How to Create an Employee Clock-In Clock-Out System

This is a chapter in our ultimate guide to clocking in and out for employers. To continue learning after you finish this post, use the links on the left (desktop) or bottom (tablet/mobile) to navigate to the other chapters.

Creating a clock-in clock-out system for your employees requires multiple steps:

• Choosing the system you’ll use for clocking in and out.
• Establishing the policies you’ll use for tracking time.
• Setting up your system to accommodate those policies.
• Determining how you’ll get your time data to your payroll provider.
• Finalizing your clocking in and out policy.
• Rolling out the new process to your team.

In this chapter, we’ll walk you through all of these steps in detail so you can choose the system that’s right for your team and get your new process up and running as quickly and painlessly as possible.

The 4 different types of employee clock-in systems

The first step in creating a clock-in clock-out system is to choose which type of system you want to use to track employees’ hours. Each type of system will work for tracking hours, but each has different pros and cons you should consider in order to find the right option for your business.

1. 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.

Pros

The big advantage of using a mechanical punch clock is that it’s a low-cost option. You can get the machine pictured above 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).

If you’re looking to track time on a low budget, this can be a big advantage over using more sophisticated systems like time clock apps that charge a monthly subscription fee.

Cons

We used a mechanical punch clock when tracking time for over 20 employees across three locations in our previous business. And at first, we were happy with its results.

We would have our employees punch in and out using a mechanical clock. Then, before each pay period, we would sit down and review all timecards one by one, calculating all the time worked using a free online calculator. We’d take the information and use it to run payroll for all of our employees.

However, we quickly started running into problems:

• 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. Plus, 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 your labor costs.

2. 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.

Pros

The biggest upside of using paper timesheets is that they’re simple and intuitive. You won’t have to train anyone on how to use the system; it’s self-explanatory.

Additionally, paper timesheets are an even lower-cost option than a mechanical punch clock because all you have to pay for is low-cost printer paper and ink.

Finally, paper timesheets eliminate one of the big issues with mechanical punch clocks: employees inserting the card wrong so the clock prints on the same spot twice, making the data illegible.

Cons

Despite their simplicity, paper timesheets come with many of the same problems as mechanical punch clocks:

• Calculating work hours is still a time-consuming process that requires extreme attention to detail and is prone to errors.
• Pieces of paper are easy to misplace, and when that happens, you’ll have no record of what hours employees worked.
• Time theft is even simpler with this method: employees can simply write down whatever times they want to get paid for.

3. Spreadsheet software

Another way to track employee hours is with an Excel or Google Sheets spreadsheet. If your employees are more tech-savvy and have access to computers, you could have them enter their hours into a spreadsheet instead of writing or printing clock-in and out times on paper.

Pros

Spreadsheets eliminate some of the risk of lost data that comes with using physical papers for tracking time.

It’s hard to lose an electronic file these days since most systems automatically back your files up in the cloud. Most also keep a history of changes to the file, so if someone accidentally overwrites a field, you can go back and see what it was before the change.

Spreadsheets also let you skip one step of the payroll process: instead of having to manually transfer all data from paper timesheets to your computer, you can simply send the finalized spreadsheet to your payroll provider.

Additionally, when using a spreadsheet, the process of calculating regular and overtime hours does get a little bit easier since you can set the spreadsheet up to do all that math for you.

Cons

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 the time (e.g., writing 8:15 instead of 8:05). It’s also easy with this method for employees to lie about the hours they worked.

And while the auto-calculation function of a spreadsheet can definitely make life easier, it’s prone to error. You can still enter information incorrectly, which will make your calculations wrong, and it’s really easy to unintentionally make a change to your spreadsheet that messes up all of your calculations without you even realizing it.

4. Time clock apps

The most common way businesses track employee hours these days is with time clock apps. These applications let employees clock in and out using a computer, tablet, mobile phone, or kiosk (a physical clock-in clock-out station that’s similar to a mechanical punch clock but stores the data digitally).

Pros

• All clock in/out data is collated into timesheets, and employee regular and overtime hours are calculated automatically, eliminating payroll errors.
• Punch times are recorded in real-time, ensuring precise tracking of hours worked, breaks taken, and overtime accrued.
• Most time clock apps offer integrations with popular payroll providers, simplifying the transfer of data between the two systems and reducing the time it takes to run payroll.
• These systems can generate detailed reports on employee attendance, hours worked, overtime, and patterns of tardiness or absenteeism.
• Many time clock apps come with features that keep employees accountable and reduce time theft, such as facial recognition, GPS tracking, and geofencing. 
• Most include features that simplify other administrative tasks, such as automatically calculating PTO accruals, tracking time-off requests, and creating employee schedules.
• If you do still need an on-site way for employees to clock in that mimics the old punch clocks, most time clock apps can be used to create a clock-in clock-out kiosk. Some providers sell physical devices, some integrate with point-of-sale (POS) systems, and most can be downloaded onto an iOS or Android tablet.

Cons

The only downside of using a time clock app is the cost. While there are some time clock apps that offer free plans, those are typically very limited in functionality. On average, the cost of using a time clock app ranges from $3 to $15 per employee per month.

Determining which clock-in system is right for your business

Hopefully, our descriptions and the pros and cons lists above helped you get closer to determining which clock-in system is right for your business. However, if you’re still on the fence and need some more help deciding, here are some additional things to consider.

In general, time clock apps are the best option. They’re the most accurate and least time-consuming, and they offer the most advanced features of all of the different options. If you can afford the cost, a subscription-based time clock app should be your number-one pick.

If you can’t afford the cost of a subscription-based time clock app, look into the free options. These will not have as many features as the paid options, but if you only have very basic time-tracking needs or a small team, they’ll probably do everything you need them to.

If you’re on a tight budget and the free time clocks won’t do what you need them to do, opt for one of the more manual time-tracking options:

• Spreadsheets are the best of the three manual options because of their ability to calculate hours for you automatically, but they’re only better than the other options if you can have your employees enter their hours into the spreadsheet themselves.
• Mechanical punch clocks are better than paper timesheets because they prevent employees from falsifying their hours, but they do come with the added costs of buying the machine, timecards, and ink.
• Paper timesheets offer the fewest benefits but are the lowest-cost option. If you really can’t afford to spend anything on time tracking, it’s the right option for you.

How to create a clock-in clock-out system at work

When you’re ready to get your new clock-in clock-out system up and running, follow these steps to make sure you have everything in place to make your new system successful.

Step 1: Choose the system you’ll use for tracking time

If the information above helped you pick the right system for your team, you’re already done with this step! If not, spend some more time reviewing those details. The system you’ll use will impact what you’ll need to do in the following steps, so you won’t be able to move forward without making that decision.

Step 2: Start writing your clocking in and out policy

You won’t be able to fully finish this document at this stage of the process, but there are some decisions you need to make upfront to ensure you set your new system up to accommodate the policies you’ll want employees to follow.

Below are some things you’ll need to consider, particularly if you’re using manual methods of timekeeping like spreadsheets, manual punch clocks, or paper timesheets. Most time clock apps have features built in that handle these issues for you automatically.

• Do you pay employees for their breaks? If not, you’ll need to add fields for break times to your timesheet templates.
• Do your employees work overtime? If so, you’ll need a way to determine how many overtime hours employees worked.
• 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 invoice your clients properly. If your employees work on lots of projects at once, you’ll need a lot more fields on your timesheet templates.
• Do your employees earn variable rates? This is common in industries like construction (prevailing wage jobs) and healthcare (less desirable shifts). You’ll need to determine how you will identify which pay 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 timesheets (since employees won’t be clocking in or out while they’re off of work).

Defining these policies upfront helps you ensure that you set up your system to accommodate your policies before you roll the new system out to your team.

Step 3: Set your system up to accommodate your policies

This just means adapting whatever system you’ve chosen to the policies you established in the last step.

If you’re using a time clock app, this might mean entering your employees into the system, setting up project codes for your different clients, entering pay rates, connecting variable pay rates to specific projects, and enabling or disabling features you do/don’t want to use.

If you’re using a manual time-tracking system, this might mean creating timesheet templates that accommodate all of the different ways you need to track time. You might need to add additional fields for breaks, overtime hours, projects, paid time off, and pay rates.

Step 4: 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 a few options for how you can 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 clock app, it will have a reporting function that allows you to easily download a CSV file for the appropriate pay period. Just download that report and upload it to your payroll provider. Their system will parse the file and automatically add the correct values for you.

Send the data automatically

Most time clock apps offer built-in integrations with popular payroll providers. 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.

Choose a time clock app with built-in payroll

By far, the easiest way to connect your time data to payroll is to choose a time clock app that also offers payroll services, like Buddy Punch. With Buddy Punch, you can track employees’ hours easily and then use that data to run payroll in seconds. We take care of all employee and tax payments, deductions, etc. for you.

Step 5: Finalize your clocking in and out policy

Once you have your clocking in and out system fully set up, you can go back to your clocking in and out policy and finalize it with the details you didn’t have previously. This time, you’ll want to make sure to add details like what system you’re using and how employees can access it.

To learn more, check out our chapter on “How to Create a Clocking In and Out Policy.”

Step 6: Roll your new system out to your team

Once you’ve completed all of the 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 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.

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What you’ve just read is only a single chapter in an entire guide to clocking in and out for employers. If you want more tips, use the links on the left (desktop) or bottom (tablet/mobile) to navigate to the other chapters and continue learning everything you need to know to set up an effective time-tracking system for your business.