How to Audit Timesheets: A Step-by-Step Checklist
Quick Answer
To audit timesheets, check each employee's records for the pay period against their schedule and your policies: missing or duplicate punches, unusually long or short shifts, missed meal breaks, overtime, edits without approval and hours that don't match job or project records. Correct errors with a documented, approved edit that keeps the original entry, pay for all hours actually worked and keep time records for at least two years under federal law.
Small timesheet errors are easy to miss. A forgotten punch, a lunch break that was auto-deducted but not taken, a shift that was entered on the wrong day. One at a time, they don't look like much. Across a team and a year, they can add up to real money, unhappy employees and records that won't hold up if anyone asks questions.
A regular timesheet audit catches these errors before they become problems. This guide walks through what to check, the red flags to look for, how to fix errors the right way and a free checklist you can use every pay period.
Note: This is general information, not legal advice. State laws may add requirements beyond federal rules.
What Is a Timesheet Audit?
A timesheet audit is a review of employee time records to make sure they're complete, accurate and consistent with your policies and wage and hour rules. It can be a quick check every pay period, a deeper review every quarter or a one-time cleanup when you switch systems.
| Type | When | What it covers |
|---|---|---|
| Pay period review | Before every payroll | Missing punches, overtime, breaks, edits |
| Spot check | Monthly or quarterly | A sample of employees or weeks in more detail |
| Full audit | Yearly, or when something seems off | All records for a period, compared to schedules, jobs and policies |
Why Timesheet Audits Matter
- Accurate pay. Employees get paid for every hour they worked, no more and no less.
- Fewer wage disputes. Errors caught early don't turn into complaints or claims.
- Reliable labor costs. Your labor numbers are only as good as your time records. See labor cost percentage.
- Compliance. Federal law requires accurate records of hours worked for non-exempt employees.
- Early warning. Patterns like regular overtime, missed breaks or late punches show up in audits first.
What the Law Requires
The Department of Labor's recordkeeping rules under the Fair Labor Standards Act require employers to keep accurate records for non-exempt employees, including hours worked each workday and each workweek, regular pay rate, overtime earnings and pay dates. The law doesn't require a particular form or time clock. In the DOL's words, "any timekeeping plan is acceptable as long as it is complete and accurate."
Payroll records must be kept for at least three years, and records used to calculate wages, such as time cards, for at least two years. For employees on a fixed schedule, an employer may record the schedule and note when the employee worked it, but must record actual hours when they differ.
Non-exempt employees must also be paid for all hours actually worked, including work that wasn't requested but was "suffered or permitted." And overtime of at least time and a half is due for hours over 40 in a workweek, with some states adding daily overtime. See overtime laws by state.
Step-by-Step: How to Audit Timesheets
Step 1: Pick the Period and Gather Records
Pull time records, schedules and any job, project or work order records for the pay period. If you use a time clock system, export the punch report with edits shown. If you use paper or spreadsheet timesheets, collect all of them before you start.
Step 2: Check for Missing and Duplicate Punches
Look for shifts with a clock-in but no clock-out, a lunch out with no lunch in, or two punches seconds apart. Each one needs a correction based on evidence, not a guess. See the timesheet edit form.
Step 3: Compare Hours to the Schedule
Compare each person's actual hours to their scheduled hours. Small differences are normal. Large or repeated gaps need a closer look. See scheduled vs. actual hours.
Step 4: Review Breaks
Check that meal breaks were actually taken. Under federal guidance, bona fide meal periods, typically 30 minutes or more, generally don't need to be paid if the employee is completely relieved from duty, while short rest breaks count as hours worked. If your system automatically deducts a lunch, confirm employees really took it. Many states have their own meal and rest break rules. See meal and rest break laws by state.
Step 5: Check Overtime
Total each employee's hours for the workweek, not the pay period, and confirm overtime was calculated correctly. Watch for overtime that wasn't approved; it still must be paid, but it may point to a scheduling or policy issue.
Step 6: Review Edits
Every change to a time record should show who made it, when, the original value and the reason. Edits without a reason or approval are a red flag. Pay close attention to edits that reduce hours.
Step 7: Compare to Other Records
For field and project work, compare hours to job records, work orders or project time. A technician clocked in for eight hours with work orders covering only five is worth a conversation. A delivery logged at 6:30 PM by someone who clocked out at 5:00 PM means unpaid time.
Step 8: Correct, Document and Confirm
Fix errors with a documented edit, keep the original entry and get the employee's acknowledgment where possible. If you find underpaid time from a past period, pay it in the next check and note it.
Step 9: Look for Patterns
After correcting individual errors, step back. Are missed punches concentrated on one shift? Do breaks get skipped on busy days? Patterns tell you what to fix in your process.
Timesheet Red Flags
| Red flag | What it might mean |
|---|---|
| Missing punches | Forgot to clock, device issue or unclear process |
| Identical times every day | Hours written from memory or the schedule, not actual time |
| Round numbers only (8:00, 5:00) | Same as above, or heavy rounding |
| Very long shifts | Forgot to clock out, or real overtime that needs attention |
| Punches at odd locations | Clocking in away from the job site |
| Edits without reasons | Unclear process or possible record changes that need review |
| Hours reduced after the fact | Possible unpaid work; review carefully |
| Work logged outside clocked hours | Off-the-clock work that must be paid |
| One person clocking in for several | Possible buddy punching. See what is buddy punching |
A red flag isn't proof of a problem. Most have innocent explanations. They're simply the places to look first.
Free Timesheet Audit Checklist
| Check | Done? |
|---|---|
| All time records for the period collected | |
| Missing and duplicate punches corrected with documentation | |
| Actual hours compared to schedule | |
| Meal breaks confirmed as taken | |
| Rest breaks counted as paid time | |
| Overtime calculated by workweek | |
| All edits have a reason, date and approver | |
| Original entries kept for every edit | |
| Hours compared to job or project records | |
| No work logged outside clocked hours, or it's been added and paid | |
| Employees notified of corrections | |
| Past underpayments paid and documented | |
| Records saved for required retention period |
Print it, save it in your shared drive or build it into a spreadsheet next to your timesheet template.
How to Correct Timesheet Errors the Right Way
- Never erase the original. Keep the original entry next to the corrected one.
- Base corrections on evidence, such as work orders, schedules, door logs or the employee's statement.
- Write a clear reason for every edit.
- Get approval from someone other than the person who made the edit, where possible.
- Tell the employee, especially when the change reduces their hours.
- Pay what's owed promptly if the correction shows unpaid time.
Changing time records to remove hours employees actually worked can create serious wage claims. If you find off-the-clock work, the fix is to pay it and change the process that caused it, not to adjust the record.
How Often Should You Audit?
| Business size | Pay period review | Deeper audit |
|---|---|---|
| 1 to 10 employees | Every payroll, a few minutes | Once or twice a year |
| 11 to 50 employees | Every payroll, with exception reports | Quarterly spot checks |
| 50+ employees | Every payroll, by each manager | Quarterly, plus a yearly full audit |
The pay period review is the most important. Errors caught before payroll runs are far easier to fix than errors found months later.
Who Should Do the Audit?
In a small business, the owner or office manager usually reviews timesheets. As you grow, have managers review their own team's time first, since they know who worked when, and have a second person spot-check. Separating the person who edits time from the person who approves it helps prevent mistakes and protects everyone.
For a smoother approval routine, see timecard approval: how often to approve time cards.
Common Timesheet Audit Mistakes
- Auditing by pay period instead of workweek, which can hide overtime.
- Fixing errors without documentation.
- Assuming auto-deducted breaks were taken.
- Only looking at totals, not individual punches.
- Ignoring patterns after fixing individual errors.
- Waiting until year-end to look at anything.
Worked Example: A Two-Week Audit
A small landscaping company audits a two-week pay period for its crew of six. Here's what the review turns up:
| Finding | Fix |
|---|---|
| Two missing clock-outs on Tuesday | Corrected using the job completion times on the work orders, with reasons noted |
| Auto-deducted lunch on a day the crew worked through | Added 30 minutes back for three employees and paid it |
| One employee at 43 hours in week one, 37 in week two | Paid 3 hours of overtime for week one; the biweekly total of 80 didn't hide it |
| A Friday shift entered as Saturday | Moved to the correct day; no change in pay |
| An edit with no reason | Asked the manager, added the reason and approval |
The third finding is the one most often missed. Because the two-week total was exactly 80 hours, it would be easy to assume there was no overtime. Checking by workweek shows three hours of overtime owed.
Auditing Paper and Spreadsheet Timesheets
Paper and spreadsheet timesheets can be audited the same way, with a few extra checks:
- Signatures: confirm the employee and manager signed off.
- Handwriting changes: look for crossed-out or written-over times and make sure each has an initial and a reason.
- Formulas: check that totals are calculated correctly and that no formula was overwritten.
- Decimal conversions: 7 hours 45 minutes is 7.75 hours, not 7.45. See how to convert hours and minutes to decimal.
- Versions: make sure you're auditing the final version, not an earlier copy.
Spreadsheets are a great tool for many small teams. A little structure, such as locked formula cells and a column for edit reasons, makes them much easier to audit.
Talking to Employees About Audit Findings
Most audit findings are honest mistakes. Treat them that way:
"While reviewing timesheets, I noticed your lunch was deducted Tuesday, but your work order shows you were on the Lee job straight through. I've added the 30 minutes back, and it'll be on this check. If that happens again, just let me know the same day."
When the finding is a pattern, such as repeated missed punches or entries that don't match job records, have a private conversation, explain the expectation and follow up. Keep the focus on accurate records and fair pay.
Using Audit Findings to Improve Your Process
Every audit should end with one question: what would prevent these errors next time? If missed punches happen at the start of shifts, move the time clock closer to where work begins or turn on a reminder. If breaks get skipped on busy days, adjust staffing. If edits lack reasons, add a required reason field to your form. Small process fixes reduce the work of the next audit, and over a few pay periods, your reviews get faster and your records get cleaner.
Keep a short running list of what each audit found and what you changed. It becomes a useful record of how your timekeeping has improved, and it helps a new manager or office lead pick up the routine quickly.
Make Timesheet Audits Faster With Updoot
Updoot's employee time clock records every punch to the minute with GPS punch locations, so you can see when and where people clocked in. The payroll report shows regular hours, overtime and PTO for every employee each pay period and exports when you're ready, so your review starts from accurate, organized records instead of a stack of paper.
Sources
- U.S. DOL: Fact Sheet #21, Recordkeeping Requirements Under the FLSA
- U.S. DOL: Fact Sheet #22, Hours Worked Under the FLSA
- U.S. DOL: Overtime Pay