How Long Should Employers Keep Employees' Time Cards and Payroll Records

keeping track of time cards and payroll records

It is important for business owners to keep proper documentation of employee time cards and payroll records. In a world where employees come and go or get moved around within a company, tracking employees’ hours worked is a must when recording accurate payroll. In fact, federal law requires such action for businesses to abide by.

In this article you will learn how long you should keep employee time cards and why you should track time worked.

How long should employers keep payroll records

According to the Fair Labor Standards Act (FLSA), “Each employer shall preserve for at least three years payroll records, collective bargaining agreements, sales and purchase records.”

Examples of payroll records

  • Names of the employees
  • Social Security number of employees
  • Rate of pay or pay rate
  • Start and end dates for a workweek (for more information on what a workweek is and how the Department of Labor defines it, please see our what is a workweek article.)
  • W2, W3, W4, W5, 941 and/or 944 forms
  • Total wages paid each year and noted as salary or hourly
  • Overtime
  • PTO (paid time off)
  • Employee hours worked in a day and a week
  • Benefits (if applicable)

Proper record keeping will help your business stay out of legal issues or any disputes that an employee may have against you. Unfortunately not all companies take proper measures when it comes to protecting their business. Precise record keeping for payroll also improves and allows achievement for consistency when it comes to taxes, balance sheets, and other bookkeeping documentation.  

What about timekeeping and records for time worked

The FLSA also states, “Records on which wage computations are based should be retained for two years, i.e., time cards and piece work tickets, wage rate tables, work and time schedules, and records of additions to or deductions from wages.”

Timekeeping can be performed in any method as long as it is complete and accurately tracks employees’ hours worked. This includes handwritten timesheets by the employees themselves. So basically, you need an accurate and efficient method to track employees’ hours worked, such as an employee time clock system.

Timekeeping is such an important aspect when it comes to payroll budgeting and making sure employees are being paid accurately. Oftentimes employees are overpaid or underpaid due to poor record tracking for hours worked. According to bambooHR, payroll errors can cost a company two-fold due to financial penalty independent of the time and money required to correct it.

Here is an example of complete and accurate timekeeping for an employee time card:

 Timecard for accurate records

5 popular time tracking systems

There are numerous time tracking services and attendance management software tools to choose between, but make sure your decision is the best value. Read reviews, see who offers a free trial and experiment to see what fits your small business the best. For example, Capterra awarded OnTheClock with the badges for Best Ease Of Use and Best Value for 2018.

Here is a list of 5 time clock systems that are popular for small businesses to try:

1. SINC

An employee time clock app where hours are sorted with ease to use staff location and time tracking software for employees and managers. This system syncs with Xero payroll (U.S. only).

  • Free for 5 users or less
  • $14.99 per month for up to 7 users
  • $24.99 per month for up to 30 users
  • $99.99 for up to 100 users

2. OnTheClock

An employee time clock system that tracks hours worked and also tracks PTO (paid time off) allowing a seamless time cards to payroll process. It is 100% cloud-based and integrates with numerous payroll providers including QuickBooks, Xero, Thomson Reuters, ADP, and more.

  • 30-day free trial
  • Free for 2 employees or less
  • Managers and Administrators are free
  • $2.50/employee per month for 3-10 employees
  • $2.45/employee per month for 11-25 employees
  • $2.40/employee per month for 26-50 employees
  • $2.35/employee per month for 51-100 employees
  • $2.30/employee per month for 101-200 employees
  • $2.25/employee per month for 201-300 employees
  • $2.20/employee per month for 301-400 employees
  • 401+ Contact OnTheClock

3. T Sheets

Employees can clock in and out with just one click. Take break, change job codes, or add timesheet details instantly. Payroll integrations include QuickBooks, ADP, Xero, Sage and more. Here is their pricing as of 11/13/2019

  • Free for 1 user
  • $8/user per month + $20 base fee per month 
  • $10/user per month + $40 base fee per month 

4. TimeClock Plus

Cloud-based time tracking so you can access and approve employee hours at any time from anywhere, from any device. This time clock integrates with ADP, Central Square, Ellucian, and Namely.

  • Price - contact a representative to receive pricing

5. ClockShark

A simple way to track, schedule, and manage your crew’s time. Their website says it’s built for local construction, field service, and franchises. Their payroll integrates with QuickBooks, ADP, Zapier, Xero and more.

  • $5/month per user + $25 per month base fee
  • $8/month per user + $45 per month base fee (more features available)

Follow payroll and time cards requirements to stay out of trouble

By following the requirements, regulations and laws for proper payroll and time card tracking, you will protect your company and prevent any issues that could possibly happen with the Fair Labor Standards Act, Equal Employment Opportunity Commission and the IRS by knowing who's in.

In the event of a company audit, you will be able to provide the proper records necessary that would be asked from you to present as proof to an investigation. This can also improve the financial side of your business along with filing taxes. A reliable employee time clock system will store your time cards in a secure cloud-based account for easy access. Sign up for a 30-day free trial with OnTheClock.

a thought From George H on 7/18/2019 ...
We keep time card records for 2 years, we should be in compliance. I really appreciate the information that you provide, it helps us to know that we are doing the right thing.
reply from OTC - Hello George, thank you for the kind words. Also keep in mind that it never hurts to hold onto your employees' time cards even longer than the minimum requirement - just in case you ever have to reference them for legal purposes. Thank you once again.

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