How to create a timekeeping policy (2023 guide)

Your employees clock in, they clock out, and you pay them for the hours they work. It’s a simple process, right?
Not quite. What happens when they start work early, stay late, or handle certain tasks outside their regular hours? If you’re not accurately tracking and compensating them for those hours, you’re not just risking unhappy employees — you’re potentially ignoring federal and state labor laws.
That’s why an effective timekeeping policy is more than just convenient — it’s necessary. Without one, the simplicity of ‘clock in, clock out’ can become a quicksand of inaccuracies that can pull your small business down.
In this article, we’ll guide you step-by-step in creating a timekeeping policy that’s fair and compliant, so you can confidently navigate the complexities of employee timekeeping and protect your business.







One easy app to manage your hourly team.
Get your team in sync with our easy-to-use, all-in-one employee app.



Get started for free with Homebase








What is a timekeeping policy?
A timekeeping policy is a set of guidelines that a business establishes to monitor and record its employees’ working hours. It typically addresses things like regular working hours, overtime, break time at work , vacation, sick leave, and other forms of paid or unpaid time off. They also normally detail procedures for handling disputes about recorded time or instances of noncompliance with the policy.
Creating and enforcing a timekeeping policy is also required by law in many countries, including under the Fair Labor Standards Act (FLSA) in the United States. While the FLSA doesn’t require business owners to use time clocks , time cards, or any other specific timekeeping system, they’re required to maintain accurate records of hours worked by nonexempt employees for a minimum of 3 payroll years. 
What to include in a timekeeping policy
Every small business is different. While your timekeeping policy should be tailored to your business needs, here’s what a basic policy should include:
Timekeeping policy objectives
First off, your timekeeping policy should explain why it’s essential and how it benefits both your small business and the employees.  
Consider these examples:

“Our policy ensures fair pay by accurately recording everyone’s work hours.”
“We use this policy to eliminate any confusion about pay and work hours, so we can all focus on the job at hand.”

Focus on the benefits of having a timekeeping policy rather than the potential consequences of failing to comply.



⚠️ Remember : While you should mention the benefits of your timekeeping policy, don’t over-promise. Set realistic expectations that your company can consistently meet.



Scope of the policy 
This section defines who’s covered under the policy, especially if you have exempt and nonexempt employees, as defined by the FLSA.





Exempt employees

Nonexempt employees



Definition


Employees exempt from FLSA overtime rules due to job duties and salary.


Employees eligible for overtime pay under the FLSA.



Pay
Fixed salary that doesn’t vary based on hours worked.

Can be paid hourly, salary, or on a piece-rate basis.



Overtime
Not entitled to overtime pay.

Entitled to overtime pay for hours worked beyond 40 in a workweek.