How to Create a Clocking in and Out Policy for Your Business

FLSA wage-and-hour lawsuits rose to 5,702 federal cases in 2025, up from 5,456 in 2024, and the Department of Labor recovered more in back wages that year than in any year since 2019. A written clocking in and out policy is one of the simplest ways to protect your business from that exposure, and it gives employees a clear, consistent standard to follow. Every company should have one, but not everyone knows what to include.

Here’s what to keep in mind.

Eligible Employees

Not every worker at your company needs to consult this policy. Most salaried exempt employees don’t clock in or out, since they receive their base pay regardless of hours worked. Nonexempt salaried, hourly full-time, and hourly part-time employees are the primary focus of this type of policy.

This helps keep track of what you owe them for the time they’ve spent working. Nonexempt salaried employees are a special case: they’re still eligible for overtime pay, so their hours need to be tracked just as closely as an hourly employee’s.

Overtime Calculations

Your policy should spell out overtime rules. Under federal law, nonexempt employees are entitled to 1.5 times their regular pay rate for any hours worked beyond 40 in a single workweek.

Some states go further. California, for example, also requires daily overtime after 8 hours in a single day and double time after 12. Check current federal and state rules at dol.gov/agencies/whd/overtime before finalizing your policy, since requirements vary by state and change periodically.

Disciplinary Action

Establish disciplinary action within the policy up front. Common issues include time theft, unauthorized overtime, and neglecting to clock in or out at all.

Some employees also clock in for a coworker who isn’t actually present, a practice known as buddy punching. These issues affect payroll accuracy and productivity, so it’s worth having a clear, nonnegotiable stance. Many companies use a three-strike approach that results in termination if an employee violates the policy three times within a set period.

Having a system that logs who edited a time card and when helps here too. If a disciplinary issue is disputed, a manager can point to the actual punch record and any edits made to it instead of piecing it together from memory.

Recordkeeping Requirements

Under the FLSA, employers are required to keep specific records for nonexempt employees: full name, Social Security number, job title, regular pay rate, hours worked each day, and total hours for each workweek, among other details. The Department of Labor outlines the full list at dol.gov/agencies/whd/fact-sheets/21-flsa-recordkeeping.

How you store that information can vary by business, but the records themselves need to be accurate and complete. This is also where rounding rules and grace periods matter. If your policy allows employees to clock in a few minutes early or late without penalty, spell out the exact window (TimeTrakGO lets you configure rounding rules and grace periods so the policy on paper matches what the system actually does).

Employee Breaks

Federal law doesn’t require employers to offer meal or rest breaks at all. But if you choose to offer short breaks of 5 to 20 minutes, the FLSA requires those to be paid as work time. Meal periods of 30 minutes or more can be unpaid, as long as the employee is completely relieved of duty during that time.

Some states require more than federal law does. California, for instance, requires a paid 10-minute rest break for every 4 hours worked. Check your state’s specific requirements before finalizing this section of your policy, since rules vary and change over time.

Put the Policy in Writing

A clear clocking in and out policy cuts down on inconsistent enforcement, disputes over hours worked, and your exposure to wage and hour claims. Put the rules in writing, apply them consistently, and make sure both managers and employees know where to find the policy when questions come up.

Start your free trial of TimeTrakGO today. Our team can help you set up rounding rules, custom overtime rules, and audit trails that back up whatever policy you put in place.