Employers take various steps to protect themselves and ensure compliance with these laws and regulations. One of the crucial practices they follow is paying accurately and timely to all the employees and for that, you maintain time cards to record the working hours of the exempt employees. However, you might be thinking about how long you need to maintain time cards as per the FLSA requirements.
In this blog, we aim to shed light on the importance of time cards, particularly for employers, HR personnel, and those working in the payroll department. We’ll discuss how long you should retain employee time cards to adhere to legal requirements.
The Role of Time Cards
The term “time cards” has evolved to refer to the digital data that is stored about employee hours worked, rather than the traditional paper time cards. Time card data, or working hour data, is essential for ensuring that employees are compensated accurately and on time.
According to the Fair Labor Standards Act (FLSA), time cards must include the following information:
- Employee’s name
- Total hours worked
- Start and end time for each workday
Time cards play a pivotal role in the workplace by serving as the backbone of efficient employee management. They provide a detailed record of when employees clock in and out, take breaks, and accrue leave, offering a comprehensive overview of their work hours. These records are not only indispensable for tracking productivity, but also for ensuring fair compensation and compliance with labor laws, safeguarding both employee rights and employer interests. They act as a safeguard against wage discrepancies and serve as a foundation for a transparent and equitable work environment.
Different Methods of Timekeeping to Record Employee Hours Worked
- Paper time cards: This is a traditional approach, employees manually record their working hours on paper time cards. Employees are responsible for manually recording their work hours, typically on a physical time card. They note their clock-in and clock-out times as well as any break periods. While this method is straightforward, it can be more susceptible to errors or time discrepancies due to manual input. This method is still utilized today by businesses that are small in size and do not have too many employees.
Example: A small retail store offers physical time cards to their part-time employees. After each shift, the employees record their clock-in and clock-out times. Subsequently, the manager reviews and calculates the hours worked, and at the end of each month, compensates them accordingly.
- Electronic time clocks: They offer a modern alternative to traditional paper-based time cards for tracking hours worked. The key distinction here is that there is no manual data entry involved, as the entire time-keeping process is automated through a machine equipped with a clock, hence its name, or some other unique identifier.
Here’s how it works: When an employee arrives at the office, they insert their time card into the machine. The machine then accurately records the time for that specific employee, based on the unique card. It’s worth noting that this method can potentially leave room for time fraud since anyone can insert the card on behalf of another colleague.
Example: A manufacturing company has electronic time clocks installed at the entrance and exit of their facility. Employees insert their swipe cards, and the system logs their clock-in and clock-out times, ensuring accuracy.
- Timekeeping software: In recent times, technology has advanced significantly, prompting many companies to adopt more efficient alternatives like timekeeping or payroll processing software. These software solutions, often web-based, enable employees to digitally record their work hours using computers or mobile devices. This method is less susceptible to errors and is particularly advantageous for remote work situations or companies with numerous freelancers. However, one potential challenge with this method is that it’s only sometimes possible to verify whether employees have worked the hours they’ve entered.
Example: A digital marketing company has onboarded several graphic designers onto their team. When a new task comes in, designers log in, record their work hours, commence work, and log out upon task completion.
- Biometric time clocks: Biometric time clocks use unique biometric identifiers, such as fingerprints or facial recognition, to record employee attendance. These are subtypes of time clocks. These advanced systems offer a high level of accuracy and security, as they ensure that the person clocking in or out is indeed an authorized employee. Biometric time clocks are becoming increasingly popular in various industries and are highly effective in preventing time or attendance fraud.
Example: A software company utilizes fingerprint scanners for timekeeping. When an employee arrives at the office, they place their thumb on the scanner to clock in, and they repeat the process when leaving to clock out. The uniqueness of fingerprints serves as a robust safeguard against any potential time fraud.
- GPS Tracking: GPS tracking technology is employed to monitor the location and movements of employees who work remotely or are frequently on the move. This technology provides employers with precise information about the employee’s location when they begin their work and their final location when they complete their work. It offers real-time insights into the total number of hours worked, where, and when employees initiate and conclude their work activities.
Example: A delivery and logistics company equips its delivery drivers with GPS-enabled devices. These devices track drivers’ routes, stops, and delivery times, ensuring efficient route planning and accurate record-keeping for payroll and customer service purposes.
Each of these timekeeping methods offers distinct advantages and is well-suited to various business requirements and scales. The selection of a method hinges on factors such as company size, employee locations, industry specifics, and the desired level of precision and automation in time tracking.
The Fair Labor Standards Act (FLSA) grants employers the freedom and flexibility to choose their preferred timekeeping system, as long as it effectively and accurately records the hours worked by their employees. This flexibility enables employers to select from various options, such as paper time cards, electronic time clocks, or timekeeping software, depending on their specific needs and preferences.
FLSA and Time Cards
The Fair Labor Standards Act (FLSA) is a federal law in the United States that regulates minimum wage, overtime pay, and labor standards. Under FLSA, employers are mandated to keep precise records of hours worked by non-exempt employees, including time cards. This law serves to guarantee fair compensation for employees and prevent labor law violations.
How Long Should You Keep Time Cards as per FLSA?
Now, let’s shift our attention to the central focus of this blog. In accordance with FLSA regulations, employers are mandated to retain time card records for a minimum of three years. This stipulates that, for every non-exempt employee, all-time card records must be kept for at least three years from the date of their creation. It’s crucial to bear in mind that certain states may have their own distinct regulations, which might necessitate a more extended period for time card retention. These state-specific variations serve as a reminder that staying compliant with labor laws requires a keen awareness of both federal and state-level requirements.
Benefits of Keeping Time Cards
Keeping accurate time cards can benefit both employers and employees. Here are some advantages:
- Wage and Hour Compliance: Accurate time cards help employers comply with FLSA regulations, reducing the risk of wage and hourly disputes.
- Overtime Calculations: Time cards are essential for calculating overtime pay, ensuring employees are compensated correctly for extra hours worked.
- Employee Accountability: Time cards promote employee accountability and discourage time theft and inaccuracies.
Consequences of Not Complying
Failing to maintain accurate time card records in accordance with FLSA regulations can lead to legal consequences. Employers may face fines, penalties, and back pay claims if they are found in violation of labor laws.
In conclusion, time cards are indispensable tools for both employers and employees. They ensure fair compensation, labor law compliance, and accurate tracking of work hours. The Fair Labor Standards Act (FLSA) mandates that employers retain time card records for at least three years, helping to protect both parties involved. By following these guidelines and understanding the importance of accurate time card maintenance, businesses can foster a transparent and harmonious working environment while avoiding legal repercussions.