Software for legally compliant time tracking helps companies document working hours in a complete, traceable, and data-protection-compliant manner. Three requirements are particularly crucial:
1️⃣ electronic recording with a timestamp,
2️⃣ Secure and traceable storage of work time data
3️⃣ as well as audit trails that provide transparency regarding changes, corrections, and approvals.
⚠️ Why Choosing the Right Time-Tracking Software Is Crucial
Many companies now realize that they need to track work hours. The real challenge, however, lies in putting this into practice: Which software reliably records work hours, complies with data protection requirements, and ensures that time data remains traceable even during audits?
A simple digital time clock is usually not enough for this. Companies need a solution that fully tracks working hours, accurately records breaks and corrections, manages access rights, and securely provides data to HR, managers, and payroll.
Especially when it comes to flexible work schedules, working from home, shift work, multiple locations, or mobile teams, the software determines whether time tracking is merely implemented as a formality or actually functions in a legally compliant, efficient, and verifiable manner.
🤔 What does "time-tracking software that complies with the law" mean?
Time-tracking software that complies with the law is a solution that records and processes work time data in a way that allows companies to effectively meet their documentation, retention, data protection, and reporting obligations.
This is not just about simply tracking working hours. The key factor is the process chain: working hours are tracked, evaluated, reviewed, corrected if necessary, approved, stored, and made available for analysis or payroll processing.
A modern solution should support various methods of time tracking. Depending on the work location, it must be possible to track working hours using a stationary terminal, a mobile terminal, a PC workstation, a web application, or an app—for example, in the office, while working from home, on the production floor, in the field, or at multiple locations.
✅ Companies derive the greatest benefit when the software not only documents but also actively helps prevent errors and media breaks. This includes transparent correction processes, approval workflows, analyses, interfaces, and clear access permissions.
❗️Requirements for Time-Tracking Software That Complies with the Law
Legal Requirement
ArbZG / BAG Case Law: Recording Working Hours
Functionality: What the system should be able to do
Complete electronic documentation of start, end, and breaks
Sample Solution
: Time tracking via terminal, app, or on a PC/web browser with timestamps
Legal Requirement
ArbZG: Retain Records
Functionality: What the system should be able to do
Secure storage of work time data for the required period
Sample Solution
: Centrally Stored Time Data with Export and Archiving Functions
Legal Requirement
: Traceability / Verifiability
Functionality: What the system should be able to do
Changes and corrections must remain transparent
Sample Solution
Audit trail for time adjustments, approvals, and addenda
Legal Requirement
GDPR: Data Protection and Employee Data
Functionality: What the System Should Do
: Roles, Permissions, and Purpose Limitation of Data Processing
Sample Solution
: Authorization Model for HR, Managers, and Employees
Legal Requirements
: Work Rules / Compliance
Functionality: What the system should be able to do
Notes on critical deviations from work time models
Sample Solution
: Compliance Check for Breaks, Maximum Working Hours, Rest Periods, and Overtime
Legal Requirements
, MiLoG / Industry Obligations
Functionality: What the system should be able to do
Recording and providing relevant work time data
Sample Solution
: Exportable Time Reports for Employee Groups Subject to Audits
Legal requirement
payroll
Functionality: What the system should be able to do
It must be possible to further process evaluated time data
Sample Solution
Certified interface to the payroll system (e.g., DATEV, HS, or other payroll software)
Legal Requirements
, Internal Control
Functionality: What the system should be able to do
Transparency regarding attendance, absences, and time accounts
Sample Solution
: Dashboards, Reports, and Self-Service for Employees and Managers
🚨 Section 16 of the Working Hours Act (ArbZG) requires, among other things, that certain records of working hours be retained for at least two years. For companies subject to minimum wage, industry-specific, or subcontractor obligations, additional documentation requirements under the Minimum Wage Act may also apply. Section 17 of the MiLoG governs record-keeping and retention obligations for certain employee groups and industries.
💡 What features should suitable software offer?
1️⃣ Time-tracking software that complies with the law should, first and foremost, enable reliable time tracking. This may sound obvious, but it is crucial in practice. Employees must be able to track their hours easily and accurately, regardless of whether they are working in the office, on the production floor, on the road, from home, or at various locations. More on this.
2️⃣ It is equally important to support various work schedule models. Medium-sized companies rarely use just one model. Flexible hours, shift work, part-time work, trust-based work schedules, remote work, premium pay models, and location-specific policies must all be accurately supported.
3️⃣ Another key issue is the correction of time data. In practice, entries are sometimes forgotten, breaks are recorded incorrectly, or times are added later. Good software should not handle such cases via email or Excel, but rather through digital correction and approval processes. This ensures that retroactive entries remain traceable, responsibilities are clear, and HR is not burdened with manual reconciliations.
4️⃣ Reports are also important for HR and managers. If you simply track work hours but can’t analyze them, you’re missing out on a significant portion of the benefits. Reports on attendance, absences, flex-time accounts, overtime, or absenteeism not only help with compliance but also with workforce planning and management.
🔐 GDPR-compliant time tracking: Data protection as a selection criterion
Time tracking data is personal employee data. Therefore, companies must carefully review who is authorized to view, edit, or export which data. GDPR-compliant time tracking software should support a role-based access control model:
✅ Employees can view their own data.
✅ Managers can view their teams’ data.
✅ HR can manage key processes.
✅ Management or the Controlling department receives reports only to the extent necessary for the respective purpose.
In its brief on employee data protection, the Data Protection Conference notes that personal data of employees may be processed in the context of the employment relationship to the extent necessary for its performance. For time tracking, this means that the processing must be purpose-limited, necessary, transparent, and proportionate.
🚨 Technical and organizational measures are also important. These include access restrictions, logging, secure data transmission, data deletion and retention policies, and clear lines of responsibility. Especially when it comes to cloud solutions, companies should also verify where data is processed, what data processing agreements are in place, and which security standards the provider meets.
🔔 Rule-based alerts instead of manual checks
Good time-tracking software shouldn’t wait until the end of the month to show that there are issues with time data. Rule-based alerts during the ongoing process are more useful. This applies, for example, to
⚡️ Missing entries,
⚡️ Unusual work hours,
⚡️ breaks not recorded,
⚡️ High time credits
⚡️ or critical deviations from established work schedules.
👉 These guidelines are not a substitute for a legal review, but they do help identify risks early on.
✅ The advantage lies in prevention. HR and managers don’t have to spend time reviewing long lists after the fact; instead, they can identify anomalies as they arise. This turns time tracking not just into a documentation tool, but into a management tool.
🤔 Excel, timesheets, or software: What's still viable?
Excel spreadsheets or paper lists may work in the short term for small organizations. However, they quickly reach their limits when factors such as multiple locations, flexible work schedules, remote work, shift work, corrections, approvals, or payroll integrations come into play.
The problem isn’t just the manual effort involved. The most critical issues are traceability, version control, access control, and verifiability. Who changed what time, and when? Was a correction approved? Is the data complete? Can it be exported for audits? Is access restricted?
👉 A time-tracking solution should therefore support the entire process, not just replace a digital spreadsheet.
🔍 Cloud or on-premises?
The appropriate operating model depends on IT strategy, data protection requirements, and corporate structure. Cloud solutions are often suitable for companies that want to get started quickly, connect multiple locations, and receive updates centrally. More on this.
On-premises solutions remain relevant when specific internal IT guidelines, custom configurations, security requirements, or existing infrastructure must be taken into account. More on this.
⚠️ The type of operation is not the only deciding factor. What is more important is that the solution meets the technical requirements: secure data entry, traceable corrections, role-based access rights, reports, interfaces, and reliable data storage.
⚠️ NIS2 and Access and Time Tracking: What Companies Need to Know
NIS2 does not affect every organization equally, but it is an important consideration for companies in regulated or security-critical sectors. The BSI provides information for NIS2-regulated companies and emphasizes that affected organizations must treat cybersecurity as an organizational responsibility.
When it comes to time tracking combined with access control , this does not automatically mean that every time-tracking solution is subject to NIS2. The issue becomes relevant in situations where access rights, identities, locations, sensitive areas, or security-critical processes are managed digitally.
Companies should then verify whether role-based permissions, logging, access protection, system availability, authorization management, and emergency procedures are appropriately regulated. It is particularly important that, while access control and time tracking can be integrated, they remain clearly separated from a functional standpoint: time entries serve to document working hours, while access rights ensure physical security.
📋 Checklist: How Companies Can Identify the Right Software
✅ A suitable time-tracking software should electronically record working hours with timestamps, support various work schedules, and allow for mobile, desktop, and web-based use.
✅ It should not handle corrections and additions informally, but rather manage them through transparent workflows with approvals. Equally important are reports on attendance, absences, time accounts, and overtime.
✅ A suitable time-tracking software solution should also support the retrieval of electronic sick leave certificates (eAU) directly from the GKV server. This allows sick leave notifications, eAU status, absences, time accounts, and payroll to be processed as part of a seamless workflow. More on this.
✅ For HR and payroll, the software should provide evaluated time data and support interfaces with payroll software. This includes the ability to automatically evaluate digitally recorded work hours and prepare them for payroll processing. Ideally, relevant data can be transferred to payroll programs such as DATEV, HS, or other payroll systems without any data conversion issues.
✅ In addition, companies should evaluate data protection, access controls, retention, export capabilities, system operations, and scalability. The best solution isn’t the one with the longest list of features, but the one that reliably balances legal requirements with operational realities.
🤓 Conclusion: Time-tracking software that complies with the law is more than just a digital time clock
Companies looking for a legally compliant time-tracking solution should not focus solely on the tracking itself. The entire process is crucial: documenting, verifying, correcting, approving, storing, analyzing, and processing payroll.
The right software supports electronic time entries, traceable changes, secure storage, role-based access, data protection-compliant processing, and interfaces with related systems. Rule-based alerts also help identify critical discrepancies early on.
👉 For decision-makers, this means that legally compliant time-tracking software isn’t just a mandatory purchase. When chosen wisely, it becomes a solid foundation for HR, payroll, management, and compliance.
💡FAQ: Time-Tracking Software That Complies with the Law
What software helps ensure that time tracking complies with the law?
The ideal software is one that records working hours entirely electronically, applies timestamps, documents corrections in a traceable manner, stores data securely, and supports role-based permissions and data exports. In addition, it should be able to account for work schedules, breaks, overtime, absences, and interfaces with payroll systems.
What software helps manage critical overtime?
Suitable time-tracking software should be able to generate rule-based alerts, for example, in cases of missing breaks, high time balances, unusual working hours, or deviations from predefined work schedules. Such alerts help HR and managers identify risks early on and review time data in a timely manner.
Is Excel still compliant with the law for tracking work hours?
Excel isn’t necessarily out of the question, but it quickly becomes problematic when it comes to traceability, access control, versioning, correction processes, and data analysis. For companies with multiple employees, flexible work schedules, shift work, or the need for integration with other systems, specialized time-tracking software is generally much more robust.
What penalties can result from non-compliant time tracking?
The specific risks depend on the individual case and the obligation in question. Relevant issues may include complaints regarding working time regulations, fines for violations of documentation requirements, additional claims arising from minimum wage audits, or data protection measures. Companies should therefore not only collect data but also ensure that its storage, auditability, and data protection are properly organized.
What requirements does NIS2 impose on access control in conjunction with the time-tracking system?
NIS2 applies only to certain organizations and industries. For companies within its scope, cybersecurity, access control, role-based permissions, logging, and risk management are particularly important. For combined access control and time-and-attendance systems, permissions should be managed centrally, changes should be documented in a traceable manner, and sensitive areas should be adequately protected.
