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The Iron Clad Argument for Using Time Tracking for Salaried Employees

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Asking employees to report how much time they are spending on each project can significantly increase productivity, and it has a number of other beneficial side effects as well.

Despite the benefits, one of the most challenging downsides is that salaried employees are not always as productive as staff that is paid by the hour or the project. They know that they will get paid the same regardless of the number of hours they invest in a project, so there is little incentive to put in extra time and effort on a regular basis.

How can you keep the advantages and curb the disadvantages of having salaried employees? You have several options, including offering bonuses, project-based incentives, and implementing team-focused projects. However, these options all reduce some of the predictability associated with having a salaried employee and often end up costing you more in the long run. Instead, you may want to consider implementing time tracking for your salaried workers.

Beyond the internal benefits of time tracking systems, your company may also be required to track hours for certain salaried employees. Like many business owners, you may assume that salaried employees cannot receive overtime, but certain salaried employees must receive overtime pay if they work over 40 hours per week. Time tracking is absolutely necessary for these employees to ensure that your business complies with federal law.

The Benefits of Time Tracking for Salaried Employees

 

Increasing Accountability

Salaried employees are simply more likely to stay on task when they are tracking time. Employees are also less tempted to use work time for personal reasons or come in late or call it a day early when they have someone “looking over their shoulder.”

Time tracking by the client also forces employees to consider where they are spending their time. Workers may be surprised to learn how much time they are spending on mundane tasks on a regular basis. For example, once an employee starts tracking his or her time, they may be surprised to learn how much time administrative matters take. In addition, simply being conscious of how long a project is taking can often speed things along.

Measuring Costs and Revenue

If you can fit more client work into a day, that is bound to increase your revenue over time. However, you can only accurately measure how much return you are gaining on a project if you know how long it is taking your team to complete.

Estimates regarding project timeline are not nearly as accurate as having hard data that states specific hours. Without a meaningful way to track time, your firm may struggle to determine just how long a project will take and whether similar projects will be lucrative for your company in the future.

Assessing Capabilities

Tracking time by the client and project will also help you decide whether you can take on several projects at once or if you have “hit your limit” in terms of resources or workload. Deciding when you have enough work or when you need to have more help is a difficult balancing act, but it can be easier to determine when you have accurate data.

This rationale applies to the company as a whole and to individual employees. Perhaps “Sarah” is already working 50 hours per week and is still behind on projects. Knowing how she is spending her time will allow you to determine whether Sarah’s workload is too much for her or whether she is using her time on other, less valuable, tasks. Having this information will allow you to adjust to increase Sarah’s productivity.

Ensuring Accurate Client Billing and Cost Measurement

When you bill by the hour, it is essential to have accurate billing information to provide to your clients. Your customers will also likely want to know what your employees are doing on a regular basis. This is true regardless of whether your staff is paid by the hour or on a salary basis.

Even if you bill by the task, it is still a good idea to track the time you are putting into the project. Having this information will allow you to charge accurately for similar projects in the future. You do not want to bill your client at a rate that would be less than your goal hourly rate for that type of work.

In situations where projects take more time than you initially estimated, you can use your tracked hours information as a bargaining point to request additional funds for the task as well.

Federal Laws and Salaried Employees

In some situations, you may not have the option of deciding on your own whether having a salaried employee or an hourly employee will be the most beneficial for your business. The federal government, and many state governments, may dictate whether a particular type of employee is permitted to be salaried at all.

The government classifies employees as either “exempt” or “non-exempt” under the Fair Labor Standards Act (FLSA). Nonexempt employees are those that are covered by the FLSA. These employees are usually hourly workers, but there are some exceptions. In particular, those who have a salary of less than $23,660 are also covered by the FLSA. Higher minimums apply in particular sectors as well, including technology-based positions.

The classification of an employee is important because it dictates whether an employer will be required to pay that worker overtime based on federal overtime laws. When a nonexempt employee works over 40 hours per week, then the employer must pay him or her at least time and a half for each hour worked over 40 hours. While some business owners assume that only hourly employees can get overtime, that is simply not the case. As a rule, anyone who earns a salary of less than $455 per week should be getting overtime for any hours they put in over the 40-hour standard work week. Again, that minimum is higher in certain sectors.

Recently, a federal law was approved and set to take effect as of December 1, 2016, that significantly increased the maximum salary of exempt employees. The limit jumped from $23,660 to over $50,000. However, the change was stopped nationwide before it even occurred by a federal judge in Texas. Nonetheless, knowing how many hours your employees are clocking, even when they are salaried, will help you determine if a change in the law like the one that nearly occurred should alter how you treat your employees moving forward.

Taking the Next Step

If you think that implementing a method to track employee time is a good decision for your business, you should take the next step and decide on a time tracking method or software. For some, basic tracking methods like a spreadsheet or even pencil and paper may work well. For others, having software that tracks inputs and can generate reports may be more valuable.

Whatever method you choose, the information you gather will likely help you increase productivity, decreases costs, and improve your bottom line. If you need assistance choosing the right software or taking the next steps, our team can help. 

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