Last updated: September 23, 2026
Most time tracking payroll errors don’t look like errors. They look like a normal timesheet. The overpayment, or the unpaid time that turns into a wage claim later, is hiding in how the hours got recorded.
Payroll can only be as accurate as the hours you feed it. So this post skips the software shopping list and goes straight to the six mistakes we see most, what each one costs, and how to fix it. Every rule comes from the U.S. Department of Labor, the Illinois Department of Labor, or Wisconsin’s Department of Workforce Development.
The short version
Time tracking goes wrong in two directions. Some mistakes pay for hours nobody worked. Others skip hours people did work, and those turn into back pay.
- Rounding is legal only if it evens out over time. Rounding that always favors you is not.
- Automatic lunch deductions are risky when people work through lunch.
- In Illinois, fingerprint and face-scan time clocks require written consent first under BIPA.
What Are the Most Common Time Tracking Payroll Errors?
Here’s the short answer. These six time tracking payroll errors cause most of the trouble we see:
- Buddy punching: one employee clocks in for another.
- One-sided rounding: punches always round in the employer’s favor.
- Automatic meal deductions: lunch gets deducted even when employees work through it.
- Off-the-clock work: tasks done before clocking in or after clocking out.
- Blended-rate overtime mistakes: overtime figured on the wrong rate for employees with two pay rates.
- Biometric clocks without consent: fingerprint or face scans in Illinois without BIPA paperwork.
The first one inflates payroll. The other five usually shortchange employees, which feels cheaper until someone files a complaint.
1. Buddy Punching: A Time Tracking Error You Pay For
Buddy punching is when one employee clocks in for a coworker who’s running late or not there at all. It’s most common with shared PIN pads, paper timecards, and badge clocks where anyone can swipe anyone’s card.
The cost is simple. You pay for time nobody worked, every pay period, and it rarely shows up in a report. Here’s what we see: owners usually find out from a coworker, not from the timesheet.
The fix: make each punch tied to the person. Individual logins, photo capture at the clock, or supervisor approval of edits all help. Biometric clocks solve this problem too, but in Illinois they create a different one. See mistake #6 before you buy.
2. Rounding Punches in Only One Direction
Rounding is legal. Under 29 CFR 785.48, the Department of Labor accepts rounding to the nearest 5 minutes, tenth of an hour, or quarter hour. However, it only works if it averages out so employees are paid for all the time they actually work.
The problem is one-sided rounding. For example, a system that rounds 8:07 in to 8:15, but also rounds 5:07 out down to 5:00, loses time on both ends. Over a year, a few minutes a day per employee adds up to real back pay.
The fix: use neutral rounding that goes both ways, or pay to the minute. Most modern systems can do either. Then spot-check a few employees’ actual punches against paid hours once a quarter.
3. Deducting Lunch Automatically
Of all the time tracking payroll errors, this one is the easiest to automate by accident. Auto-deduct is a setting that subtracts a 30-minute lunch from every shift. It saves clicks. It also assumes every employee actually took a full, uninterrupted break.
That assumption is where the risk lives. A meal period is only unpaid when the employee is completely off duty. Wisconsin makes this explicit. According to Wisconsin DWD’s break rules, breaks under 30 consecutive minutes count as work time and must be paid. Wisconsin doesn’t require meal breaks for adults, but if you give one, those rules apply.
Illinois adds a requirement. The Illinois One Day Rest in Seven Act requires a meal period of at least 20 minutes for shifts of 7.5 hours or more. It must begin no later than 5 hours into the shift, with another 20 minutes for every additional 4.5 continuous hours.
The fix: have employees punch out and back in for lunch instead of auto-deducting. If you keep auto-deduct, give employees a simple way to flag a missed or shortened break, and pay for it.
4. Letting Work Happen Off the Clock
Off-the-clock work is the quiet one. An employee answers texts before their shift, finishes closing duties after clocking out, or loads the truck before punching in. Nobody asked them to. It still counts.
Federal rules are clear on this. Under 29 CFR 785.11, work not requested but “suffered or permitted” is work time. The regulations also say that simply having a rule against it isn’t enough. If you know or should know it’s happening, you owe for it.
The fix: tell employees in writing not to work off the clock, then enforce it. Clock in before any work starts. Also, watch for patterns like messages sent well before shift start.
5. Getting Overtime Wrong for Employees With Two Pay Rates
It’s one of the few time tracking payroll errors that’s really a math problem, and it catches restaurants, contractors, and medical offices. An employee works some hours at one rate and some at another. For example, a server who also covers host shifts, or a tech who does both field and shop work.
When that employee goes over 40 hours, overtime isn’t based on whichever rate you’d prefer. Under 29 CFR 778.115, the regular rate for that week is the weighted average of both rates. That’s total straight-time earnings divided by total hours worked. There’s a narrow exception if you agree in advance to pay overtime at the rate for the work done during the overtime hours.
The fix: set up each job as its own pay code, so your system tracks hours at each rate and blends them automatically. Doing this by hand is where the mistakes come from. If you’re unsure who’s owed overtime in the first place, start with our guide to exempt vs. non-exempt employees.
6. Using Biometric Time Clocks in Illinois Without BIPA Consent
Fingerprint and face-scan clocks stop buddy punching cold. In Illinois, though, they fall under the Biometric Information Privacy Act (BIPA). That law requires written notice and a signed written release from each employee before you collect their biometric data, plus a written retention and destruction policy.
The penalties are why BIPA is famous. Employees can sue for $1,000 per negligent violation and $5,000 per reckless or intentional violation. Public Act 103-0769, effective August 2, 2024, narrowed that exposure. Repeated scans of the same person by the same method now count as a single violation. The same amendment confirmed that an electronic signature counts as a written release.
So the per-scan nightmare is gone. However, a missing consent form is still a per-employee problem.
The fix: before you install a biometric clock in Illinois, get signed consent from every employee, publish a retention policy, and have an attorney review both. Or skip biometrics and use individual logins with photo capture instead.
The Time Tracking Payroll Errors Checklist
Use this once a quarter. It takes about 30 minutes.
| Check | What to look for |
|---|---|
| Punch ownership | Can anyone punch for anyone? Shared PINs or cards? |
| Rounding setting | Neutral rounding, or pay to the minute? |
| Meal breaks | Auto-deduct on? A way to report missed breaks? Illinois 20-minute rule met? |
| Off-the-clock signs | Early messages, late closing tasks, pre-shift setup? |
| Multiple pay rates | Separate pay codes? Overtime on a weighted average? |
| Biometric clocks (Illinois) | Signed consent on file for every employee? Written retention policy? |
How to Fix Time Tracking Payroll Errors for Good
Notice the pattern. Almost every one of these time tracking payroll errors happens in the gap between the time clock and payroll. Hours get exported, retyped, adjusted, or estimated along the way.
That’s why the biggest single fix is connecting the two. When punches flow straight into payroll, there’s no retyping, pay codes carry over, and overtime math happens the same way every time. Our time and attendance tools on the iSolved platform connect directly to payroll for exactly that reason. For a side-by-side of the options on the market, see our 2026 roundup of timekeeping software.
What This Means for You
What this means for you: time tracking payroll errors rarely show up as one big mistake. Instead, they’re a few minutes here and a skipped lunch there, repeated every pay period. The good news is that most of them are settings, not people problems.
So start with the checklist above. Fix the settings first, then put the rules in writing. If you’d like a second set of eyes on how your hours flow into payroll, that’s a conversation we’re happy to have. You can also see what it costs with our pricing calculator.
Time Tracking Payroll Errors FAQ
Is it legal to round employee time punches?
Yes, under federal rules, if the rounding is neutral. The Department of Labor accepts rounding to the nearest 5 minutes, tenth of an hour, or quarter hour, as long as it averages out so employees are paid for all time actually worked.
Do I have to pay employees who work through lunch?
Yes. A meal period is only unpaid when the employee is fully relieved of duty. In Wisconsin, breaks under 30 consecutive minutes must be paid. In Illinois, shifts of 7.5 hours or more also require a meal period of at least 20 minutes.
Does BIPA apply to fingerprint time clocks?
Yes, in Illinois. Employers must give written notice, get a signed release from each employee, and keep a written retention policy before collecting fingerprints or face scans.
How do I stop time tracking errors from reaching payroll?
Connect your time clock directly to payroll, tie every punch to one person, use neutral rounding, and set up separate pay codes for different rates. Then review a sample of timesheets each quarter.
Get your hours and your payroll in the same system
Payroll Freedom connects time and attendance directly to payroll on the iSolved platform, so punches, pay codes, and overtime flow through without retyping. A real person helps you set it up.
See Your Price → Request a MeetingThis article is provided for general informational purposes only and does not constitute legal, tax, or payroll advice. Wage-and-hour and biometric privacy rules depend on your specific facts, and BIPA compliance in particular should be reviewed by an attorney. Before acting on anything you read here, please consult a qualified advisor, including, we hope, us. Reach out to Payroll Freedom for guidance specific to your business.
About the Author
Frank Fiore, CPA — President & Visionary, Payroll Freedom
Frank Fiore has spent 20+ years helping small business owners navigate payroll accuracy, including the timekeeping setups that feed it. Payroll Freedom serves clients from offices in Mundelein, IL and Grafton, WI.
