Time and attendance for small business owners

Your first employee checklist

1. Get an Employer Identification Number from the IRS if you do not have one.
2. Register with your state for unemployment insurance and state income tax withholding where it applies.
3. Get workers’ compensation insurance; it is required in nearly every state once you have employees.
4. Have the new hire complete Form I-9 by their first day and inspect documents within three business days; see our Form I-9 guide.
5. Collect Form W-4 and the state withholding form.
6. Report the new hire to your state’s new hire registry, generally within 20 days of hire under federal law.
7. Display required federal and state labor law posters, including digitally for remote staff.
8. Choose how you will record hours before the first shift.

See also legal requirements for starting a small business.

Employee or contractor?

Calling someone a contractor does not make them one. Under federal wage law, the question is whether the worker is economically dependent on your business or is truly in business for themselves, looking at factors such as control over the work, opportunity for profit or loss, investment and permanence. Several states, including California, Massachusetts and New Jersey, use a stricter ABC test. A part-time cashier who works your schedule in your store is an employee, whatever the paperwork says. Misclassification can mean back wages, overtime, taxes and penalties, so ask an accountant or attorney when in doubt.

The rules that apply even to tiny businesses

• Federal minimum wage and overtime generally apply to employees of businesses with $500,000 or more in annual sales, and to many employees of smaller businesses who engage in interstate commerce, such as handling credit card payments or out-of-state orders. Most small employers should assume they are covered.
• Overtime at one and a half times the regular rate after 40 hours in a workweek, plus daily overtime in some states; see FLSA overtime rules.
• State and city minimum wages, often higher than the federal rate.
• Meal and rest break laws in many states; see break laws by state.
• Paid sick leave laws in many states and cities, some of which apply from the first employee; see paid sick leave laws.
• Record keeping: at least three years for payroll records and two years for time cards under federal rules.

Choosing how to record hours

Our guides on setting up a time clock and what a time clock costs go deeper.

Paying yourself vs. paying staff

Owners often forget that their own long hours are not a model for employees. An owner of an LLC or sole proprietorship is not an employee for wage and hour purposes, but the people they hire are. An eager employee who stays late to help, takes calls at night or comes in early to set up is working, and those hours count toward overtime. The best habit is to decide what work you need, schedule it and pay for it, instead of discovering unpaid time in a wage claim later. Our HR for small business guide covers the basics.

How EZTime fits

Employees clock in with the mobile app, web, a kiosk tablet or NFC, with optional GPS and geofencing for field work. You build schedules, let staff request time off and swaps from their phone, and get labor rule alerts before someone misses a break or hits overtime. Digital forms with e-signatures collect onboarding paperwork, expense management handles receipts, tasks keep opening and closing routines on track and reports export to PDF and Excel for your accountant or payroll service. EZTime does not process payroll or file taxes.

An example with numbers

The owner of a small bakery has nine employees and has been adding up handwritten timesheets every other Sunday, about three hours each time. Twice in a year, an employee disputed a paycheck and there was no record of when they had actually clocked in. After moving to a kiosk tablet by the back door and a simple schedule template, the owner approves hours in about 20 minutes per pay period, sees that weekend overtime is caused by one person covering every Sunday, and spreads those shifts across two part-timers.

The bakery and numbers are fictional.

A weekly 15-minute routine

1. Review the coming week’s schedule against expected busy times.
2. Approve time off requests and swaps.
3. Check last week’s hours for missed punches and fix them with a note.
4. Look at total hours and overtime against sales.
5. Send one short update to the team about the week ahead.

Our time audit guide helps you find where your own hours go.

When to get help

Owners can handle most time and attendance on their own, but some moments call for an expert: your first employee in a new state, a wage complaint or a demand letter, a decision to treat a role as exempt, a large change to pay structure and a Department of Labor or state agency inquiry. An hour with an employment attorney or a payroll professional at those moments costs far less than fixing a mistake later.

Mistakes to avoid

• Paying hourly staff a flat salary and assuming that removes overtime.
• Treating regular part-time staff as contractors.
• Letting employees work through breaks to finish early.
• Keeping no record of actual start and end times.

Frequently asked questions

Related pages