Quick answer

US federal law requires employers to keep accurate records of hours worked for non-exempt employees and to pay overtime after 40 hours in a workweek. You can track time however you like, but the records must be accurate, and rounding, off-the-clock work, and monitoring all carry legal limits. This is a plain-English overview, not legal advice.

This guide is written for us small business owners and managers responsible for tracking employee hours and staying compliant who want time tracking to support better planning, billing, reporting, and project decisions.

The FLSA sets the baseline for recordkeeping

The Fair Labor Standards Act is the federal law that governs minimum wage, overtime, and recordkeeping. It requires employers to maintain accurate records for non-exempt employees, including hours worked each day, total hours each workweek, and the wages paid. The law does not mandate a particular method, so a paper timesheet, a spreadsheet, or software can all be compliant if the records are accurate.

Exempt employees, such as many salaried professionals, are treated differently and generally are not owed overtime, but classification is a legal test, not a job title. Misclassifying an employee as exempt to avoid overtime is one of the most common and expensive mistakes small businesses make.

Overtime has to be paid and recorded

Non-exempt employees must be paid at least one and a half times their regular rate for hours worked beyond 40 in a workweek under federal law. Your time records are the evidence for that calculation, which is why accurate tracking is not just administrative tidiness but legal protection.

Some states add their own rules, such as daily overtime thresholds or stricter requirements. Federal law is the floor, and where a state law is more generous to the employee, the state law usually applies. Check the rules for every state where your employees actually work, which for remote teams may not be where your business is registered.

Rounding and off-the-clock work carry real limits

Rounding time entries is permitted within limits, but it has to be neutral. A rounding practice that consistently favours the employer, always rounding down against the employee, can violate the law even if each individual adjustment is small. If you round, round to a fair increment in both directions.

Off-the-clock work is a frequent trap. Answering messages after hours, prepping before a shift, or working through an unpaid break can all count as hours worked that must be paid. A policy telling employees not to work off the clock does not remove the obligation to pay for work you knew about or should have known about.

  • Record hours worked each day and total hours each workweek
  • Pay overtime after 40 hours for non-exempt employees
  • Keep rounding neutral, never systematically in the employer's favour
  • Count compensable off-the-clock work as hours worked
  • Check state rules on breaks, daily overtime, and final pay

Breaks and monitoring have their own rules

Federal law does not require meal or rest breaks, but where employers offer short breaks, typically those under 20 minutes, they generally must be paid. Bona fide meal periods, usually 30 minutes or more where the employee is relieved of duty, generally do not have to be paid. Several states impose their own break requirements on top of this.

If your time tracking includes monitoring such as screenshots or activity capture, that adds a second layer of legal and ethical considerations. Requirements vary by state, and some jurisdictions require notice or consent. The defensible approach is clear disclosure: tell employees what is tracked, why, and how it is used, and tie monitoring to work context rather than raw surveillance.

Keep records long enough and treat this as a starting point

The FLSA requires payroll records to be kept for at least three years, and records used to compute pay, such as time cards, for at least two years. Good records are your best defence in a wage dispute or audit, and reconstructing them after the fact is far harder than keeping them as you go.

This overview is general information, not legal advice, and it focuses on US federal rules. State laws vary widely, other countries have entirely different frameworks, and your specific situation may raise questions this cannot answer. When the stakes are real, confirm your obligations with an employment lawyer or your state labor department before you rely on a policy.

Where Zeitio fits

Zeitio helps teams connect tracked hours to clients, projects, tasks, reports, approvals, and invoices so time data becomes useful business context instead of another spreadsheet.

Start with simple time entries, review them weekly, and use the data to improve project planning, billing accuracy, and team workload decisions.

Compare Zeitio pricing or create a workspace to try the workflow.

Further reading

FAQs

Are employers legally required to track employee hours?

In the United States, yes for non-exempt employees. The Fair Labor Standards Act requires employers to keep accurate records of hours worked and wages paid. The law does not mandate a specific method, so paper, spreadsheets, or software all work as long as the records are accurate.

Is it legal to round employee time entries?

Rounding is permitted within limits, but it must be neutral. A practice that systematically rounds down against the employee can violate wage laws even when each adjustment is small. If you round, use a fair increment and round in both directions.

Do I have to pay for off-the-clock work?

Generally yes, if the work is compensable and you knew or should have known it was happening. Answering messages after hours, prep before a shift, or working through an unpaid break can all count as hours worked. A policy against off-the-clock work does not remove the duty to pay for work that was performed.

Is employee monitoring like screenshots legal?

It depends on the jurisdiction. Rules vary by state, and some require notice or consent. The defensible approach is clear disclosure: tell employees what is tracked, why, and how it is used, and connect any monitoring to work context rather than raw surveillance. Confirm the rules for the states where your employees work.

How long do I need to keep time records?

Under the FLSA, payroll records must be kept for at least three years, and records used to compute pay, such as time cards, for at least two years. Accurate, well-kept records are your strongest protection in a wage dispute or audit. This is general information, not legal advice.