Paper timesheets, Excel spreadsheets, manual overtime calculations – traditional time tracking is cumbersome, error-prone and increasingly out of step with modern working life. Time tracking software offers a digital alternative: working hours are recorded electronically, evaluated automatically and documented in a legally compliant way. Since the Federal Labour Court ruling in 2022, systematic time recording has been mandatory for employers in Germany – a digital solution makes meeting this obligation significantly easier. This article explains what time tracking software is, what functions it offers, which legal requirements apply, and how companies can select and successfully implement the right solution.
What Is Time Tracking Software? Definition
Time tracking software (also referred to as working time recording software, time management software or digital time tracking) is a digital solution for electronically recording, managing and evaluating working hours. The software documents the start and end of the working day, breaks, overtime and absences, and makes this data centrally available. Time tracking software replaces manual, paper-based or Excel-driven systems and offers extensive automation and analysis capabilities.
Related Terms Distinguished
Time tracking software vs. punch clock: A traditional punch clock only records arrivals and departures. Time tracking software offers far more: break management, overtime calculation, reporting and integration with payroll software.
Time tracking software vs. Excel spreadsheets: Excel spreadsheets are prone to errors, offer no automation and cannot reliably prevent manipulation. Professional software automatically validates entries and fulfils legal requirements.
Time tracking software vs. HR software: Time tracking software can be a standalone solution or part of a comprehensive HR platform. Modern HR systems often integrate time tracking, absence management and digital personnel files.
Legal Framework: The Obligation to Record Working Hours
Legal Basis
The obligation to systematically record working hours was established by the following rulings:
- 2019: The Court of Justice of the EU (CJEU) required employers to introduce a system for recording working time
- 2022: The Federal Labour Court (BAG) confirmed this obligation for Germany
What must be recorded?
- Start of the working day
- End of the working day
- Breaks
- Overtime
Purpose: Protection of employee health and compliance with the Working Hours Act (ArbZG)
Working Hours Act (ArbZG)
Key requirements under the ArbZG:
- Maximum working hours: 8 hours per day (up to 10 hours if offset within a compensation period)
- Rest periods: At least 11 hours between two working days
- Breaks: 30 minutes for 6–9 hours of work; 45 minutes for more than 9 hours
- Retention obligation: Records of overtime must be kept for at least 2 years (§ 16 ArbZG)
Data Protection: GDPR and BDSG
Time tracking software processes personal data – data protection is therefore essential:
Legal basis (GDPR):
- Art. 6(1)(b) GDPR: Contract performance (time recording as part of the employment relationship)
- Art. 6(1)(c) GDPR: Legal obligation (compliance with the ArbZG)
- Art. 88 GDPR in conjunction with § 26 BDSG: Employee data protection
Key data protection principles:
- Data minimisation: Only collect the data that is necessary
- Purpose limitation: Data must be used for time recording only, not for performance monitoring
- Transparency: Employees must be informed about data processing
- Storage limitation: Define clear deletion periods
- Access control: Restrict access to authorised persons only
Planned Changes to the Working Hours Act
A draft bill to amend the Working Hours Act proposes:
- Electronic recording: Time tracking should in future be conducted electronically
- Exemption for small businesses: Companies with fewer than 10 employees may potentially continue paper-based recording
Status: Not yet enacted, but the direction of travel is clearly towards digital recording.
Core Functions of Time Tracking Software
1. Time Recording and Management
- Working time logging: Recording the start, end and breaks of the working day
- Multiple recording methods: Web portal, desktop app, mobile app, terminal
- Manual or automatic recording: Clock-in function or retrospective entry
- Flexible working time models: Full-time, part-time, shift work, flexitime, trust-based working hours
2. Automatic Compliance Checking
- Maximum hours alerts: Warning when daily working time exceeds 10 hours
- Rest period monitoring: Automatic check of the 11-hour rule
- Break reminders: Automatic prompts for required break times
- Compliance monitoring: Continuous checking against the ArbZG
3. Overtime Management
- Automatic calculation: The system identifies overtime automatically
- Working time account: Transparent overview of positive and negative hours
- Overtime reduction: Planning of compensatory time off
- Approval workflows: Manager sign-off required for overtime
4. Absence Management
Integrated holiday and absence management:
- Leave requests: Digital submission and approval
- Automatic leave calculation: Based on working time model
- Sick leave recording: Capture and management of illness absences
- Business travel, training: All absence types managed in one place
- Team calendar: Overview of who is absent and when
5. Employee Self-Service (ESS)
- Employee portal: Access via web or app
- View own hours: Full transparency over recorded time
- Submit corrections: Retrospective adjustments possible
- Request leave: Directly within the system
- Check remaining leave: Always up to date
6. Manager Dashboard
- Team overview: Attendance of all team members at a glance
- Approvals: Approve leave requests and overtime in one click
- Workforce planning: Team availability always in view
- Alerts: Notifications when working time limits are exceeded
7. Project Time Tracking
- Project allocation: Assign time to specific projects or cost centres
- Project controlling: Transparent view of time spent per project
- Budget monitoring: Target vs. actual time comparison
- Client billing: Foundation for accurate client invoicing
8. Reports and Analytics
- Standard reports: Working time summaries, overtime reports
- Custom evaluations: Filterable by department, time period or employee
- Trend analysis: Identify patterns such as seasonal fluctuations
- Export functions: PDF, Excel, CSV
9. Integrations and Interfaces
- Payroll: Automatic data transfer to payroll software (DATEV, etc.)
- Digital personnel file: Working time records are automatically archived
- Calendar: Synchronisation with Outlook and Google Calendar
- Project management tools: Connection to project management software
Benefits of Time Tracking Software
For Employers
- Legal compliance: Documented adherence to statutory requirements
- Efficiency gains: Automation saves time in HR and payroll
- Better workforce planning: Data-driven decisions through reporting
- Cost control: Overtime and project hours made transparent
- Tamper protection: Digital systems are more secure than paper records
- No paper costs: Timesheets become a thing of the past
- Centralised data: All records in one place
For Employees
- Transparency: Access to own working hours at any time
- Ease of use: Simple operation via app or web browser
- Flexibility: Clock in from anywhere (home office, on the road)
- Fairness: Overtime is recorded accurately
- Less admin: No more handwritten timesheets
- Self-service: Manage leave requests independently
For Managers
- Team overview: Attendance at a glance
- Quick approvals: Leave and overtime approved with a single click
- Early warning system: Alerts for working time limit breaches
- Better planning: Transparent view of team availability
Selection Criteria: Finding the Right Time Tracking Software
1. Company Size and Scalability
- Small businesses (up to 10 employees): Simple, cost-effective solutions with core functionality
- SMEs (10–250 employees): Extended features, payroll integration
- Large enterprises (250+ employees): Enterprise solutions with complex access management
- Growing companies: Modular structure that scales with the business
2. Feature Set
Essential features:
- Working time recording (start, end, breaks)
- Automatic compliance checking
- Overtime calculation
- Absence management
- Employee self-service
Advanced features:
- Project time tracking
- Shift planning
- Custom reports and analytics
- Mobile apps
- Payroll and HR software integrations
3. Usability
- Intuitive interface: Employees should be able to use it without lengthy training
- Mobile apps: Time tracking on the go (important for field staff and remote workers)
- Responsive design: Optimised for all devices (desktop, tablet, smartphone)
- Clear dashboards: Key information visible at a glance
4. Data Protection and Security
- GDPR compliance: Non-negotiable
- EU-based servers: Data stored within Europe
- Encryption: End-to-end encryption for data transmission
- Certifications: ISO 27001 (information security), ISO 27018 (cloud data protection)
- Access management: Granular user permissions
- Audit trail: Full traceability of changes
5. Integrations and Interfaces
- Payroll software: DATEV interface and other payroll systems
- HR software: Seamless integration into existing systems
- Calendar: Outlook, Google Calendar
- API: Open interfaces for custom connections
6. Pricing
Typical pricing models:
- Per employee/month: €2–10 per user depending on feature scope
- Flat rate: Fixed monthly price regardless of employee count
- One-time licence: High upfront investment, low ongoing costs
Additional costs to factor in:
- Implementation and onboarding
- Training
- Support and maintenance
- Data migration from legacy systems
- Hardware (if terminals are required)
7. Support and Service
- Local language support: Critical for quick problem resolution
- Availability: Phone, email, live chat
- Training resources: Webinars, video tutorials, documentation
- Update policy: Regular updates to reflect changes in legislation
Implementation in 6 Steps
Step 1: Needs Analysis (1–2 Weeks)
Key questions:
- What data needs to be recorded? (Working hours only, or project times too?)
- How many employees will use the system?
- Which working time models exist in the company?
- Which integrations are required?
- Are there field staff or remote workers?
- What reports are needed?
Stakeholders to involve:
- Management
- HR department
- Line managers
- Works council (if applicable)
- IT department
- Data protection officer
Step 2: Budget Planning (1 Week)
- Licence fees (monthly or annual)
- Implementation costs
- Training for employees and managers
- Data migration from legacy systems
- Support and maintenance
- Hardware (if terminals are needed)
Step 3: Shortlisting and Obtaining Quotes (2–4 Weeks)
- Create a market overview
- Filter providers against defined criteria
- Book product demos (usually free of charge)
- Request quotes
- Check references
- Make a decision
Step 4: Pilot Phase (2–4 Weeks)
- Form a test group: 5–10 people from different areas of the business
- Run in parallel with existing system: Compare results
- Identify what works well: Document best practices
- Identify issues: Where does it fall short?
- Create training materials: Based on pilot learnings
- Gather feedback: Collect suggestions for improvement
Step 5: Employee Training (1–2 Weeks)
Different audiences need different training:
- Employees: How do I log my hours? How do I submit a leave request?
- Managers: How do I approve requests? How do I use the dashboard?
- HR team: Administration, reports, integrations
- IT: Technical setup and troubleshooting
Training formats:
- Live webinars
- Video tutorials
- Written guides
- FAQs
- In-person training (for larger organisations)
Step 6: Go-Live
- Communication: Announce the launch well in advance (2–4 weeks beforehand)
- Set a go-live date: Ideally at the start of a month
- Provide enhanced support: Make extra support available in the first few weeks
- Decommission old systems: A clean cut – no parallel operation
- Monitor closely: Watch the first weeks carefully and respond to issues quickly
Challenges and How to Address Them
1. Cost
Time tracking software involves ongoing costs. For small businesses, this can initially feel like a barrier.
Solution: Calculate the ROI. Savings on paper, manual administration and payroll processing often outweigh the software costs.
2. Technical Disruptions
Server outages or software issues can interrupt time recording.
Solution: Define a contingency plan (e.g. paper-based recording for emergencies). Choose providers with high availability (99.9% uptime).
3. Employee Acceptance
Some employees may have concerns about being "monitored".
Solution: Communicate clearly: time tracking is about health protection, not performance surveillance. Involve employees early and emphasise data protection.
4. Learning Curve
New software takes some getting used to.
Solution: Comprehensive training, an intuitive interface and strong support during the initial phase.
5. Data Protection Risks
Improper use can lead to data protection breaches.
Solution: Choose GDPR-compliant software, implement clear access controls and involve the data protection officer from the outset.
Frequently Asked Questions (FAQ)
Is time tracking software mandatory for small businesses?
Systematic time recording is mandatory. Whether it must be digital is currently still open. A draft amendment to the Working Hours Act proposes electronic recording, potentially with an exemption for companies with fewer than 10 employees.
How can I ensure my time tracking is GDPR-compliant?
Choose a certified provider (ISO 27001, ISO 27018) with EU-based servers. Conclude a data processing agreement (DPA). Define clear access controls and inform employees transparently about how their data is processed.
Can employees correct their own time entries?
Yes, this is possible in most systems. However, changes are logged via an audit trail and typically require manager approval – ensuring tamper protection is maintained.
How much does time tracking software cost?
Costs vary considerably: from €2–3 per employee per month for basic solutions to €10 or more for comprehensive systems. Add to this one-time costs for implementation and training.
Can time tracking software be integrated with existing systems?
Yes, professional time tracking software offers interfaces to payroll software (e.g. DATEV), HR platforms and calendar tools. Check for compatible APIs and system compatibility when making your selection.
Do managers also need to record their hours?
This depends on the employment contract. Senior executives with full power of attorney (Prokura) are often exempt. Standard managers are generally subject to the same time recording obligations as other employees.
Conclusion: Time Tracking Software as a Standard for Modern Workplaces
Time tracking software is more than a tool for meeting legal obligations – it is a strategic instrument for better workforce planning, greater efficiency and increased transparency. Digital time recording replaces error-prone manual processes, saves time in HR and payroll, and protects both employers and employees through legally compliant documentation. When selecting a solution, companies should prioritise GDPR compliance, usability, feature scope and integration options. Careful implementation – with a pilot phase, thorough training and clear communication – secures employee buy-in. Organisations that invest in professional time tracking software today lay the foundation for modern, efficient HR processes and are well positioned for future regulatory requirements. Try Emplovia free of charge and see how straightforward digital time tracking can be.