroll will be. Further, some systems will automatically calculate gross wages including overtime pay.
3. Time records help control costs
Principles of accounting include the ability to forecast the future based on historical performance. By knowing the number of hours worked during a season, it is possible to plan and budget labor for the future. Additionally, records can be used to discover issues that need improvement, such as noticing excessive overtime expenditures, etc.
Like accounting software, time clock software can provide insight into your historical labor usage and expenses. The deeper your records, the deeper your insight. Share them with your accountant, it may help you make you better business decisions.
How much does time clock software cost?
Time clock software was once purchased in shrink-wrapped boxes with a one-time fee... but with a catch. If you needed support, you had to pay for it, sometimes in the form of an annual support agreement you paid every year. Modern time clock software has changed that model with monthly payments and free support.
The cost is roughly the same as it was before, but with improvements such as automatic backups, real-time reporting, availability from any browser, free support, and free upgrades.
Still, there are those who draw the line on cloud software with monthly fees. If you fall in that camp, your best option is to handle time tracking with spreadsheets or done manually. The trade-off is knowing it will require more work on your part.
If you are open to the idea, there are a variety of providers who offer different prices. If one clock system fits your needs and budget, then the cost should be considered a valued expense.