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Written by Alex Tolbert. Alex is the founder and CEO of BerniePortal, the founder of Bernard Health and an EO Nashville member. The following article appeared on the BerniePortal blog. This column was originally published in HR Technologist.

If you have hourly employees, you know how important it is to keep an accurate and compliant record of employee hours. On paper, this is challenging, and it has traditionally created a significant administrative burden for the human resources (HR), payroll, or project management departments.

As a result, more and more employers are taking their HR administration online, including time and attendance tracking. But how do you know if you have the right solution for your organization and whether your time-tracking processes are optimized for compliance and efficiency?

In general, there are five criteria that will help the HR department evaluate the best time and attendance system for their needs.


1. Ability to clock in and out

If you aren’t familiar with time and attendance systems, it may surprise you that many of them do not actually allow the employee to clock in and out within the system. Some are manual entry systems, which require employees to keep their own record of how many hours they worked.

This raises some compliance concerns. Some organizations with this type of system find it incentivizes a culture of rounding up or “just clocking eight hours,” regardless of how long employees actually work. If there is ever a compliance audit, this puts the employer in a disadvantaged position. If your organization intends to invest time and money in a system to track time compliantly, it’s worth asking if this is the best type of platform to accomplish that goal.

Alternatively, a system that tracks the precise minute employees clock in and clock out keeps a better and more accurate record of hours, giving employers more compliance confidence.


2. Editing functionality

Anyone who has worked in HR knows that tracking employee hours usually results in a lot of edits. Employees may forget to clock in, forget to clock out or forget to take a lunch break, requiring an edit to their timesheet.

A nice feature to have in a time and attendance system is a prompt asking employees if they need to request an edit at the moment they clock in or out.

Many time and attendance systems don’t have this ability, and employees have to send an email to their manager—or even leave a note on his or her desk—to request an edit. The result is an electronic system that requires managers to make lots of manual edits, which isn’t the most optimized solution.

An additional benefit of a system that manages edits natively is that the HR department can track edit patterns. In the event that there are consistent issues regarding an employee’s time tracking, management can address them.


3. Location-based clock-in / clock-out

Another beneficial feature is a platform that restricts the ability to clock-in exclusively to devices getting WiFi from a certain IP address. In other words, employees can only clock in or out on their device while present at the office. This prevents the potential issue of early clock-in, also improving compliance.


4. At-a-glance in-and-out time board

A visual representation of who is clocked in at any moment is important for managers, especially for larger organizations. This makes it easy to see who is present at a glance.


5. Payroll reporting

Reporting time tracking to payroll is a process with a lot of complexity. The easier it is to get hours worked out of the time and attendance system and into payroll, the better. One area of complexity is differentiating the types of hours worked. The time and attendance system need to be able to communicate how many total hours were worked, how many of those hours were overtime, how many were at a normal pay rate, and how many were paid time off hours, if any. This can be tricky to understand. To explain, let’s look at an example.

Let’s say over a two-week pay period, Jane worked 78 hours at Acme Company. Overtime hours are any hours worked over 40 hours per week, per federal regulations. Is Jane eligible for overtime pay? Some might say no—she was under 80 hours worked for the two-week period. But this thinking isn’t accurate.

You can’t tell if Jane is eligible for overtime without a breakdown of the total hours worked. If Jane worked 45 hours during week one, and then 33 hours during week two, she would need to be compensated for five overtime hours. This is why you want a system that can differentiate between the total 78 hours worked, the 73 normal pay hours, and the five overtime hours.

Traditionally, figuring all of this out is a huge burden on the HR department. Without a robust time and attendance system, tracking this requires calculating all of these hours across multiple reports and platforms that don’t talk to one another.

This complexity is a big part of the reason many small and medium-sized employers choose to have only salaried employees, even in circumstances where that approach isn’t the right fit for the organization—or even compliant with federal labor laws.

By contrast, using a robust time and attendance system streamlines this process and allows employers to better optimize the structure of their workforce. Especially for organizations that are in growth mode, there is a tipping point where tracking hours becomes necessary and painful.

Using the above criteria to evaluate systems can ensure your organization finds a system that best meets your needs.

This article was originally published on the EO Global Octane Blog.

Entrepreneur’s Organization is a global network of over 13,000 business owners. Learn how EO Chicago helps over 100 business owners grow.