Tracking the time of hourly employees is a common practice. Detailed records of hours spent on tasks help employers calculate how much they must pay to this group of workers. Besides, time tracking, in this case, is a guarantee of compliance with overtime regulations under the Fair Labor Standards Act (FLSA), which legally entitles hourly employees to be compensated for each hour spent at work beyond the standard 40-hour week. In other words, timesheets for salaried employees are a means to control labor costs and prevent legal risks.
As for time tracking among salaried employees, its purposes and benefits are not so obvious. Salaried workers receive a fixed amount of money every month and are usually not eligible for overtime compensation. Therefore, if those employees get their job done, why would employers need to bother making them fill in timesheets daily?
In this article, we have listed eight reasons for doing that, demonstrating that time tracking produces multiple benefits not only when applied by hourly workers but by salaried ones alike.
Are timesheets required for salaried employees?
Under US federal law, whether time tracking for salaried employees is required depends on whether the employee is exempt, not on whether they are salaried. Those are two different things, and treating them as the same is the mistake that causes most of the trouble here.
Being paid a salary does not by itself make someone exempt from overtime. An employee is exempt only if they meet all of the tests, and plenty of salaried people do not.
| Employee type | Must the employer record hours? | Why |
|---|---|---|
| Salaried non-exempt | Yes, in detail | They are still owed overtime, so hours worked each day and week must be recorded under FLSA recordkeeping rules |
| Salaried exempt | No detailed hours requirement | Federal recordkeeping for exempt staff is lighter, though the employer may still require timesheets |
| Hourly | Yes, in detail | Pay depends directly on hours worked |
So the short answer for exempt salaried staff is that federal law does not require you to record their hours, but nothing stops you asking them to. An employer can require timesheets from any employee regardless of classification, and many do for reasons that have nothing to do with payroll.
What makes an employee exempt
Three conditions have to be met together. Failing any one of them means the employee is non-exempt, and their hours must be recorded.
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Paid on a salary basis.
A predetermined amount each pay period that does not vary with the quality or quantity of work.
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Paid at or above the salary threshold.
The federal minimum is $684 per week, which works out at $35,568 a year, and the Department of Labor publishes the current earnings thresholds. Several states set a higher figure, and the state rule applies where it is stricter.
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Performing exempt duties.
The job has to genuinely fit an executive, administrative, professional, computer or outside sales role, as set out in DOL Fact Sheet 17A. Job titles do not decide this; actual duties do.
The deduction trap
The salary basis test is where employers most often lose an exemption without meaning to. Docking an exempt employee’s pay for partial-day absences, or for working fewer hours in a week, can undermine the salary basis and put the exemption at risk, potentially for everyone in the same job.
This is the practical reason to be careful about what a timesheet is used for. Recording an exempt employee’s hours is fine. Using those hours to reduce their salary usually is not.
This section is general information rather than legal advice, and state rules vary. Check your own position before changing how anyone is paid.
Outside the US, the answer is usually the opposite
Everything above describes US federal law. Across the European Union the position is close to reversed: there is no exempt category that removes the obligation, and employers are generally required to record working time for every worker.
The framework comes from the Working Time Directive 2003/88/EC, which sets limits on weekly hours and minimum rest. In May 2019 the Court of Justice held in Case C-55/18, CCOO v Deutsche Bank that those limits cannot be enforced unless hours are actually measured, so member states must require employers to set up an objective, reliable and accessible system recording each worker’s daily working time.
The Directive sets the floor. Each country then implements it, and the detail varies more than the headline suggests.
| Country | What is required | Since |
|---|---|---|
| Spain | Daily record of start and end times for every employee, no exceptions by size, sector or contract type. Kept 4 years and available to staff, representatives and the Labour Inspectorate | May 2019 |
| Germany | All working hours recorded, not only overtime and Sunday work. The court set no method and allowed no transition period | September 2022 |
| Greece | Digital work card reporting into the state ERGANI platform, so the labour inspectorate sees the data directly. Rolled out by sector | Phased from 2021 |
| France | Long-standing recording duties for hourly staff and some salaried groups. The forfait jours day-count contract used for managers remains contested against the Directive | Pre-dates the ruling |
| Poland, Czechia, Hungary, Slovakia | Existing labour code duties, updated guidance rather than new statutes after the ruling | Varies |
| United Kingdom | Outside the EU framework. The Working Time Regulations still cap weekly hours and require adequate records, but the CJEU ruling does not bind it | 1998 Regulations |
Spain is the sharpest example because it legislated directly in response. Royal Decree-Law 8/2019 added Article 34.9 to the Workers’ Statute, and it applies to full-time, part-time and remote staff alike. Penalties reach into the thousands of euros per affected worker, which is why Spanish employers moved quickly while others waited for national legislation.
The UK is the exception worth knowing if you employ across the Channel. It remains bound by its own Working Time Regulations 1998 rather than by the CJEU decision, so the record-keeping expectation is lighter than in Spain or Germany.
Implementation continues to move, national rules differ in detail, and this is general information rather than legal advice. Check the position in each country you employ people in rather than applying one policy everywhere.
Benefits of Timesheets for Salaried Employees
1. Billing Time and Labor Costs Tracking
Timesheets are essential for collecting information on billable hours and for consequent invoicing. With the aid of timesheets, you increase the accuracy of the billing procedure. Besides, time track data serves as hard evidence for showing customers how much time you spent on work for them and how much money is due to be paid for that work.
The process of billable time tracking is straightforward with digital timesheets. For example, in actiTIME, you can build billing reports with billable time and amounts across teams, customers, or projects.
Additionally, you may utilize digital timesheets to gather data regarding labor costs incurred by your business. To do so in actiTIME, firstly, you should divide your salaried employees’ monthly wages by the number of hours worked to identify their hourly rates. Then, you will need to set up workers’ fee rates in their user accounts and, after enough time tracking data is submitted, run the Cost of Work Report or the Profit/Loss Report.
The latter allows for overseeing labor costs in real time and comparing them with business revenues (based on billable amounts calculated). Therefore, the Profit/Loss Report helps always stay in the know of how much money the company spends on employees, regardless of whether they are hourly or salaried, and monitor expenses more efficiently.
Profit/Loss Report in actiTIME
2. Calculating Overtime and Time Off in Lieu
Although the majority of salaried employees are exempt from the FLSA, according to the new rule, those who earn less than $47,476 per annum are still entitled to be compensated for overtime work. Failing to track the working hours of such employees, you face an elevated legal risk due to non-compliance with fair labor standards and laws. Conversely, with detailed timesheet records and proof of provided overtime pay, you will protect yourself from any legal suits and charges filed by unsatisfied and overworked employees.
As for those salaried workers whose annual wages are higher than $47,476, you may find other ways to compensate them for their extra efforts. One of them is the accrual of time off in lieu (TOIL) in the amounts proportional to the number of hours an employee spent staying late at work.
Just like in the case of overtime monitoring, time off accrual is always easier when automated. Therefore, you can largely benefit from implementing a digital tool with an option to set up custom overtime and time off accrual rules. In actiTIME, you may also monitor how many overtime hours each of your team members worked over a certain period in an informative and easy-to-read chart.
3. Leave Balance Monitoring
In case your timesheets are designed in a way that allows for the collection of data on vacation, sick leave and other kinds of time off taken by employees, timesheet data may be applied not just for TOIL accrual but also for calculating and monitoring employees’ leave balances in general.
While regular timesheets are handy in this regard, software tools with built-in mechanisms for leave balance accrual make the process even more effortless and efficient. In actiTIME, you can review how many days your workers have already taken and how many are left in their balances. Such a feature is an excellent time-saver for team managers and payroll professionals.
4. Accountability Promotion
While promoting employers’ accountability in figuring out overtime pay and time off monitoring, timesheets also increase employees’ level of responsibility. The demand to keep daily records of hours spent on different tasks motivates one to engage in work and present favorable outcomes in a timely manner. In contrast, without a well-established time tracking procedure, your salaried employees may tend to procrastinate and slack on their jobs, especially when managers are not on site.
So, timesheet data often serves as soft evidence in terms of team progress assessment: it doesn’t reflect the actual work results but simply indicates whether your workers are actively performing their duties and utilizing work time in an optimal way. Thus, time tracking is an excellent way to hold salaried employees accountable for their output on an ongoing basis before checking on their actual performance outcomes.
5. Superior Project Management Results
With accurate work time records, the efficacy of your project management may increase multifold, and there are three main reasons for that:
- Firstly, you can foster better cost tracking (which we have already discussed above). In its turn, improved control over expenses stimulates better adherence to budgets and prevents the risks of cost overruns.
- Secondly, time tracking data is valuable when evaluating your current workforce capacities and resource allocation strategies, and planning future ones. Looking at time track records, you can identify which tasks are performed as planned and which consume too many hours. Such an analysis is conducive to more educated managerial decisions. More precisely, with this knowledge, you’ll be able to optimize resource allocation, concentrating attention and efforts on the areas where they are needed most.
- Lastly, time tracking enables you to oversee employee adherence to time estimates and schedules. As a consequence, you will be able to assess not only your team’s work progress but also the quality of your approach to time estimation. The latter is especially vital since inadequate time estimation is among the leading causes of project failures. By analyzing your team’s performance and compliance with initial schedules, you can increase time estimation accuracy, plan your projects more efficiently, and avoid severe risks.
6. Productivity Boosting
Measuring productivity for teams and individuals is not an easy task, but timesheets for salaried employees can be of significant assistance here. As it was said before, time tracking provides data necessary to figure out which activities are time-consuming and which are easy to complete on schedule. Thus, time track data educates on actions needed to optimize daily routines and increase performance efficacy at the project and individual levels.
When scrutinizing time logs, one may reveal some barriers to productive performance that could be eliminated only with the involvement of other staff members or management: e.g., redistribution of workloads for greater personal and team efficiency or recruitment of new talents to minimize the risk of staff burnout. But besides, employees can always analyze their work time records to develop a more mindful approach to personal work time distribution.
Having a chart that shows ongoing performance results is helpful for those working on their productivity. Digitized timesheet data may depict ratios between scheduled and worked hours, and show statistics on overtime and delayed outputs. Thus, with a timesheet tool like actiTIME, one will always be aware of their performance progress and have all the data necessary for better productivity gains at hand.
7. Additional Information for Employee Appraisal
Historical data from timesheets for salaried employees informs employee appraisal. Did an employee frequently pull all-nighters and put in an extra effort to meet the impending deadlines? Did they show consistent results in terms of adherence to time estimates? Did they spend a reasonable amount of time on tasks or, on the contrary, utilize too many hours on trivial activities? Time-track data shows it all.
Asking your salaried workers to fill in timesheets daily, you gain a chance to identify underperformers, achievers, and overachievers by analyzing their time logs. In this way, you will have an opportunity to recognize employee contributions with greater ease, stay more attentive to those who excel at work, and undertake appropriate and prompt measures to promote more efficient organizational behaviors.
8. Evidence for R&D Tax Credit Approval
Taking advantage of the research and development (R&D) tax credit is another valid reason why companies with salaried staff prefer keeping track of time expenses.
People tend to think that only research labs or large innovative corporations are eligible for the R&D tax credit. However, any business with research or experimental development projects can qualify for this incentive if they provide sufficient evidence to support their claims.
As you have probably guessed, the tracking of project time expenses is one of the easiest ways to do that. If you’re using an advanced timekeeping tool that allows for running reports on your employees’ work hours, you can get an automatically developed document representing your team’s R&D activities in a detailed breakdown. For an even more comprehensive and accurate picture, you may elaborate your time expense reports with information on work steps, assignments, and tasks of your R&D project.
Frequently asked questions
Are timesheets required for salaried employees?
Only for salaried employees who are non-exempt. Their hours must be recorded because they are still entitled to overtime. For exempt salaried employees there is no federal requirement to record hours in detail, though an employer may still ask for timesheets and many do, for project costing, billing and leave tracking rather than for payroll.
Do salaried employees have to clock in?
Not as a matter of federal law if they are exempt, and yes in practice if they are non-exempt, because someone has to be able to show what they worked. Beyond that it is an employer decision. Nothing prevents a company asking exempt staff to record hours, as long as their salary is not then reduced for working fewer of them.
Is a salaried employee the same as an exempt employee?
No, and this is the most common misunderstanding on the subject. Salaried describes how someone is paid. Exempt describes whether overtime rules apply to them. An employee must be paid on a salary basis, meet the federal threshold of $684 per week, and perform genuinely exempt duties before the exemption applies. Salaried non-exempt employees exist in large numbers and are owed overtime like anyone else.
Why track hours for exempt employees at all?
Because payroll is not the only thing hours are used for. Time tracking for salaried employees earns its place well away from the payroll question: Project costing, client billing, leave balances, capacity planning and evidence for tax credit claims all depend on knowing where time went, and none of those depends on whether the employee is entitled to overtime.
Do EU employers have to track hours for salaried employees?
Generally yes. A 2019 Court of Justice ruling requires member states to make employers set up a system measuring each worker’s daily working time. Spain legislated for it directly in 2019, Germany’s Federal Labour Court confirmed it in 2022, and Greece runs a digital work card reporting into a state platform. There is no equivalent of the US exempt category that removes the obligation, so a salaried professional in the EU is normally covered where an exempt US employee would not be.
Ready to Introduce Timesheets for Salaried Employees?
Timesheets for salaried employees produce multiple advantages. While not influencing the amounts of these workers’ monetary compensation directly, timesheets assist in obtaining data crucial for accounting, HR and project management.
If you are looking to get all these benefits in your team, try introducing timesheet software. For example, in actiTIME, your team can register working hours across tasks in the online timesheet, the browser extension, or the mobile app. You as a manager can use real-time widgets, charts, and reports to review individual and team productivity, project performance, build bills, and cost reports. Explore the whole set of actiTIME’s benefits – start a free 30-day trial (no credit card required).
