What is time tracking?
As the one resource all businesses share in equal measure, time has always represented the key to competitive advantage. But the only way to use it better is to learn how you are already using it. That’s why time tracking is still used by a multitude of industries — from professional services like legal, accountancy, IT and management consultancies, right through to creative agencies and individuals. In the US alone, 42% of companies already use a time tracker, and this looks set to escalate rapidly.
No manager, employee or contractor lives outside of time; it continues to be the universal currency for valuing, organizing, planning and managing work. Without tracking our time, we simply can’t gauge or manage productivity, profitability and efficiency. We can’t see where we’re lagging, where our biggest time drains are, or where we’re stretched too thinly.
Why is time tracking important?
The purpose of time tracking is to understand how we’re actually spending the time we have. Only when we can see where our time’s going can we make changes to get more quality from it. Crucially, that can benefit everyone in the work equation — there are so many different things you can do with time tracking.
In our increasingly digitized world, time tracking has never been as valuable as it is today — and the insights and benefits time tracking tools can return are enormous. As our workforces become increasingly remote and distributed, time tracking can give teams the insight needed to manage performance and keep collaboration visible.
The benefits of time tracking
For employers and managers, the purpose of time tracking goes far beyond clocking in and out. With a robust, accurate time tracking solution, you can:
Being able to accurately track the time you’re spending on projects means all internal costs are accounted for and you won’t overlook any hidden billable hours. Once you know how long certain tasks take, you can then gauge project profitability, set competitive rates, drive workflow efficiencies and improve client budget spend in the future.
“It’s extremely important to have an accurate overview of our time – and not to miss any hours. Our profitability and client relationships depend on accurate, transparent tracking.” — Christopher Schwarz, PTS Group
Improve project management
Being able to see all the work that’s going into each project means you can make accurate estimates for future work and refine project proposals and plans. Understanding which resources you’ll require also enables you to delegate more smoothly, and knowing how long certain tasks take allows you to proactively spot and resolve any problems before they get expensive.
“We need time tracking to ensure project profitability. By capturing every hour that goes into each project, we can follow project budget spend to proactively manage the return of our work.” — Oskari Leino, Hasan & Co
Lead happier teams
Because of the team visibility it provides, time tracking is one of the most important tools companies have to protect against burnout. It allows you to assess each team member’s capacity and allocate work fairly, ensuring no-one’s overworked. It also makes it easy to monitor overtime (now a legal requirement in the EU!) and compensate for it accordingly with time off, meaning your team will be happier as well as more productive.
“Effective time tracking can help management understand exactly where employees are spending time so they can ensure everyone is working on the highest priority and maintaining a healthy workload.” — Praveen Dalal, Nabler
Work more productively
You can’t become more productive without first recognizing the inefficiencies in your workflow. Time tracking enables you to identify your biggest time drains, interruptions and distractions, as well as which tasks are most challenging. It also allows you to identify unconscious behaviors and see when you’re most productive.
Employee time tracking - How it is beneficial?
Time tracking is just as important for employees as it is for employers and managers. Rather than presenting time tracking as a chore they have to do, a good time tracking solution will empower and support everyone using it. Time tracking can help employees:
Understanding how you work is even more important now that so many of us are working from home. Time tracking gives you the knowledge to create a winning schedule and become a master of your own performance. With time data, you’ll know when you’re most productive, how long different tasks take, how and where you become distracted, and which processes are inefficient. You can then use this to create a structure that allows you to stay focused and get more done.
“As a ‘solopreneur’ it's great to get an overview of your actual activities and since I am my own manager, it’s also a useful way to increase my productivity and efficiency.” — Alana Flick, interior designer
Keep work visible
Lack of visibility is a big concern for remote workers, but because it accurately records everything you’re working on, time tracking helps keep work visible – meaning employees can get due recognition for their efforts. Because employees can see what their teammates are working on (and vice versa), collaboration and communication is also improved.
Time tracking allows employees to become more autonomous and improve the ways they plan and manage work. Knowing how long tasks take allows employees to plan against capacity, time box their working week, identify low-value tasks, and capture work outside their remit. It also keeps everyone in the loop about who has capacity, and makes sharing updates much more efficient.
“Two people on my team used Timely data to show that their day-to-day work strayed significantly from their job description. We’ve used that data to put both of them in more appropriate roles.” — Vicky Weber, Healthfinch
Tracking time allows employees to stick to contracted hours and ensure they maintain a healthy schedule. Remote workers are especially at risk of burnout, so having a clear record of how many hours you’ve done each week makes it easier to maintain boundaries. Plus, time tracking also documents all overtime, allowing employees to be compensated accordingly with time off, and letting managers know that some workloads may not be realistic.
Why consultants need time tracking
When you charge by the minute, being able to accurately track your time just makes sense if you want to get paid fairly. But aside from ensuring you get paid for all your work, time tracking has a multitude of benefits for consultants. It allows them to:
Surface business costs
As well as recording billable hours, time tracking also logs all the non-billable hours required to run and grow a consultancy business. Time spent on non-billable tasks like admin, pitching, networking and marketing helps you understand your utiliziation rate and set competitive billable rates, and time tracking gives you a seamless record of all your business costs.
“I track time to help improve my efficiency and bill honestly. I also use it to track unbillable hours spent on marketing, client and supplier relationship management, essential admin and accounting.” — Alana Flick, interior designer
Keep a manageable schedule
To run a successful consultancy, you need to be aware of your limits and deliver on commitments. Without knowing precisely how long you take to complete certain tasks or projects, it can be easy to overpromise – and this can adversely affect your wellbeing just as much as your work quality and reputation. Time tracking gives you the insights needed to keep a healthy, manageable schedule.
Become more efficient
You can’t improve the ways you work until you’re aware of where all your time’s really going. Time tracking software holds a mirror up to the way you work, revealing inefficient work processes and distractions, helping you run a more efficient operation, and ensuring you dedicate enough time to each client.
“Timely’s helped me address my own productivity. One of the first things I noticed since I started using it, was how much I multitask and frequently switch between different projects.” — Heidi Patmore, Stellaris
Billable vs. non-billable hours
Generally, time tracking is used to record all billable hours so you can ensure you get paid fairly. But knowing exactly how much time you’re spending on a project or task gives you a serious advantage, so it’s prudent to track non-billable hours too.
What are billable hours?
Billable hours represent everything you do at work that can be charged to a client. Businesses, agencies, entrepreneurs and freelancers often use billable hours to charge for their services – and in order to charge by billable hours, you need to be able to track the amount of time you’re spending on each client’s projects every day.
What constitutes billable time can vary depending on the service that’s being carried out, but some of the most common examples of billable hours include:
- Project planning
- Performing project work
- Developing project timelines
- Attending meetings
- Managing work emails
- Editing work at the client’s request
What are non-billable hours?
Non-billable hours are all the tasks you do at work that can’t be billed to a client. Common examples of non-billable time include:
- Developing proposals for new clients
- Pitching and bidding for new work
- Entertaining clients
- Staff development and training
- Business strategy and research
- Fixing your own mistakes
- Admin tasks like time tracking, invoicing, expensing, bookkeeping etc.
Why should you track non-billable hours?
You might be wondering why you should track non-billable hours if you don’t get paid for them – but capturing non-billable time is crucial if you want to develop your business. Knowing precisely where your non-billable time goes can help you:
- Weed out expensive inefficiencies. Low-value non-billable tasks are a necessary evil, but that doesn’t mean you have to waste too much time on them. By tracking non-billable hours, you’re able to weed out the tasks that are the biggest time drains and figure out how to minimize or automate them.
- Identify unprofitable clients. No matter how much you might like working for them, not all clients are profitable – and by tracking non-billable hours, you can see how much your clients actually cost you. If a client is causing you to spend more time on non-billable work than other clients, you can address the issue, either by adjusting pricing, trying out new tools or automation, or reassessing your future with the client.
- Identify more billable hours. These days, many of us work outside of our core hours, whether that’s by joining early morning meetings or working into the night. Tracking non-billable time means you get a thorough view of everything you’re working on, allowing you to locate the hidden or leaked billable time spent on things like out-of-hours emails or meetings – which annually costs US firms $52,500 per employee in lost billable hours.
Using your time tracker in ethical ways
Time tracking and employee monitoring can absolutely be ethical. At Timely, we understand that high-performance teams are built on trust and transparency, so we built a tracking tool that offers user-level privacy by design. Here’s what makes Timely ethical:
- It leads with transparency. Employees must give their consent to tracking and sharing their data, and they need to know why this data is being captured in the first place – and how it’ll be used. Employees should also be able to access their own data.
- It offers employees clear benefits. Because time tracking should benefit everyone, employees should understand how tracking their time and sharing their data supports their own interests, as well as that of their employer, and can provide them with powerful insights and benefits.
- It protects employee agency. Any system that’s tracking employee activity must also protect their privacy and agency. Employees should maintain full control over their privacy, and be able to choose what data they want to share and what they want to remain private.
“Employees adore that they can trust Timely to track all their computer activity without automatically sharing it with the company. Everyone stays in control of their data.” — Beau Clark, Compass
Is all time tracking software ethical?
The sad truth is that most employee monitoring software is unethical. Rather than empowering employees to be masters of their own time, many employee monitoring apps use covert methods to track employee activity. These type of tools might:
- Take candid photos of employee screens
- Track mouse movements
- Track keyboard activity
- Monitor all employee internet activity
- Access a computer’s webcam remotely
- Geo-tag to see where employees are working
Obviously, this type of time tracking is hugely unethical – but it doesn’t have to be this way.
Time tracking methods
There are lots of different ways you can track time, but essentially, they fall into two categories: manual time tracking and automatic time tracking. Some of the most common time tracking methods include:
The paper method
This method only requires a pen, paper and a stopwatch (or phone). The approach is simple: you simply start the timer when you begin working on a task, and stop it when you’re done. Then you write down your results on paper.
The problem with this approach is that you can lose the paper, meaning you’ll have to rely on your memory. You also won’t have a digital record of your hours. Accuracy depends on remembering to stop the timer when you take a break or get interrupted – and then remembering to restart it when you get back to work.
The spreadsheet method
For the spreadsheet method, rather than writing down your times on paper, you manually add them to a spreadsheet template like Excel or Google Sheets. This approach means you don’t have to worry about losing data, and because you use in-built formulas to do your calculations, the chance of making a mistake is lower. Plus, you’ll have a digital record of your hours which you can send to clients or colleagues.
However, this method still means you have to manually start and stop timers and type in the data, so it can be time-consuming and unreliable.
The software method
The software approach uses a time tracking tool or app to record your time. You can either do this manually by typing in what you’re working on and starting a timer, or automatically by getting software to capture what you work on in the background. The latter – automatic time tracking – is the quickest, easiest and most accurate way of tracking your hours.
However, not all time tracking software is ethical, and some invade employee privacy by taking candid screenshots. Of course, privacy-first time tracking tools do exist which actively protect employee privacy and company culture.
Types of time tracking software
Time tracking software might be the most accurate approach to tracking your hours, but there are vast differences in the types of tracking software available. The most common types of time tracking software include:
Automated time tracking
The automatic approach is still new, but it’s by far the most advanced and accurate way to track time. Unlike other approaches, automatic time tracking software removes the need for a timer, meaning you can focus entirely on your work – and because it drafts timesheets automatically, it also minimizes human error and time tracking overhead.
Aside from this, automatic tracking also captures hidden billable hours, and offers users insight into the ways they work. By removing the subjectivity of manual logging, automatic time tracking apps produce flawless time records and remember every single thing you’ve worked on – even when you don’t.
Manual timer-based app
Manual timer-based apps require employees to start and stop timers while they work. Many of these tools have sophisticated designs, but they don’t remove the burden of having to track your hours. You still have to keep an eye on timers while you work, and because they rely on human memory, manually logged time records are only ever 67% accurate.
Most of these tools also ask employees to enter notes and qualify what they worked on during different times, so this is still very much a “hands on” approach to time tracking.
“I tried Toggl last year: while remembering to start the timer was a chore, remembering to stop it proved impossible. I was constantly receiving notifications saying ‘your timer has been running for 8 hours’.” — Richard via G2
In-app time tracking
Lots of business tools – especially invoicing, accounting and payroll apps – offer time tracking as a feature. However, a problem with this is that some of these time tracking tools haven’t had the benefit of proper development, and feel tacked-on. They usually lack the quality and breadth of a bespoke time tracking tool, and offer only a basic user experience designed around a very specific (and often inflexible) workflow.
Online time clock
Online time clocks are essentially a digital version of the analogue “clock in, clock out” approach to time tracking. Some online time clocks have fields where you can enter relevant notes, but that’s about as far as the UI goes. Aside from only providing you with a daily timestamp — not the actual content of what you did — the main drawback with online time clocks is that you still have to remember to start and stop a timer, which means time records are often strewn with costly inaccuracies.
Hours calculators are the most basic approach to digital time tracking. You type in when you started work and when you stopped, including any breaks you had, and the calculator works out your total hours. As the name suggests, this is more of a calculator than a time tracking tool, so you’ll still need to keep a separate record of all your hours. If you’re looking to simply work out how many hours you’ve worked, hours calculators can be a good choice, but they lack the ability to return any detailed information and are open to extreme manual error.
Features of time tracking software
So if you’re looking to invest in a time tracking tool, which type of features should you be looking for? Sophisticated tracking tools, like automatic time trackers, offer a wealth of features and rich insights, including:
- Automation. Rather than simply being a way to record your hours, time tracking software can also reduce the amount of time people have to spend on admin. Aside from automatically tracking work activity, these tools can also draft timesheets, send automatic reminders, and effortlessly integrate with other apps.
- Project time tracking. Some tracking tools make it much easier for project managers to keep on track of every project. You can get updates from team dashboards, track budget spend, and get notifications for critical budget movements. Many also offer powerful reporting capabilities, allowing you to send beautiful reports in just a few clicks. The ability to display your billable/non-billable percentage is a big plus.
- Team time tracking. Smart time tracking tools can monitor employee hours, capacity, workload and overtime, allowing managers to allocate resources when needed and support employee performance and wellbeing. They also help keep work visible, giving you a bird’s-eye-view of activity across your company and help teams stay aligned on priorities.
What to look for in time tracking software
These days, there are so many different time tracking tools on the market that it can be hard to cut through the noise and figure out which one is best for you. To single out the right time tracking software, you might want to consider the following:
There’s not much point forking out on new time tracking software if it doesn’t fit into your workflow. The right tool should work seamlessly within your existing set-up and integrate with your other work tools. Consider how you’ll interact with the tool: is it fiddly? Are the insights it returns actually valuable? Will you need to spend lots of time each day managing the tool?
Also, consider who will actually use this tool, and how you think they’ll use it. Will it enable and empower your colleagues – or will it make them feel like they’re being watched? Is it easy or fiddly to use? Does it actually bring them value?
If you’re investing in time tracking software, it’s important to make sure it’s ethical. Bringing in a tracking tool that makes employees feel distrusted and spied on can quickly erode company culture, so look for tools that focus on empowering and enabling employees rather than monitoring them.
It’s important to think about privacy here, and check how each tool will treat employee data. What data is being collected and who can access it? Can employees control what happens with it? How is tracked data stored? Transparency is one of the most vital features a time tracking tool can have, so avoid tools that use covert techniques.
Some time tracking tools have a wealth of features – but if you’re not going to be using most of them, you’re spending money you don’t need to. On the flipside, if the tool is missing features that you need, it’s not a good investment. It’s helpful to have a list of essential features before you start looking, as well as an idea of budget. Many tools have different pricing plans and feature bundles, so it may be that you can add more features and users to your plan as your business grows.
If you’re going to be spending money on new time tracking software, you want to know it’s a high quality tool. Rather than taking the tool’s own website at face value, head over to independent review sites like G2 and do your own research. This doesn’t have to take long: just see if there are any problems that several people have encountered, and find out how this particular tool compares to others.
While most new software requires a bit of a learning curve, you don’t want to be spending large amounts of time trying to get to grip with a tool that’s meant to simplify things — nor should migrating from your existing time tracking tool be painful. Have a look at how accessible and easy to use the tool is, and think about what type of onboarding process you might need. Most tools offer trials, so invite employees to trial different tools and see which work best.
Will employees be able to quickly get the hang of the tool and its different features? If there’s a problem, will you be able to solve it or will you need external help? If getting used to a time tracking tool looks like it’s going to be too much effort, it may not be worth it.
How to get people to track time
There’s no point investing in new time tracking software if your employees don’t want to use it. If you want your employees to start tracking time, the most important thing you can do is ensure your team is on board. To make time tracking work long-term, employee buy-in is crucial – and to get employees to not only accept but embrace time tracking, you need to communicate with honesty and empathy.
It’s important to be clear about the purpose and benefits of time tracking. The last thing you want is for your team to feel like you distrust them or want to spy on them, so be sure to explain how employees will also benefit from tracking their time. Ethical time tracking tools support employees’ interest just as much as a company’s, so make sure your team knows that tracking their time can:
- Protect against burnout
- Ensure work is allocated fairly
- Show who has capacity and who’s overworked
- Document all overtime
- Show how people work best
- Highlight distractions and low-value tasks
- Identify workflow inefficiencies
- Reveal unconscious unproductive behaviors
- Provide transparency over project progress
Because privacy is one of the biggest concerns around time tracking – and one of the biggest reasons people are reluctant to embrace it – it’s especially important to choose a time tracking software that offers user-privacy by design. Time tracking will only work if there’s mutual respect between companies and their employees.
Time tracking takeaways
Ultimately, time tracking can benefit everyone: managers, employees, consultants, and businesses as a whole. It provides users with self-knowledge that’s instrumental to improve the ways we work and refine particular work processes. When it’s used correctly, time tracking shouldn’t feel like a top-down chore; rather, it should empower and enable employees and help them become masters of their own time and schedule.
Time tracking also doesn’t have to destroy your company culture. To successfully introduce time tracking to your team and get the most out of it, it’s helpful to follow these steps:
- Clarify your purpose and intentions. Make sure all team members are clear about the specific reasons why you want to track time.
- Set boundaries. Ensure all employees know their privacy won’t be compromised, and clarify what data you’ll track, how you’ll use it, and who can see it. Lead with employee consent.
- Communicate the benefits. Explain how time tracking benefits everyone – not just managers – and ensure employees understand how it can improve their own working experience.
- Choose an employee-first tool. Be sure to choose a tool that’s easy to use, accessible, champions employee privacy and ultimately makes the working day more enjoyable.
- Review it. To make sure your time tracking tool is working for everyone, review it after a month. Get feedback from power users and see whether the tool is serving its purpose.