“Do I Really Need Timesheets if I Trust My Employees?”

I trust my employees. Do I really need formal timesheets?

I hear this one all the time. Nobody ever likes my answer.

If an employee is nonexempt and subject to federal, state, or local hours-recording requirements, the employer needs accurate records sufficient to show the hours the employee actually worked. Period. I wish I had better news.

That does not necessarily mean you need to install a punch clock on the wall. Federal law, for example, does not require one particular timekeeping method. But the employer does need a reliable record of actual hours worked.

The interesting problem, to me, is why good employers often talk themselves out of keeping those records in the first place.

I’ve worked with organizations in overtime disputes that started with very ordinary decisions. Usually, the leader hired someone they trusted personally. Formal timekeeping felt unnatural and unnecessarily cumbersome between people who thought of the relationship as more than transactional.

Years later, the relationship changed, and the organizations were defending multi-state overtime claims. The missing records were a MASSIVE problem.

The lesson I took from those cases is simple: trust has its place in a relationship. A risk area that can expose you to back wages, liquidated damages, and attorneys’ fees is not that place.

Informality feels safe when the relationship feels comfortable

Small organizations rarely skip systems because someone sat down and affirmatively decided accurate records were a dumb idea.

It happens because “we know each other.” “We’re all friends here.”

The leader knows roughly when the employee works. The employee is performing well. Schedules move around. Staffing changes. Nobody wants to make a trusted person feel watched or micromanaged. Detailed time tracking feels absurdly corporate for a team of six, seven, eight people. “Just put down eight hours” is virtually frictionless; “if you worked eight hours and fifteen minutes, I need that logged precisely” is exacting.

I don’t use memes in my blog posts because I don’t feel like testing the outer bounds of fair use, but imagine Admiral Ackbar here:

IT’S A TRAP!

Goodwill can make a working relationship easier in so many ways. It cannot reconstruct years of hours worked after memories fade.

Accurate timekeeping does not require surveillance

Keeping “real” time isn’t as difficult as you may be thinking. Federal law does not require one particular timekeeping method for covered nonexempt employees. Employers can use a time clock, an employee-entered system, or another method, as long as the required records are complete and accurate.

For most covered nonexempt employees, the federal rule requires the employer to record the hours worked each workday and the total hours worked each workweek. The federal rule does not generally require a record of every start and stop time. Federal law also permits a simplified exception-reporting approach for certain employees who normally work a fixed schedule.

That leaves room, in many jurisdictions, to design something proportionate and workable for your team. A team that already uses almost any payroll software may need nothing more elaborate than using the tool it already has consistently.

The goal is merely an accurate record.

What changes in Maryland, DC, and Virginia?

Unfortunately, the analysis can’t always stop at the federal rule.

Consider the following. For employees covered by Maryland’s wage and hour laws, Maryland requires employers to keep records of the hours each employee works each day and each workweek. D.C. is more stringent: for employees covered by its time-recording requirement, employers must keep the precise times worked each day and each workweek. Virginia, by contrast, does not impose a generally applicable state rule requiring—for example—precise times worked for ordinary adult employees. Many states mirror federal requirements, but checking the federal law isn’t enough.

“We have a system” and “our system complies where our employees actually work” are two different questions. You do need to review the rules where your employees perform their jobs.

Time records also tell you something about the job

There are operational reasons to care about timekeeping even before a legal risk shows itself.

If an employee regularly works more hours than the job was designed to require, you want to know that for your budget, your workload distribution, and your performance assessments.

Maybe an employee’s workload has grown. Maybe one process is consuming far more time than anyone realized. Maybe a flexible arrangement works beautifully and gives you a model you can use elsewhere. You can’t tell any of those things from a payroll record built on everyone’s best guess.

Accurate time records are management information.

Common questions about employee timekeeping

Do hourly employees have to punch a time clock?

Probably not. Federal law does not require a punch clock or a particular timekeeping tool. Maryland, DC, and Virginia do not require time clocks either; accurate timekeeping in payroll software typically suffices. The employer does need complete and accurate records for covered nonexempt employees. State and local record-keeping requirements can be specific, so be sure to consult them.

What if the employee has a flexible schedule?

Flexibility and accurate timekeeping can coexist. Neither federal law nor the relevant laws in Maryland, DC, or Virginia require employees to work the same hours every day.

Check the law in every jurisdiction where the employee performs work. Remember, by way of example: D.C. requires records of precise times worked for employees covered by its rule. So “put in the same eight hours every day” is not always a good idea if it’s not true, even if it’s easier and doesn’t affect the amount of the next paycheck.

What if the employee sometimes forgets to log hours?

Treat missing records as something to fix rather than a reason to keep guessing or letting things slide.

Your process—whatever it is—should make corrections easy and repeated failures visible. Accurate timekeeping can be an ordinary job expectation, and an employer may require employees to follow a reasonable reporting and correction process. In other words, poor timekeeping can be treated as poor performance. However, at all times, the employer remains legally responsible for maintaining the records the law requires.

Does every employee need a timesheet?

Not necessarily, and “timesheet” is really shorthand for the larger record-keeping question.

Federal law imposes different record-keeping requirements depending on an employee’s status, and employers generally need more detailed hours-worked records for nonexempt employees. States and localities impose their own requirements as well, as do public and private funders.

Classification and applicable federal, state, and local law matter, as do your grants and contracts.

As a best practice, it often makes sense to keep exact time for all non-exempt employees, at a minimum.

What if an employee thinks exact timekeeping means I don’t trust them?

This one’s simple: explain what the system is for and show them how accurate records protect THEM (i.e., records make sure they get paid fairly for every hour) as much as they protect you.

You can trust an employee’s character and still keep employment records. In a healthy organization, the process should be routine and fairly applied such that nobody experiences it as invasive.

The records ultimately protect the relationship. Neither party has to rely entirely on memory years later or argue about whether one person was taking advantage of the other.

The employment relationships that feel safest over time are often a little more structured than not.

The bigger question: are your relationships overriding your systems?

If you recognize your organization in this post, the timesheet may be one example of a broader pattern: a relationship is doing work that should belong to a system. This is a breeding ground for resentment and inequitable treatment that can ultimately create risk.

A timesheet is not going to create a sprawling bureaucracy, I promise. You need enough structure that records are clear when trust is strained, someone leaves, or the facts are called into question.

It happens. I would know.

InTriplicate helps small organizations set up right-sized HR and people operations systems that fit the team they actually have. Apply for a fit call to see if we can build something right for you.

Lauren Agresti is the founder of InTriplicate, a DC metro area HR and people operations consultancy.

Sources

U.S. Department of Labor, Wage and Hour Division, Fact Sheet #21: Recordkeeping Requirements under the Fair Labor Standards Act

29 U.S.C. §§ 211(c), 216(b)

29 C.F.R. §§ 516.1–516.3

Md. Code Ann., Labor & Employment §§ 3-403, 3-424

Maryland Department of Labor, Recordkeeping: An Employer’s Responsibility

D.C. Code § 32-1008

Va. Code Ann. § 40.1-29

Virginia Department of Labor and Industry, Payment of Wage / Virginia Labor Laws guidance

You Audit the Books Every Year. You’ve Never Audited the Risk Behind So Many Nonprofit Claims.

Each year, your board approves the financial audit without question. It’s already in the budget, the finance committee expects it, and a $1 million organization will spend $5,000 to $15,000 on it without hesitation.

Meanwhile, one of the most significant sources of nonprofit management liability often gets far less scrutiny. Employment practices claims consistently rank among the most common and costly actions nonprofits face, yet many organizations have never subjected their people infrastructure to anything resembling an audit.

The numbers.

I spent nearly a decade as a litigator before I started building workforce systems instead of fighting over their absence or neglect. Allow me to show you what the data says, and then tell you what I saw from counsel’s chair.

• Nonprofits experience management liability claims at higher rates than similarly sized for-profit organizations. One widely cited, albeit older, Towers Watson (now Willis Towers Watson) survey found about 63% of nonprofits reported at least one D&O claim over ten years.

• Employment practices claims, including wrongful termination, discrimination, harassment, retaliation, and wage-and-hour disputes, consistently rank among the leading sources of nonprofit management liability claims. The Nonprofit Risk Management Center describes employment suits as both common and costly, a finding echoed by major nonprofit insurers.

• “Routine” employment conflicts can become expensive. Employers often spend tens of thousands of dollars defending discrimination allegations before any judgment or settlement is reached, and litigation costs can quickly exceed the value of the underlying dispute. For an organization running on grant cycles, that can cost an entire program.

• Gallagher’s 2025 Nonprofit D&O Management Liability Report states that employment practices claims “continue to be a lead loss in the nonprofit sector,” and that carriers are seeing “a high frequency of wrongful termination claims for organizations that lack a strong HR infrastructure with dedicated resources.” The insurance industry has identified missing HR infrastructure by name as a significant driver of nonprofit claim frequency. The same report warns that federal funding disruptions are forcing layoffs across the sector, which it expects to push employment liability higher still, and notes that wage-and-hour violations are often not covered by insurance at all. Its prescription includes “adequate timekeeping and proper written documentation.”

• The wider enforcement climate points in the same direction. The EEOC received 88,531 discrimination charges in fiscal year 2024 and recovered $700 million for workers, with retaliation cited in nearly half of all charges. Employment disputes are not confined to large companies. The EEOC has historically said that about 50% of charges are filed against small and midsized employers, with the most common target being organizations with 15 to 100 employees.

So why are nonprofits especially vulnerable? The answer is structural. I tend to see three forces show up again and again. One of them starts with funders.

1. The starvation cycle: you were rewarded for skipping this.

In 2009, the Stanford Social Innovation Review named something every ED already knew in their bones: the nonprofit starvation cycle. Funders hold unrealistic expectations about the cost of running an organization. Nonprofits, competing for those funders, suppress and underreport overhead. The reported numbers then confirm the funders’ expectations, and the ratchet tightens. The researchers found organizations running on broken systems, untrained staff, and, in one especially striking case, office furniture so far gone the movers refused to touch it.

HR infrastructure is overhead: handbooks, comp structures, classification reviews, personnel files, manager training. Every dollar spent there is a dollar off the program-expense ratio that watchdogs score you on.

The problem got bad enough that in 2013, the CEOs of GuideStar, Charity Navigator, and BBB Wise Giving Alliance, the watchdogs themselves, published an open letter to the donors of America declaring the overhead ratio a poor measure of nonprofit performance and naming the “Overhead Myth” as a problem they helped create. Overhead, they wrote, includes “important investments charities make to improve their work: investments in training, planning, evaluation, and internal systems.”

The letter was right. It was also thirteen years ago, and the sector's HR landscape is still being dictated by the ratio police. Employment claims are one predictable consequence of long-term underinvestment in people infrastructure.

2. Mission attachment can make disputes hotter.

Employment disputes are driven by a complex web of factors. They’re about people.

People take nonprofit jobs, often at below-market pay, because they believe in the work. That’s the sector’s superpower. It can also raise the emotional stakes when something goes wrong. A termination, a denied accommodation, or a promotion that went sideways may be experienced as a personal betrayal as much as a business decision.

Betrayed people call lawyers. And the “we’re family here” culture that made the workplace warm and gave it grit is often the same culture that skipped the documentation, applied discipline inconsistently, and never wrote down a rationale for the last three personnel decisions.

In active litigation, those facts mattered. A record full of positive reviews, undocumented concerns, shifting explanations, or inconsistent treatment can make an otherwise sound employment decision much harder to defend.

Interpersonal trust is a noble instinct. It gets dangerous when it becomes load-bearing.

3. Volunteer boards with professional exposure.

Nonprofit boards are staffed by generous volunteers who are often asked to oversee employment matters without deep employment or HR expertise. A for-profit of the same size may have a professional management layer that absorbs more of those decisions.

Volunteer board governance can complicate employment decisions and create additional management liability exposure, especially when a board operates at one of two extremes: board members become directly involved in personnel matters, or they exercise too little oversight to catch problems before they grow.

What this means for your next board meeting.

This is not an argument against the financial audit. You absolutely need it to be taken seriously in the sector, and funders often require it.

It is an argument for bringing some of that same discipline to employment practices before a dispute forces the review for you.

I run a fixed-fee People Infrastructure Audit for exactly this reason. It applies that rigor to classification, internal policies, compensation, performance management, and personnel files.

If your organization has 5–50 staff members and you’ve been meaning to look under this particular hood, see if we’re a fit.

Lauren Agresti is the founder of InTriplicate, a DC metro area HR and people operations consultancy.

Sources

ADP, Understanding the Benefits of Employment Practices Liability Insurance (EPLI)

Gallagher, 2025 Nonprofit D&O Management Liability Report

Gregory & Howard, The Nonprofit Starvation Cycle, Stanford Social Innovation Review (2009)

Hiscox, Employee Charge Trends Across the United States

National Council of Nonprofits, Independent Audits

Nonprofit Risk Management Center, Employment Practices Liability resources

Risk Strategies, 2025 Nonprofit Insurance Market Outlook

The Hartford, Employment Practices Liability resources

The Overhead Myth letter, GuideStar, Charity Navigator & BBB Wise Giving Alliance (2013)

Towers Watson Directors & Officers Liability Survey, via The D&O Diary

U.S. Equal Employment Opportunity Commission, FY2024 Enforcement and Litigation Statistics

WTW, Employment Practices Liability: 2024 Year in Review