Accurate time records help employers review the hours worked by tipped staff, but a timekeeping tool does not by itself calculate tips, establish tip-credit eligibility, or guarantee legal compliance. This guide focuses on practical recordkeeping and summarizes selected U.S. federal rules under the Fair Labor Standards Act (FLSA). State and local laws may provide greater protections, and employers should check the rules that apply where each employee works.
What should employers record?
Keep a complete, accurate record of each employee’s hours worked and wages. For tipped employees, employers claiming an FLSA tip credit have additional recordkeeping duties, including records of reported tips and hours worked in tipped and non-tipped occupations. The U.S. Department of Labor explains these duties in its Fact Sheet #15 on tipped employees.
A practical timekeeping process can help managers review start and finish times, breaks, schedule differences, and missed punches. If employees perform different duties or work at different rates, keep the information needed to determine which hours and pay rates apply. Do not assume a time clock records tip amounts, job duties, tip pools, or pay calculations unless the product documentation confirms those functions.
U.S. federal tip-credit rules to understand
Under the FLSA, an employer may claim a tip credit only if it meets the law’s requirements. The employer must inform tipped employees of the required tip-credit information before taking the credit. The Department of Labor says notice may be oral or written; the FLSA does not generally require a signed acknowledgment. If the employer does not provide the required information, it cannot take the federal tip credit. The employer must also ensure that direct wages and tips meet the applicable minimum wage for each workweek. State or local law may prohibit a tip credit or require a higher cash wage.
Federal rules on duties are more specific than a simple “80/20 rule.” When an employer takes a tip credit, the credit applies to time spent in a tipped occupation and certain directly supporting work, subject to limits. The Department of Labor’s rule treats directly supporting work as substantial if it exceeds 20 percent of the employee’s hours in the workweek or continues for more than 30 minutes. Other non-tipped work may not qualify for a tip credit. The details depend on the duties and applicable rules; employers should consult the DOL guidance and relevant state or local authority rather than assume that every block over 30 minutes has the same treatment. See the DOL’s tipped-employee guidance and tip regulations page.
For covered, non-exempt employees, federal overtime generally applies after 40 hours in a workweek. The regular rate calculation can involve tips, different pay rates, and other compensation, so it is not safe to calculate overtime by simply applying 1.5 to one job’s rate. Refer to the Department of Labor’s guidance or a qualified payroll professional for the employee’s specific situation.
Record retention: avoid a blanket three-year claim
Federal FLSA rules distinguish between record types. The Department of Labor says payroll records generally must be kept for at least three years, while records used to calculate wages—such as time cards, schedules, and records of additions or deductions—generally must be kept for two years. Other federal, state, local, tax, or industry rules may impose different requirements. Check the rule that applies to each record; do not treat every timekeeping document as subject to the same retention period. See Fact Sheet #21: FLSA Recordkeeping.
A practical process for tracking tipped staff hours
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Set a clear clock-in and clock-out routine. Explain how staff record time and how to report a missed punch or correction.
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Record actual work time. Review time entries against schedules and investigate discrepancies with the employee. A scheduled shift is not proof of the hours actually worked.
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Capture tips and duties through the appropriate process. Follow the employer’s established method for employee tip reports, tip pools, and any duty information needed for wage calculations. Do not assume these details flow automatically from a timekeeping or point-of-sale system.
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Review wages before payroll is prepared. Check applicable minimum-wage, tip-credit, overtime, and recordkeeping rules for the employee’s location. Clock records are inputs for payroll preparation; they do not themselves calculate or pay wages.
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Keep and correct records consistently. Document changes and their reasons under your organization’s process, and retain each record for the period required by the applicable law.
What ClockHQ supports
ClockHQ lets staff clock in and out in a browser using a workplace QR code and PIN; installing an app is not required. Managers can set standard weekly schedules and compare scheduled hours with actual clock records. Breaks can be clocked or configured as automatic, and staff can submit leave or early-finish requests for manager review. ClockHQ provides timesheet and payroll-preparation summaries or exports. It does not process payroll, and compatibility with every payroll provider or direct integrations should not be assumed.
ClockHQ’s confirmed features do not establish that it records tips, applies tip credits, classifies duties under U.S. federal rules, calculates tipped overtime, manages tip pools, or creates a compliance audit file. Employers should confirm the required workflow and use appropriate payroll or legal guidance for tipped-wage decisions.
Frequently asked questions
Does the FLSA require a signed tip-credit notice?
The Department of Labor says required tip-credit information must be provided before an employer takes a tip credit. The notice may be oral or written; a signed acknowledgment is not generally required by the federal rule. Keep records that demonstrate compliance with applicable law and company policy.
Does every non-tipped task lasting more than 30 minutes lose the tip credit?
No. The federal rule distinguishes directly supporting work from other non-tipped work. For directly supporting work, the substantial-work limit includes more than 20 percent of the workweek or a continuous period exceeding 30 minutes. The classification depends on the work performed and the applicable rule. Check current DOL guidance and state or local law.
Must all tipped-employee records be kept for three years?
No. Under the general FLSA recordkeeping guidance, payroll records are generally kept for at least three years, while wage-computation records such as time cards and schedules are generally kept for two years. Other laws may require different periods.
Can ClockHQ calculate tips or tip-credit wages?
Those functions have not been verified as ClockHQ features. ClockHQ provides time records and payroll-preparation summaries or exports; it does not process payroll. Confirm any tip, wage, or payroll calculation separately.
Where can U.S. employers check the federal rules?
Start with the U.S. Department of Labor’s Fact Sheet #15, Fact Sheet #21, and tip regulations page. State and local requirements may be more protective, so check the rules for the employee’s location.