When it comes to tracking time and attendance, most companies generally do a good job of recording time worked for their hourly employees. They know almost all hourly employees are entitled to overtime pay, so recording actual hours worked is important to ensure employees are paid correctly.
Unfortunately, when it comes to recording time worked for salaried employees, the picture is not always so clear.
Salaried Doesn’t Always Mean Exempt
Some companies, for instance, operate under the mistaken idea that all salaried employees are automatically exempt from overtime pay. In fact, as we covered in a previous article, there are certain specific exemption criteria that must be met in order for an employee to be exempt from overtime, regardless of salaried status.
If you have salaried employees who should be paid overtime and you’re not recording their hours to enable you to accurately pay them, you may be placing your business at significant risk of a wage and hour audit or even a lawsuit. The U.S. Department of Labor hired 250 additional wage and hour inspectors in 2009 alone, and state labor departments are also stepping up enforcement actions. All it takes is one complaint from one disgruntled employee, and your business could well be next in line for an audit.
Exempt Doesn’t Mean You Can’t Track Time
Other companies don’t record time worked for their salaried exempt employees, believing they are not allowed to do so because those employees are exempt from overtime pay.
As it happens, though, the U.S. Department of Labor, in an opinion letter issued in January 2005, stated “employers may require exempt employees to record and track their hours,” provided the timekeeping policy “…has NOT been established for the purpose of wage payment tied to hours actually worked.”
In other words, you can record, track and monitor time worked by salaried exempt employees, as long as you don’t use those time records to calculate their pay.
Why Track Salaried Employee Work Time?
There are several reasons why tracking time worked by all employees — including salaried exempt employees — is a good idea.
First, it gives you information you need for good workforce management. For example, if you see employees in one department consistently working overtime, week after week, you may have a staffing shortage or a workload issue in that department. Identifying and addressing the problem on a timely basis can help raise employee morale, reduce turnover and improve productivity.
If you don’t track salaried employee time, you might never know about the problem.
Second, many employers have found tracking employee time reduces “time theft.“ The American Payroll Association estimates as many as ten minutes per day per employee are lost due to late arrivals, early departures and extended breaks and lunches. This can add up to over 30 hours per year per employee — time you pay for, but employees aren’t working.
It’s human nature. If employees know someone is watching, they are less likely to come in late, slip out early or take extra long breaks. The simple act of recording employee arrivals and departures can have a significant impact.
Finally, ponder what could happen if you are found to have misclassified employees as overtime-exempt when they were actually overtime-eligible. We don’t like to think about the possibility, but it makes sense to take practical steps to reduce risk whenever possible.
The courts and the Department of Labor operate under the assumption that employees are eligible for overtime until they have been proven to be exempt. In other words, the burden of proof rests on you. If you fail to prove the exemption, you could be on the hook for back wages and possible penalties.
If that were to happen, the next step would be to determine how much back overtime you owe. If you have accurate records for your employees’ work time, the courts would most likely use your records to calculate any back overtime. However, if you don’t have time records, your employees’ own recollections or records of the hours they worked could be used to determine how much overtime you’ll have to pay.
The problem with this, of course, is human nature. Even well-intentioned and honest people tend to remember the times they worked late or came in early, and to forget the times they took extended lunches or breaks or worked a slightly shortened day.
Having records of time worked for all employees could save you a substantial amount of money in the event the Department of Labor or the courts decide you should have been paying overtime to some of your salaried employees.
The Bottom Line
Recording time for all employees, salaried as well as hourly, can give you information you need to better manage your business. It can reduce “time theft” and increase employee productivity. If you ever find yourself liable for back overtime pay, accurate time records can insure you don’t pay any more than you should.
Acroprint offers time and attendance solutions suitable for all types of businesses and all work environments. For instance, our computer-based systems offer sleek, modern terminals that work with proximity badges or offer biometric authentication to eliminate the potential for “buddy punching.” These systems will accurately record time for both salaried and hourly employees and can export directly to your payroll software or service, eliminating clerical errors and speeding payroll preparation. Many businesses find an upgraded timekeeping system pays for itself in a matter of months through more efficient payroll processing.
If you’re not already tracking time for all your employees, now is the time to start.