Time Tracking Compliance Audits

Overview

Time tracking compliance audits are systematic reviews of time records to ensure accuracy, legal compliance, and proper documentation for regulatory requirements, client billing, and internal controls.

What to Audit

Recordkeeping

• Complete time records for all employees
• Required retention period (3 years FLSA)
• Proper overtime calculations
• Break and meal period tracking
• PTO accrual and usage documentation

Accuracy

• Time entries match actual work performed
• Proper rounding practices
• No systematic errors favoring employer
• Consistent timekeeping policies
• Audit trails for all edits

Compliance

• FLSA overtime requirements
• State-specific labor laws
• Industry regulations (DCAA for government contractors)
• Union contract terms
• Client contract requirements

Audit Frequency

• Internal audits: Quarterly or semi-annually
• Spot checks: Monthly random sampling
• Pre-payroll: Every pay period
• External audits: Annually or as required

Red Flags

• Excessive manual adjustments
• Patterns of late time submissions
• Employees consistently at exactly 40 hours
• Missing or incomplete records
• Unauthorized overtime
• Improper exempt classifications

Best Practices

1. Document everything: Policies, procedures, approvals
2. Maintain audit trails: Track all changes
3. Regular training: Ensure proper procedures
4. Automated controls: Reduce manual errors
5. Spot check regularly: Don't wait for annual audit
6. Fix issues promptly: Correct errors immediately

Documentation Required

• Time tracking policies
• Employee classifications (exempt/non-exempt)
• Approved time entries
• Overtime authorizations
• Correction logs
• Audit reports