Creating a Clock-In Clock Out System: 4 Simple Steps

ByEric Czerwonka Last Updated
Illustrative image of different clock-in clock-out systems

If you have employees who are paid by the hour, a clock-in clock-out system is essential. 

It lets you track the hours employees work so you can avoid over/underpaying them. It helps you identify absenteeism and chronic lateness. And it allows you to determine when employees need to be paid overtime as required by law.

The fact that you need a system for tracking employee time is probably not news to you, but what you might not know is that the system you choose can have a huge impact on the amount of time and effort that time tracking and running payroll requires.

In this post, we’re going to walk you through a four-step process for creating a clock-in clock-out system for your business, offering different options to consider depending on how much manual work you’re willing to put into managing your team’s time and running payroll.

Step 1: Determine what type of system you want to use

The first step in setting up a method for employees to clock in and out is choosing what type of system you want to use. 

The best method for your business will vary depending on whether you’re running a small business with a few employees or a large company with multiple locations, departments, and job classifications.

There are four main types of clock-in clock-out systems.

Mechanical punch clocks

The most basic way to track employee hours is by using a mechanical punch clock. These devices function very simply: employees enter paper timecards into the punch clock when they start and stop working, and the clock automatically registers the time and date of punch on the timecard using printer ink.

The big advantage of using a mechanical punch clock is that it’s a low-cost option. You can get one of these machines for around $300. After that, the only ongoing expenses you’ll have are the cost of the paper timesheets that work with the punch clock (around $60 for a package of 250) and ink ribbons (less than $20 each).

However, there are a lot of disadvantages to using a mechanical punch clock. 

  • What you save in costs, you lose in productive time. To run payroll, you’ll have to collect all timecards, add up all hours for all employees, and determine if anyone worked overtime. Then you have to manually enter all of that data into your payroll provider.
  • It’s easy to make a miscalculation, forget to account for overtime, or overlook a shift, which causes rework, and it’s upsetting for employees when they’re not paid correctly.
  • Employees can lose or misplace their timecards, giving you no way to validate what hours they worked. Plus, employees often insert the timecard incorrectly, causing two punches to overlap each other and make both illegible.
  • Manual time tracking has no safeguards against time theft acts — like buddy punching or clocking in and leaving work — which can increase labor costs.

Related: The Best Portable Time Clocks for Construction

Paper timesheets

A good alternative to using a mechanical punch clock is to have your employees write down when they started and stopped working on a sheet of paper. This prevents issues like the punch clock printing on the same spot twice and making the data illegible.

This method of time tracking comes with two major upsides. One, it’s simple and intuitive. Any employee can fill out a paper timesheet with no training or explanation required. Second, it’s the cheapest possible option. Regular printer paper is significantly cheaper than the time cards that work with mechanical punch clocks. 

But despite its simplicity, this method comes with many of the same problems as tracking time with a punch clock.

Calculating work hours is still a time-consuming process that requires extreme attention and is prone to errors. Paper timesheets offer no help with calculating PTO or overtime. And time theft is even simpler with this method: employees can simply write down whatever times they want to get paid for.

Spreadsheet software

Another way to track employee hours is with an Excel or Google Sheets spreadsheet.

With this method, employees can log their hours using a punch clock or a paper timesheet — or they can enter them directly into the spreadsheet. The obvious upside to the latter method is that you don’t risk losing or damaging a piece of paper, and you can back up the data.

Another upside is that this method lets you skip one step of the payroll process: instead of having to manually transfer all data from paper to your computer, you can simply upload the spreadsheet to your payroll software.

Additionally, when using an Excel or Google Sheets file, the process of calculating total billable hours does get a little bit easier since you can set up things so the spreadsheet does all of the calculations for you automatically.

Your employees still need to sit down and write down the time and date of their punches, meaning they can easily forget to punch or make a mistake when recording (writing 8:15 when they punched in at 8:05, for example).

Also, using Excel or Google Sheets to track employee hours does not take into account overtime and paid time off — at least not by default. You could set things up so the spreadsheet calculates them in real-time, but that process requires a lot of technical knowledge to set up.

Time clock software

The most common way businesses track employee hours these days is with time clock software. 

These applications let employees clock in and out using a computer, tablet, or mobile phone. Their punch data is stored within the time clock application, which collates the clock in/out data into timesheets and calculates employee hours automatically.

With time clock software, entries are recorded in real-time, ensuring precise tracking of hours worked, breaks taken, and overtime accrued. This makes running payroll easier and less error-prone, and it ensures compliance with labor laws.

Time clock software also automatically integrates with payroll systems, simplifying the transfer of data and reducing the administrative burden. 

Additionally, these systems can generate detailed reports on employee attendance, hours worked, overtime, and patterns of tardiness or absenteeism.

Finally, many time clock apps come with features that keep employees accountable and reduce time theft. And most also include features that simplify other administrative tasks, such as calculating PTO accruals, tracking time-off requests, and creating employee schedules.

And if you do still need an on-site way for employees to clock in that mimics the old punch clocks, most time-tracking software can be used to create a clock-in clock-out kiosk. 

Some time clock providers sell physical devices that can be installed on-site. Others integrate with systems you already have on-site, such as the point-of-sale (POS) systems commonly used by restaurants and retail stores.

But the least expensive way to create a time clock kiosk is typically to download a time clock app to a computer or tablet device that’s kept in a central location.

Step 2: Set your system up to accommodate your needs

After you’ve selected the type of clock-in clock-out system that will work best for your business, you need to set the system up to accommodate all of your different needs.

For punch clock and paper timesheet systems, that usually means creating in-depth spreadsheets that account for many different variations of work hours. For example:

  • Do you pay employees for their breaks? If not, you’ll either need to have them clock out for their breaks and back in when returning to work, or you’ll need to figure out a way to automatically deduct break times from employees’ total hours.
  • Do your employees work overtime? If so, you’ll need a way to determine how many overtime hours employees worked. This can become more complicated if you have employees in different states with different overtime laws.
  • Do your employees work on client projects? If so, you’ll need a way to determine how many hours were spent working on specific projects so you can not only pay your employees but also invoice your clients properly.
  • Do your employees earn variable rates? This is common in industries like construction (prevailing wage jobs) and healthcare (overnight shifts). If your employees earn variable rates, you’ll need a way to identify which rates apply to which time entries.
  • Do your employees earn paid time off? If so, you’ll need a way to know when they’re taking PTO so you can add those hours to your spreadsheet (since employees won’t be clocking in or out while they’re off of work).

Remember earlier when we said manually tracking time with paper timesheets, punch clocks, and spreadsheets can get complicated quickly? This is exactly what we were referring to.

We used to use this process ourselves when running a previous business. We had more than 20 employees working in three different locations, and we found that we were spending more time on payroll tasks each week than we were on initiatives to grow our business.

As a result, we decided to build Buddy Punch — a time clock system that does all of the hard work for you so tracking time is effortless and running payroll takes only seconds. Here are some of the ways you can use it to simplify all of the different issues described above.

Automatic breaks

In Buddy Punch, you set up rules for how long employees need to work before a break triggers and how long the break is, and then our system automatically deducts breaks from timecards.

Overtime calculations

Add the rules your business follows for determining overtime, and Buddy Punch will automatically calculate employee overtime hours and rates for you.

Plus, if you want to avoid having to pay employees overtime, you can set up alerts that notify you when an employee is approaching overtime so you can alter their schedule.

Project tracking

Job codes in Buddy Punch make it easy to attach employee time to specific jobs or projects. To track employee time per job, create job codes and assign them to the employees who are working those jobs. 

When employees clock in, their time will either automatically be attached to the job code they’ve been assigned (if they’ve only been assigned one), or if more than one job code is assigned, they’re presented with a job code list to select from when clocking in.

Time off tracking

Set up PTO accrual rules in Buddy Punch based on pay periods, hours worked, or anniversaries. You can also customize accrual rules per employee. This can be helpful if you have different rules for salaried and hourly employees, or part-time versus full-time employees. 

Additionally, you can specify how carry-over/rollover PTO works (i.e., if hours are lost at the end of the year or carry-over into the next year).

On the employee side, your team can log into the employee self-service portal to request time off and view their PTO balance. Time off requests are sent to a manager or admin for approval. And approved paid time off is automatically added to employees’ timesheets.

Variable rates

You can set up different pay rates for different types of tasks, shifts, or jobs. For example, if employees get paid more for working a prevailing wage job, an overnight shift, or a holiday shift, you can set up those pay rates in Buddy Punch and assign them to different jobs or shifts.

This will automatically assign the correct pay rate to the hours an employee works so you can ensure they’ll be paid properly for their time.

Want to learn more about Buddy Punch? Start a free trial, watch a recorded demo, or request a personalized demo.

Step 3: Determine how you’ll get your time data to your payroll provider 

After you’ve figured out how you’ll track employees’ hours and account for things like breaks, overtime, paid time off, and variable rates, you’ll need to decide how you will get that data to your payroll provider. There are four primary ways to do this.

Type the data in manually

If you’re using a punch clock or paper timecards and aren’t doing your calculations in a spreadsheet, you generally need to type in all of your hours data manually. Your payroll provider should have a user interface that allows you to do this when it’s time to run payroll.

Upload an Excel or CSV file

If you have all of your data in a spreadsheet already, you can generally download the data as an XLS or CSV file that you can then upload to your payroll provider. The payroll provider’s system will parse the file and automatically add the correct values to their system for you.

Download a report from your time clock software

If you’re using a time card app to track employee time, it will have a reporting function that allows you to easily download a CSV file for the appropriate pay period. In Buddy Punch, reports can be downloaded in Excel, PDF, and CSV formats.

Once you have the file, you simply upload it to your payroll provider, and their system parses the file and automatically adds the correct values for you.

Send the data automatically

Another big benefit of using a time clock app is that most offer built-in integrations with popular payroll providers. For example, at Buddy Punch, we integrate with QuickBooks Online, QuickBooks Desktop, ADP, Gusto, Paychex, Paylocity, PayPlus, SurePayroll, and Workday.

With an integration, you can simply click a button to send your time data to your payroll provider. It takes only seconds and prevents a lot of the mistakes that can occur as a result of incorrect setup or formatting when uploading the data via a spreadsheet.

Step 4: Roll your new system out to your team

Once you’ve completed the three steps above, you’re finished with the administrative setup work and can move on to getting your team acclimated to and using your new system.

It’s helpful to communicate with your team early on that you’re planning to implement a new system so they’re not surprised when it happens. Let them know why you’re making the switch, and explain how the new system will benefit both them and the company overall.

You might also want to invite some of your team members into the process of choosing a system and testing any systems you’re considering. Gathering their feedback will make them feel valued and will reduce the number of complaints you get after the system is in place.

If you can’t invite people into the decision-making process, consider running a pilot with a small team before rolling it out company-wide. This will help you discover common issues that you can address in training once it’s time for the whole team to get onboarded to the new system.

When it’s time to roll it out company-wide, host a meeting where you introduce the new system and show employees how to use it. This will give you one place to answer questions and ensure that everyone is trained on the new system properly.

Finally, make sure people know where they should go if they need support. Designate a point of contact, create a repository where you house training documents and answers to frequently asked questions, and — if you’re using software — show them how to contact your provider’s support team with any technical issues.

By having a good plan in place for rolling out your new system, you can avoid headaches and get your team up and running with the new system quickly and seamlessly.

Choosing the right time clock for your business

If you’ve read through all of this and have decided that using a time clock app is the right option for your business, there are still a few more decisions to make. There are lots of different options on the market (here are some of our favorites), and each caters to slightly different types of businesses.

Here’s some additional guidance to help you make the right choice:

  • If you have only one location and employees that work 100% on-site, a time clock that offers kiosk functionality is usually ideal. 
  • For restaurants and retail shops, a time clock that integrates with your POS system prevents you from needing to purchase a separate tablet to use as a clock-in/out kiosk.
  • For businesses where security is a concern, look for a time clock kiosk that offers biometric identification and could double as a security device by unlocking doors.
  • For businesses with employees who work in different locations — like construction — a time clock app with GPS tracking is usually the best option. These allow employees to clock in and out from anywhere, and they also have location-tracking features that keep employees accountable.
  • For businesses that bill customers or clients for the work they do, you’ll want to use a time clock app that has project tracking features that allow you to track employee time toward projects so you can create accurate invoices.
  • For businesses that have remote knowledge workers, you might want to look for a time card app that also measures employee productivity so you can track time worked, as well as how much work was actually completed during that time.

In general, time clock apps can be used by businesses in any industry. The key is to find an app that has the features you need to keep employees accountable, streamline your administrative work, and reduce time theft and unnecessary labor costs.