Yes, You Have to Track Hours — Even If You Pay Piece Rate
I hear this question from contractors constantly: "If I'm paying my guys by the piece, why do I need to track their hours?" The answer is simple and non-negotiable. Federal law requires it. State laws require it. And if you skip it, you are setting yourself up for wage claims, audits, and penalties that will cost you far more than the few minutes it takes to track time.
When I was running roofing crews and paying per square, I did not track hours at first either. It felt pointless. I knew what each guy completed, I knew what I owed them, and hours seemed like extra paperwork for no reason. It was not until I learned about the legal requirements that I realized I had been exposing myself to serious liability the whole time.
Here is the full breakdown of why hour tracking is legally required for piece rate workers, what the specific requirements are, and how to do it without making it a burden on your crew.
The Federal Requirement: FLSA Section 516
The Fair Labor Standards Act does not care how you calculate pay. Hourly, salaried, piece rate, commission — the employer's obligation to keep accurate time records applies to all non-exempt employees. And nearly all construction workers are non-exempt.
Under FLSA recordkeeping requirements, employers must maintain the following for every non-exempt employee:
- Hours worked each day — not just total weekly hours, but daily records
- Total hours worked each workweek
- Total piece rate earnings for each workweek
- The regular rate of pay for each workweek (total earnings divided by total hours)
- Total overtime compensation for the workweek
- Total wages paid each pay period
Notice items 1 and 2. You need daily and weekly hour records. Pieces completed do not satisfy this requirement. You need actual time records showing when your workers started, when they stopped, and how many hours they put in.
The FLSA also requires you to keep these records for at least three years for payroll records and two years for time cards and schedules. Most employment attorneys will tell you to keep everything for at least four years, since some state statutes of limitation run that long.
Why Hours Matter Even When You Pay Per Piece
You might be thinking, "Okay, so I need the records. But why?" Here are the three concrete reasons hour tracking is not just a bureaucratic checkbox — it is the foundation of legal piece rate pay.
Reason 1: Minimum Wage Verification
Every piece rate worker must earn at least the applicable minimum wage for every hour worked. Not on average over the year. Not most weeks. Every single workweek.
Here is how the math works. Say your state minimum wage is $15.00 per hour and a worker earns $500 in piece rate pay during a week where he worked 40 hours.
$500 / 40 hours = $12.50 per hour
That is below the $15.00 minimum wage. You owe the worker an additional $2.50 per hour for all 40 hours — that is $100 in make-up pay. Without hour records, you would never know this worker fell below minimum wage, and you would never pay the make-up amount. That is a wage violation.
Use our Minimum Wage Calculator to check this math for your state.
Reason 2: Overtime Calculation
Piece rate workers are entitled to overtime pay for hours worked over 40 in a workweek (and over 8 in a day in states like California). But overtime on piece rate is calculated differently than hourly overtime. You need to know the total hours worked to find the regular rate, and then you apply the overtime premium.
Without accurate hour records, you cannot calculate overtime correctly. Period. And miscalculating overtime is one of the most common triggers for Department of Labor investigations. Our Overtime Calculator can help you verify the math once you have the hours tracked.
Reason 3: Defending Against Wage Claims
When a worker files a wage claim — and in construction, it happens more than you think — the burden of proof depends on your records. If you have complete, accurate time and pay records, you can show exactly what the worker earned, how many hours they worked, and that you paid them correctly.
If you do not have hour records, the burden shifts to you. The Department of Labor and courts will generally accept the employee's estimate of hours worked if the employer cannot produce records. An employee says they worked 55 hours a week for the last two years? Without your records to prove otherwise, you could be on the hook for all that back pay plus penalties.
I have seen contractors lose five-figure settlements over wage claims they would have won easily if they had kept time records. The records are your defense. Without them, you are fighting with your hands tied behind your back.
State Laws That Go Even Further
Federal law sets the floor. Many states set the bar higher. Here are some of the strictest state requirements for tracking hours on piece rate workers.
California
California is the strictest state for piece rate compliance. Under AB 1513, employers must separately compensate piece rate workers for rest and recovery periods and for "other nonproductive time." You need to track not just total hours, but productive time versus nonproductive time. California also requires daily overtime (over 8 hours in a day) and double time (over 12 hours), which makes accurate daily hour tracking essential.
Penalties for record-keeping violations in California start at $50 per employee per pay period for initial wage statement violations and $100 for subsequent violations under Labor Code 226. On top of that, PAGA allows employees to sue on behalf of the state with penalties of $100/$200 per pay period. For a 10-person crew paid weekly, combined penalties can add up quickly if you are not keeping proper records.
Use our California Piece Rate tool to check your compliance with these requirements.
Washington
Washington requires employers to provide detailed pay statements showing hours worked, piece rate earnings, and the rate of pay. The state also has specific requirements for agricultural piece rate workers that extend to construction in some cases.
New York
New York requires employers to provide a written wage notice at the time of hire that specifies the rate of pay, including piece rate details. Time records must be kept for at least six years — longer than the federal requirement.
Oregon and Colorado
Both states have daily overtime provisions that require daily hour tracking. Oregon requires overtime after 10 hours in a day for manufacturing workers. Colorado requires daily overtime after 12 hours for all non-exempt employees.
The takeaway: if you operate in any state with daily overtime rules, rest period pay requirements, or enhanced record-keeping obligations, hour tracking is not optional even at the most generous interpretation of the law. Check our State Minimum Wage tool for current rates and rules in your state.
What Happens If You Do Not Track Hours
Let me lay out the specific consequences, because "you might get in trouble" does not capture how bad this can get.
Department of Labor Investigation
The DOL can investigate based on a single employee complaint. When they show up — or more likely, send a demand letter — the first thing they ask for is time records. If you cannot produce them, the investigation expands. They will look at every employee, every pay period, and every potential violation. An investigation that started over one worker's complaint can turn into a company-wide audit.
Back Pay Awards
If the DOL finds you underpaid workers — and without hour records, they almost certainly will — you owe back pay for up to two years (three years for willful violations). The DOL calculates back pay using the employee's estimated hours when the employer has no records. Workers tend to estimate high.
Liquidated Damages
Under the FLSA, workers who were not paid minimum wage or proper overtime can recover liquidated damages equal to the unpaid wages. That doubles the back pay amount. So if you owe $20,000 in back wages, you now owe $40,000 plus the employee's attorney fees.
State Penalties
Many states stack their own penalties on top of federal liability. California's waiting time penalties alone can equal up to 30 days of the employee's daily pay rate per violation. New York imposes liquidated damages of 100% of underpayments. Some states allow treble damages.
Criminal Penalties
Willful violations of FLSA record-keeping requirements can result in fines up to $10,000 and, for repeat offenders, criminal prosecution. This is rare, but it happens. Telling a DOL investigator "I didn't know I had to track hours" is not a defense — it is evidence of willfulness if you have been in business long enough to know better.
The Easiest Way to Track Hours for Piece Rate Workers
Here is the good news: tracking hours for piece rate workers does not have to be complicated. You do not need a separate time clock system. You do not need paper timesheets. You just need a system that captures both pieces and hours in the same workflow.
Option 1: Integrated Tracking Software
The best approach is software that tracks piece rate production and hours simultaneously. When your crew logs what they completed, they also log when they started and stopped. One entry captures both data points.
Piece Work Pro was built exactly for this. Your crew logs their production — squares completed, linear feet installed, whatever the unit is — along with their hours for the day. The system automatically calculates their piece rate earnings, checks against minimum wage, computes overtime if applicable, and stores all the time records you need for compliance.
This eliminates the "two systems" problem where you are tracking pieces in one place and hours in another and trying to reconcile them at payroll time. That reconciliation step is where most errors and compliance gaps happen.
Option 2: Paired Systems
If you are not ready for integrated software, you can pair a time tracking app with your piece rate tracking method. Have your crew clock in and out using a mobile time tracking app, and separately log their piece counts. The challenge is making sure both records match up and that someone reconciles them before every payroll run.
This works, but it is more manual, more error-prone, and more likely to fall apart when things get busy. And in construction, things are always busy.
Option 3: Paper Timesheets (Not Recommended)
Technically, you can use paper timesheets alongside paper production logs. Legally, this satisfies the requirement as long as you keep the records organized and accessible. Practically, it is a nightmare. Paper gets lost, handwriting is illegible, and nobody wants to dig through filing cabinets during an audit.
If you are still on paper, read our comparison of Piece Work Pro vs. spreadsheets — the same problems apply, only worse.
What Good Hour Tracking Looks Like
For each piece rate worker, every workday, you should have a record that includes:
- Date
- Job site or project name
- Clock-in time
- Clock-out time
- Total hours worked (including break deductions if applicable)
- Productive hours (time spent producing pieces)
- Nonproductive hours (travel, setup, cleanup, meetings, waiting time)
- Pieces completed and applicable rate
- Total earnings for the day
At the end of the workweek, you need:
- Total hours worked for the week
- Total piece rate earnings for the week
- Regular rate (total earnings divided by total hours)
- Minimum wage check (regular rate versus applicable minimum wage)
- Overtime hours and overtime premium if applicable
- Make-up pay if the regular rate fell below minimum wage
- Total compensation for the week
This might sound like a lot, but with the right software, most of it is calculated automatically. Your crew's only job is logging their time and production. The system does the math.
Stop Treating Hour Tracking as Optional
I talk to contractors every week who treat hour tracking as optional for piece rate workers. They see it as bureaucracy that does not affect the bottom line. They are wrong. Hour tracking is what makes piece rate pay legal. It is what proves you paid minimum wage. It is what lets you calculate overtime correctly. And it is what protects you when a former employee decides to file a claim.
The time investment is minimal — a few minutes per worker per day. The cost of not doing it can be tens of thousands of dollars. That math is not hard.
If you are paying piece rate and not tracking hours, start today. Not next week, not next quarter, today. Read up on the full FLSA requirements for piece rate employers, check out the hidden risks of piece rate without tracking hours, and get a system in place that captures both data points every single day. Your future self will thank you the first time someone asks to see your records.