Time Clock Rules for Hourly Employees

Overtime, clocking in, rounding hours, and local regulations can make restaurant payroll a nightmare. Labor is one of the largest expenses in the industry, and mistakes can irreparably damage a restaurant's reputation and bottom line. Restaurant managers need to adhere to time clock rules for hourly employees to ensure every time a paycheck is processed, it's accurate.

In this article, you'll learn which employees need to adhere to time clock rules, which rules apply to your restaurant, and how to use software to save $500 each week on payroll errors and time theft.

Salaried vs. Hourly Employees

Not all employees in a restaurant use the time clock. Hourly employees do, but salaried employees don't. Here's the difference:

Hourly employees

Hourly employees are workers whose pay is set by the hour. This model can cause some fluctuation when it comes to weekly pay for employees, but steps have been taken to create a more consistent paycheck for hourly employees through restaurant fair workweek initiatives. To accurately track how many hours these employees work and - by extension - how much they are owed on payday, restaurants need to record employee working hours. This is typically done through the use of an accurate time clock software or system.

Salaried employees

Salaried employees are those who work for a set amount of money each year. In a restaurant, these tend to be higher-ranking restaurant positions, such as general manager or executive chef. Normally, a salaried employee will work around 40 hours each week - and in a restaurant, possibly much more than that. But just because an employee is salaried does not mean they don't need to log hours or are ineligible for overtime pay. We'll get to that in the next section.

Exempt vs. Non-Exempt Employees

On the subject of employment, the term “exempt” refers to whether or not a person qualifies for benefits such as overtime pay mandated by the Fair Labor Standards Act (FLSA). If an employee is not exempt from the FLSA, it simply means they are entitled to these benefits.

Exempt Employees

Exempt employees are not entitled to overtime pay if they work more than 40 hours a week. According to the Department of Labor (DOL), reasons for overtime exemption are earning a salary of $684 per week ($35,568 per year) and meeting certain criteria in their roles and responsibilities. For example, under the act's executive exemption, an exempt employee must meet all of the following criteria:

• “Managing a customarily recognized department or subdivision of the enterprise.”
• “Direct[ing] the work of at least two or more other full-time employees or their equivalent.”
• “Hav[ing] the authority to hire or fire other employees, or the employee's suggestions and recommendations as to the hiring, firing, advancement, promotion, or any other change of status of other employees must be given particular weight.”

If your salaried employees make at least $35,568 annually and meet the above criteria, they would be exempt from the FLSA's overtime requirements and would not have to log their hours. However, if the salary threshold or any of the above criteria are unmet, those employees are non-exempt and must clock in - even if they are expected to work a 40-hour workweek - and receive additional pay for overtime work.

Non-Exempt Employees

Non-exempt employees are the workers who do qualify for overtime pay under the FLSA. This means employees are either paid hourly or earn an annual salary of less than $35,568. These employees are eligible for overtime pay no less than one-and-a-half times their normal hourly rate for all hours worked in excess of 40 in a given workweek. Thus, their hours must be tracked per the FLSA.

Some states also require overtime pay for weekend or holiday work, so check your local laws to see if this is something your restaurant needs to adhere to.

Remember that while you can define the 168 hours for what is considered a “workweek” in your restaurant, you cannot redistribute an employee's hours from one week to another to reduce overtime costs.

Now that you're aware of which employees need to follow time clocking rules, let's jump into a few key rules to remember.

Types of Time Clocking Rules

Rounding

To streamline the payroll process, some restaurants use a method that rounds employees' clock-in times up or down - so long as that rounding does “not result, over a period of time, in a failure to compensate the employees properly for all the time they have actually worked.”

In other words, rounding needs to be consistent and fair. The DOL's policy is to accept a formal policy of rounding up or down to the nearest five-, six-, fifteen-, or thirty-minute intervals throughout the hour. The below chart shows what would happen when an employee scheduled to work 5:00 shift clocks in under each of these different rounding rules.

Rounding Rule	Time Increment	Actual Clock-in Time	Recorded Clock-in Time
Five-Minute	Every 5 Minutes	4:58 p.m.	5:00 p.m.
One-Tenth of an Hour	Every 6 Minutes	5:04 p.m.	5:06 p.m.
One-Quarter of an Hour	Every 15 Minutes	5:13 p.m.	5:15 p.m.
One-Half Hour	Every 30 minutes	5:41 p.m.	5:30 p.m.

The 7-Minute Rule

Of the four common rounding rules, the 15-minute cadence is one of the more popular ones in restaurants, as it only penalizes employees for being more than seven minutes late to a shift. This is where the 7-minute rule comes into play.

For restaurants that round time clocking to the nearest 15-minute interval, an employee's clock-in time is rounded down if they clock in within the first seven minutes of their scheduled shift. Anytime after that, their recorded clock-in time will round up 15 minutes from their scheduled start time.

For example, if an employee is due to start a shift at 4:00 p.m. and shows up anytime between 4:00 and 4:07, there would be no penalty. However, if that employee shows up between 4:08 and 4:22, the clock-in time will appear at 4:15 - rounding up from 4:08 and 4:14 and rounding down from 4:16 until 4:22. Here's a chart to break it down further.

Time Clocked In	Time Recorded
3:53 p.m - 4:07 p.m.	4:00 p.m.
4:08 p.m - 4:22 p.m.	4:15 p.m.
4:23 p.m. - 4:37 p.m.	4:30 p.m.
4:38 p.m. - 4:52 p.m.	4:45 p.m.

Record Keeping

To comply with requirements set forth by the Department of Labor, employers must record and save every non-exempt employee's working hours for at least three years. This law exists to protect both employers and employees in case there's a discrepancy or lawsuit regarding working hours and owed wages. This storage process might sound overwhelming, but don't worry - time clocking software will automatically document this information for you.

Other Time Clocking Best Practices

Communication

Not all restaurants follow the same rules regarding rounding, so it's important to over-communicate your restaurant's rounding practices to all employees. Make it clear at what time intervals they'll start seeing their clock-in times rounded up so there's no confusion when they see their paychecks.

Confirmation

Employers should review hours worked vs. hours scheduled and confirm those hours with employees. Particularly, these confirmation discussions should be held during new hires' first few pay periods, when there is a pattern of late clock-ins and wages are lower than projected, and anytime employees have questions about their pay. Assuming there are no hiccups in the time clock system, these conversations are brief.

State-Specific Time Clock Rules & Laws

Each state has different rules about when non-exempt employees earn breaks when they should (or should not) be on the clock, and how rounding works. Here are a few examples.

Washington

The following time clock laws apply in Washington state:

• Employees are entitled to a paid ten-minute break every four hours worked. Since the break is paid, employees should stay on the clock.
• Employees have the right to take unpaid 30-minute meal breaks if working more than five hours. Since this break is unpaid (and optional), employees should clock out.
• While worker time clocks are not required in Washington, they must have the functionality to adhere to the 7-minute rule if they are being used and the restaurant rounds clock-in times.
• Rounding or deducting time from an employee break is not permitted.

Oregon

Here are some noteworthy Oregon time clock rules.

• Employees earn one ten-minute paid rest break when working between two and six hours. Additional rest breaks kick in after working six, ten, and fourteen hours.
• Because these rest breaks are paid, employees should not clock out for them.
• Employees earn one 30-minute unpaid meal break after working six hours and a second one after working 14 hours.
• Meal breaks are required under Oregon law to be taken.
• Because meal breaks are unpaid, employees should clock out for them.

California

In California,

• Ten-minute paid rest breaks are required in all shifts over three and a half hours.
• A 30-minute meal break is required for shifts over six hours and is optional for a shift between five and six hours.
• On-duty meal periods are permitted, but only if...
• The employee agrees to them.
• The nature of the job prevents an employee from leaving.
• They are paid in full during their mealtime, and thus do not clock out.

Do salaried employees have to clock in in California?

Salaried, exempt employees do not need to clock in or track hours in California, as their exemption from FLSA regulations means their pay is the same regardless of hours worked. However, according to the SHRM, all non-exempt employees in California “are required to accurately record hours worked,” and this includes salaried, non-exempt employees. While the act of “clocking in” isn't required, a record of worked hours is.

New York

In New York state...

• Employees are entitled to an unpaid 30-minute, off-the-clock lunch break, in addition to a 45-minute meal break for shifts exceeding “six hours starting between 1:00 p.m. and 6:00 a.m.”
• If their workday starts before 11 a.m. and ends after 7 p.m., employees are entitled to an additional unpaid, off-the-clock meal break.
• Additional rest breaks are not legally required.

Pennsylvania

Finally, Pennsylvania law states that...

• Meal breaks are not required for adult employees but may be offered.
• If the break is less than 20 minutes, they must be paid and employees must stay clocked in.
• If the break is 20+ minutes, employers may choose to pay employees during it, meaning employers dictate whether or not it's on-the-clock time.

Other States

In general, other states will have similar laws about staying on the clock for rest breaks and clocking out during an extended, non-working meal break. In addition, making employees work off the clock is considered illegal, and they must be paid for the required working time before and after a scheduled shift. Most states' time clock rules closely align with the FLSA, but because there will always be differences, it's best to look up your local laws to ensure you're staying compliant.

Effective Time Tracking with 7shifts

The archaic approach of using paper punch cards eats up hours of a restaurant manager's week.

Time tracking software eliminates physical punch cards, makes early clock-ins and buddy punching impossible, and yields the most accurate labor reports for restaurants and employees. Modern software even uses photos and GPS tracking to ensure employees always punch in at the right time.

That's why more than 1 million restaurant professionals use 7shifts team management platform, which integrates employee schedules and time clocking with leading payroll software like ADP, QuickBooks, Gusto, and more.

7shifts Time Clocking App for Restaurants

This seamless and reliable process saves restaurants using 7shifts $500 per week - or $26,000 annually - on labor costs due to reduced time theft and payroll errors.

You can see the benefits of 7shifts yourself with a free trial or demo here.

Frequently Asked Questions

Is it illegal to make employees work off the clock?

Yes, it is illegal to make employees work off the clock. It's called wage theft, and if employers are found guilty of it, they could face up to $10,000 in fines and face potential prison time for repeat offenses. Any time an employee does work before or after a shift - whether it's picking up change for the register on the way in or delivering a pizza on their way home - it must be recorded as time worked.

Can my employer make me wait to clock in?

It depends. If you show up too early for your shift, or if you're running late (and are crossing your fingers for a buddy punch), an employer can make you wait to clock in so that actual, recorded, and scheduled working hours add up correctly. This helps to avoid time theft. However, it's different if an employer tells you to wait to clock in for your scheduled shift when it's not too busy when you show up. In some parts of the country, this can be considered a violation of required advance notice of hours, which can result in fines to the restaurant.

Should hourly employees clock out for lunch?

If they are not working through lunch, hourly employees should clock out during meals. However, if an employee works throughout their lunch break, they may be eligible for pay during that time. It's best to look into your local laws to ensure you're not violating any scheduling rules here.