Time Sheets and Overtime: Keeping Pay Records Clean

Why time sheets are the start of every pay run

Every pay run begins with hours. Before anyone can be paid, someone has to know how many hours each worker worked in the pay period. That record is the time sheet. Without it, the pay is a guess.

A clean time sheet does two things. It shows the real hours, and it shows who approved them. When both are clear, the pay run is just math. The hours times the rate equals the gross pay. The withholdings come out. The take home pay goes to the worker.

When the time sheet is messy, the whole pay run gets messy too. Hours get missed. Overtime gets left off. A worker gets paid too much or too little. Then a correction has to run, and the books get harder to follow. The fix is to start with a clear time sheet every period.

Here is what a time sheet does for you.

• It shows the real hours each person worked.
• It shows when the work happened.
• It shows who approved the hours.
• It gives the pay run a clear starting point.

Dates and rules change. Confirm what your time sheet needs to show with your payroll provider, your CPA, or the state labor agency.

What a clean time sheet shows

A clean time sheet has a few parts that should all be there every time. When any part is missing, the record is weaker and the pay is harder to check.

The dates come first. The time sheet should show the start and end of the pay period. That way you know which days are included and which are not.

The hours come next. For each day in the period, the time sheet shows the hours the worker worked. Some shops use clock in and clock out times. Others use a total for the day. Either way, the hours for each day should be clear.

Breaks matter too. Some rules require breaks to be tracked or subtracted. A clean time sheet shows breaks so the paid hours are correct. Ask your payroll provider or the state labor agency what break rules apply to you.

Approval is the last part. Someone should look at the hours and say they are right. That person is often the owner or a manager. When the hours are approved, the pay run can move forward with confidence.

Here is what a clean time sheet shows.

• The start and end dates of the pay period.
• The hours worked each day.
• Any breaks that were taken.
• Who approved the hours.

Rules differ. Ask your payroll provider, your CPA, or the state labor agency what your time sheets need to include.

How overtime and corrections should be handled and noted

Overtime and corrections are the two things that most often make pay records messy. Both are normal. The key is to handle each one in a clear way and to note what happened.

Overtime is extra pay for extra hours. The rules for overtime differ by state and by the kind of work. What matters for your records is that overtime hours are shown on the time sheet, separate from regular hours, so the pay run can tell them apart. When regular hours and overtime hours are mixed together, the pay is hard to check and the books are hard to follow.

Corrections happen when a time sheet is wrong. A worker may have forgotten to clock in. A manager may have entered the wrong hours. When the error is found, it gets fixed. A clean record notes what was changed, when it was changed, and who changed it. That note stays with the pay record so anyone looking later can see what happened.

Here is how to keep overtime and corrections clean.

• Show overtime hours separate from regular hours.
• Note each correction with what changed and who changed it.
• Keep the note with the pay record.
• Do not erase the old hours. Show the fix.

Do not explain overtime law to yourself or your workers. Ask your payroll provider, your CPA, or the state labor agency how overtime works for your setup.

How hours turn into wages in your books

Once the time sheet is approved, the hours turn into wages. The hours times the rate gives the gross pay for each worker. Overtime hours use their own rate, which your payroll provider figures out based on the rules that apply to you.

In your books, the gross pay goes on the wages line. If you track wages by worker or by job, the gross pay can be split that way too. The withholdings come out and go into the liability accounts. The employer costs go on their own lines. The take home pay leaves the bank.

The time sheet is the proof behind the wages line. When someone asks why the wages went up one period, the time sheet shows the extra hours. When the wages look wrong, the time sheet is the first place to check. Your CPA decides the accounting method and we keep the books consistent with it.

Here is how the hours flow into the books.

• The approved time sheet gives the hours.
• Hours times the rate equals gross pay.
• Gross pay goes on the wages line.
• Withholdings and employer costs go to their own lines.

We are QuickBooks Online Accountants, or QBOA, and we work in QuickBooks Online and Xero. We keep the payroll lines in the same software your books live in.

Keeping records and who to ask about how long

Pay records are not something you use once and throw away. They are records you may need to show later, to a worker, to an agency, or to your CPA. That means you keep them, and you keep them where you can find them.

The time sheets, the pay records, and any correction notes should all stay together. When they are together, the story of each pay run is complete. Anyone looking later can see the hours, the approval, the overtime, and any fixes.

How long you keep these records is a rules question. The rules differ by state and by the kind of record. Ask your payroll provider, your CPA, or the state labor agency how long you need to keep pay records. Then keep them at least that long, in a safe place.

Here is what to keep together.

• The time sheets for each pay period.
• The pay records for each run.
• Any correction notes.
• Any approval marks.

Dates and rules change. Confirm how long to keep records with your payroll provider, your CPA, or the agency.

Made up example for teaching

A shop with two hourly workers and one late correction

A small shop has two hourly workers. The numbers below are made up and round so the math is easy to follow. They are not real rates or real rules. Confirm the real amounts with your payroll provider or your CPA.

The pay period is two weeks. Worker one worked eighty regular hours and five overtime hours. Worker two worked seventy regular hours and no overtime. The time sheets show the hours for each day, the breaks, and a manager approval mark.

The pay run uses the approved time sheets. The gross pay for each worker is the hours times the rate. The overtime hours use their own rate, which the payroll provider figures out. The withholdings come out. The take home pay goes to each worker.

Then a late correction comes in. Worker two points out that one day was missed on the time sheet. The manager checks and agrees. The time sheet is fixed, and a note is added that says what changed, when, and who approved the fix. A second pay record is created for the extra hours. The books show the wages line go up by the extra gross pay, and the take home pay leaves the bank.

The owner uses their own payroll provider to run the pay, take out the right amounts, send the pay checks, and send the filings. We keep the books. Each line lands where it belongs, and the close that month is just a sum.

This is a made up example for teaching. Your numbers and your setup are your own. Confirm the dates and rules that apply to you with your payroll provider, your CPA, or the agency.

Common questions

Why do time sheets matter for my books? Because the hours on the time sheet become the wages in your books. When the hours are clear, the wages are easy to check. When the hours are messy, the books are messy too.

How should I handle a correction on a time sheet? Note what changed, when it changed, and who approved the fix. Keep the note with the pay record. Do not erase the old hours. Show the fix.

Do you tell me the overtime rules? No. Overtime rules differ by state and by the kind of work. Ask your payroll provider, your CPA, or the state labor agency how overtime works for your setup.

Do you run the payroll? We offer monthly payroll with pay runs every pay period, pay checks, filings and a clean tie to your books. You can read more on our payroll page or reach us on our contact page.