Project Time Versus Payroll Time: Two Systems, Two Purposes

Organisations that track time usually track it twice, badly. Payroll needs hours worked. Delivery needs to know where effort went. Someone proposes merging them, and the result is a payroll record carrying data it should not hold and a project record nobody trusts.

Monitask discusses bias in self-reported time in read more.

Payroll recordkeeping requirements are set out in the federal recordkeeping regulations in 29 CFR Part 516.

They answer different questions and they have different rules.

What each one is

Payroll time is a legal record. Hours worked per day and per week, for non-exempt employees, kept for defined periods and producible on demand. Its purpose is to establish that people were paid correctly.

Its properties: contemporaneous, complete, auditable, unalterable without a trail. Governed by rules. See FLSA recordkeeping.

Project time is a management record. Where effort went, by client, project or activity. Its purpose is costing, billing, capacity planning and pricing.

Its properties: allocated rather than clocked, complete to a useful level of granularity, and not a compliance artefact — unless it is the basis of an invoice, in which case it has its own accuracy obligations.

Where the totals should and should not match

For non-exempt staff, project allocations should reconcile to recorded hours. If someone recorded 42 hours for payroll and allocated 38 to projects, four hours are unaccounted for — and unaccounted-for time is either a project-tracking gap or unrecorded work.

Do not force the reconciliation by editing payroll time. The payroll record is the legal one. If the project allocation is short, fix the allocation.

For exempt staff, they need not match, and expecting them to introduces the salary basis risk described in tracking time for exempt staff.

Why merging them causes problems

Payroll records acquire data they should not hold. A legal record annotated with client codes, task descriptions and project narratives is a record with more surface area in a dispute than it needed.

Project tracking acquires the tone of a time clock. Asking a director to punch in and out to allocate effort communicates something nobody intended, and it degrades participation.

Different granularity. Payroll needs start and end times to the minute. Project costing needs allocation to the half-hour or hour. Forcing project-level precision onto payroll produces false precision; forcing payroll precision onto project tracking produces abandonment.

Different populations. Payroll time is mandatory for non-exempt staff. Project time may be needed from exempt staff who have no payroll timekeeping requirement at all.

Different consequences for error. A wrong project code is a costing inaccuracy. A wrong payroll entry is a wage issue.

When merging is reasonable

Two cases.

Professional services billing by the hour. Where the time record is the invoice, the same entry legitimately serves both — and it inherits the stricter obligations of both. Reconciliation is not optional here.

Small organisations. Where a single simple system is the difference between tracking and not tracking, one system is better than none. Just be clear which purpose governs when they conflict: the payroll obligation wins.

Making project tracking actually work

The recurring failure is not the system. It is that people fill it in on Friday from memory.

Keep the category list short. Twelve options get used. Ninety do not.

Allocate at the day level. "Six hours on project A, two on internal" is enough for costing and is completable. Fifteen-minute granularity across a week is not.

Do it daily. Retrospective allocation is guesswork, and everyone knows it, which is why nobody trusts the output.

Include a category for the work that is not a project. Meetings, admin, support, interruptions. Without it, that time gets allocated to whatever project is nearest, and your costing is wrong in a specific and expensive direction — it systematically understates overhead.

Show people the output. Project tracking that disappears into a finance system produces resentment and low-quality data. If people see how their allocations inform capacity and pricing decisions, participation improves.

Do not use it to evaluate individuals. The moment allocations affect someone's standing, they become a description of what looks good rather than of what happened. See measuring knowledge work.

The question worth asking first

What decision will the project data change?

If it prices work, informs staffing, or supports an invoice, collect it and invest in the quality.

If nothing downstream consumes it, stop collecting it. Half-filled project timesheets nobody reads are a tax on the workforce and a source of numbers that mislead whoever eventually finds them.

Payroll time you have to keep. Project time you have to justify.