Image Alt Text
manage employees

Are timesheets a legal requirement??

Are timesheets legally required to run a business? To answer this question simply, yes, timesheets are a legal requirement. Why are timesheets necessary, you ask? Timesheets track the amount of time an employee works or spends on a project. It’s important to track employee time so that an employer knows exactly how much to pay the employee come payday. Employers are required to keep accurate records of the number of hours an employee works as part of the recordkeeping requirements under federal law.

In this article, we will be covering the labor laws that apply to timesheets and records, the different rules for salaried and hourly employees, penalties for not keeping records, and more. As an employer, you must understand the importance of timesheets so that you can pay your employees accurately and run an efficient and successful business. Now, you may be wondering: Are timesheets a legal requirement? Get started by reading our guide from beginning to end, or use the links to get the answers to your most pressing questions.

Are timesheets required by law?

So, are timesheets a legal requirement? Yes, employers must use a time tracking method to record the number of hours an employee works. This can be done with a timesheet templatetimesheet software, or time card apps . Any time tracking plan is acceptable as long as the record is accurate and complete. But beyond just that, it’s important to be aware of various rules and laws that have to do with timekeeping. These federal timesheet laws, and in some cases state laws, are established to ensure that employers comply with federal minimum wage and overtime laws.

Federal rules

According to the federal law, an employer must have timesheets that record the number of hours an employee works. When recording hours worked, an employer can round up to the nearest 15 minutes. However, the Wage and Hour Division of the U.S. Department of Labor states that employers that round down must also round up occasionally to properly compensate their employees.

General laws

Employers must adhere to certain recordkeeping requirements under the Fair Labor Standards Act (FLSA) . The FLSA establishes the minimum wage, recordkeeping, overtime pay, and youth employment standards for employment. The FLSA applies to state, local, and federal government employers. It also applies to union halls, public agency employers, health care employers, schools, and private employers who have interstate business or who have gross sales of at least 500,000 annually. These businesses must adhere to the FLSA timesheet legal requirements at all times. Certain states also have additional wage and hour laws for employers.

In addition to timesheet legal requirements, employers must also hold onto other employee records, such as name, Social Security, address, and salary. Federal laws require that hourly employees must receive overtime compensation of 1.5 times their hourly wage if they work more than 40 hours a week. Federal law does not require meal periods, but employees must be paid for breaks that are less than 20 minutes and meals that are less than 30 minutes.

Are timesheets considered a legal document?

According to timesheet policy, timesheets are considered a legal document. However, the FLSA doesn’t require any specific time tracking plan, it just requires that an employer keep record of their employees’ hours in some way. Timesheets are an important part of payroll and client invoicing, as well as payroll for remote employees. Timesheets act as a legal basis to make sure that employees secure the proper compensation, benefits, and time off.

Timesheet rules for hourly versus salaried employees

Keeping an accurate record of the number of hours your employees work is essential for an employer. How else are you going to compensate them properly? In addition to time tracking, it is an employer’s responsibility to adhere to the FLSA, which also establishes time tracking requirements for both hourly and salaried employees. Below, we’ll explain the difference between the federal requirements for hourly and salaried employees:

Hourly employees

  • Time tracking records must state the date and time an employee starts and finishes work, the number of hours they work in a day, and the total hours they work each week.
  • “Off the clock” work is illegal for all hourly employees during a pay period.
  • Hourly employees must receive payment for all hours worked.
  • Clock-in and clock-out times must be rounded to the nearest 15 minutes.
  • An employee’s clock-in and clock-out times, overtime hours, and breaks must be stored in accurate records.
  • Employees must wait for their assigned shift before starting any duties.
  • The employer decides how many hours a week an employee works.
  • If an hourly employee works overtime, they must be paid 1.5 times their regular pay rate.
  • As long as an employee is accurately paid, an employer can modify their time card without their knowledge.

Salaried employees

  • Salaried employees must receive their base pay despite how many hours they actually work during the workweek.
  • If an employee is absent for less than a full workday, employers cannot deduct any pay from their salary.
  • Employees must complete their expected tasks despite how long it may take.

Exempt versus nonexempt employees

Another important situation to note is exempt versus nonexempt employees. An employee is exempt from overtime pay as long as they are paid a salary of at least $455 a week and they complete executive, administrative, and professional tasks. All hourly employees are considered nonexempt workers, but salaried employees can either be exempt or nonexempt, depending on their circumstances. All nonexempt employees are entitled to overtime pay.

What is timesheet compliance?

Timesheet compliance essentially means that an employer correctly completes and submits a timesheet that complies to the industry standards. For an employee, that means accurately tracking their work hours and submitting their timesheet on time.

If you don’t adhere to timesheet compliance, a myriad of things can happen. It can make reporting payroll difficult because you don’t have accurate timesheets. It can disrupt project management because you don’t know how many resources need to be allocated to certain projects. It can also cause issues with employees and clients because they will not receive their payment on time. So, as an employer, you must have a time tracking system and encourage your employees to always complete their timesheets accurately and submit them on time.

Are there penalties for timesheet noncompliance?

Beyond just making life difficult for you as an employer, serious penalties can happen for timesheet noncompliance. You can suffer a data breach, which happens when an employer fails to use the proper security and holds on to important information for their employees. It’s essential to protect employee information, and if their information is used for purposes other than payroll, they must be informed. Releasing an employee’s information can result in high fines and further penalties. Adhering to these compliances is one of the legal requirements for starting a business, so make sure your employees’ information is safe and secure at all times.

Why are timesheets necessary?

So now that you know all about timesheets and their role in running a business, you may be wondering: Why are timesheets necessary?

Timesheets are necessary for many reasons, such as:

  • Ensures payroll accuracy: Timesheets make it easier for employers to track hours worked for payroll records and overtime, and to make any adjustments to their pay. Using payroll software will also help to simplify the payroll process and ensure your employees are always paid accurately and on time.
  • Improves efficiency: Timesheets help you have a better understanding of where you’re wasting labor on unnecessary tasks so you can improve your business’s overall efficiency
  • Ensures bill accuracy: Employee timesheets are a good way to let your clients know that you’re not wasting their money and show them that you’re allocating the proper amount of time to completing their projects.
  • Saves money: Timesheets tell you what projects your employees are working on and how much time they spend, so you can compare their hours spent to the overall outcome, which can help save your business money.
  • Improves project management: With a timesheet, you can see the project an employee works on and track how much time they spend on it so you can analyze their time usage and efficiency. Timesheets can also help to identify how many workers need to be assigned to certain projects, which can improve work distribution.

Wrapping up

A business owner wears many hats, but thankfully, they have employees who help out along the way. Your employees are a huge part of your business’s success, so you want to make sure their time is compensated. Part of doing so is using timesheets to record the number of hours your employees work so they can be paid accurately and on time. Time tracking can be confusing, especially for a new business, but QuickBooks Time is a great solution to help employers leverage time tracking and streamline their business processes. Running a business is a lot of work, but fortunately, there are services out there like QuickBooks to help take some of that weight off your shoulders.

Recommended for you

Mail icon
Get the latest to your inbox
No Thanks

Get the latest to your inbox

Relevant resources to help start, run, and grow your business.

By clicking “Submit,” you agree to permit Intuit to contact you regarding QuickBooks and have read and acknowledge our Privacy Statement.

Thanks for subscribing.

Fresh business resources are headed your way!

Looking for something else?


From big jobs to small tasks, we've got your business covered.

Firm of the Future

Topical articles and news from top pros and Intuit product experts.

QuickBooks Support

Get help with QuickBooks. Find articles, video tutorials, and more.