In this article, we’ll break down what time tracking for small businesses means and how to get it right.
Since the rulings by the European Court of Justice (ECJ) in 2019 and the German Federal Labor Court (BAG) in 2022, employers in Germany are required to record working time systematically. In practice, this means that the start, end, and duration of daily working time must be documented using a reliable system. These requirements apply to small businesses just as much as to large corporations.
Keep reading for insights on how complex time tracking can be for small businesses, reliable time tracking solutions for smaller teams, and how to implement a system that’s compliant and easy to use.
TL;DR
- Who this article is for: owners, managers, and HR admins of small businesses in Germany (including very small teams) who need to understand their legal duty to record working time and want a practical digital solution.
- Legal situation in a nutshell: since the ECJ ruling (2019) and the BAG decision (2022), employers in Germany must record the full working time of their employees with an objective and reliable system, regardless of company size.
- The best time tracking solution for smaller teams: digital, cloud-based time tracking tools (available as web and app interfaces) typically offer the best combination of flexibility, cost-effectiveness, and legal security compared to Excel sheets or traditional time clocks.
- Implementation approach: choose a simple and user-friendly system, test it with your team, and then gradually replace manual lists and Excel sheets.
- Benefits of time tracking: fewer admin and calculation errors, better planning of absences and overtime, and more transparency and trust in the team. It also reduces legal risks and documentation stress.
Legal Time Tracking Requirements: What Small Businesses in Germany Must Know
The German Working Time Act (Arbeitszeitgesetz, ArbZG) is designed to protect employees’ health and safety by regulating maximum working hours, rest periods, and breaks. It requires that working time rules be respected and that compliance can be verified.
Two decisions are particularly important for small businesses:
- ECJ Ruling (May 2019, C-55/18): EU member states must ensure that employers use an objective, reliable, and accessible system to record daily working time.
- BAG Ruling (September 2022, 1 ABR 22/21): The Federal Labor Court derived a general duty to record working time directly from German occupational health and safety provisions (§ 3 ArbSchG), making time recording mandatory for all employers in Germany.
Does Time Tracking Really Affect Small Businesses?
Yes. For the current legal situation, what matters is your role as an employer, not the number of people you employ. The duty to record working time applies to:
- Micro businesses
- Small and medium-sized enterprises (SMEs)
- Large companies
Draft legislation to update the Working Time Act is still under discussion and may clarify details, such as electronic recording and possible simplified rules or exceptions for very small companies. However, these drafts do not remove the fundamental obligation; they mainly clarify how time should be recorded in the future.
For small businesses, this means:
- Obligation today: working time must already be recorded fully and systematically, even without a completely revised statute.
- Future development: electronic time recording is likely to become the standard, with defined rules and possible exceptions for specific groups.
Why a Digital System Is Worth It Even for Very Small Teams
Even if specific details for companies with fewer than ten employees are still being discussed, a digital system is already worthwhile today because it offers:
- Legal reliability: in the event of audits or disputes regarding overtime, wages, or working time violations, you can provide accurate, complete records.
- Transparency for everyone: employees can view their recorded hours, overtime balances, and vacation days at any time, which reduces questions and frustration.
- Efficiency in administration: automatic calculations for working time and overtime save time in payroll, especially when small teams already handle many tasks at once.
From Punch Clock to Cloud: Common Time Tracking Options for Small Businesses
Small businesses have more options than ever to record working time. Broadly, the solutions fall into three groups.
1. Manual Time Tracking (Excel and Paper Timesheets)
This is the classic approach: employees write their hours on paper timesheets or enter them into an Excel template.
Advantages
- Very quick to start with no upfront software costs.
- Familiar for many employees and easy to explain.
Disadvantages
- High error risk: handwritten entries, forgotten times, and manual calculations often lead to inaccuracies – a problem in audits or disputes.
- Limited legal robustness: Manual lists can be lost, changed, or become unreadable; they rarely meet the “objective, reliable, and accessible” standard.
- More administrative effort: someone has to check, correct, and sum up hours, often under time pressure, before payroll deadlines.
Manual time tracking can be a temporary solution, but for long-term, legally secure documentation, it is usually too fragile.
Related: Google Sheets alternatives for employee time tracking
2. Electronic Time Clocks and Terminals
Electronic time clocks and terminals are widely used in trades, logistics, or production — everywhere employees are physically present at a workplace.
Advantages
- Accurate and hard to manipulate: employees clock in and out with cards, chips, or PINs; data is stored centrally.
- Robust hardware: suitable for workshops, warehouses, or production environments.
- Integration options: often linked to payroll or HR systems.
Disadvantages
- Investment and setup costs: hardware, installation, and maintenance can be relatively expensive, especially for very small teams.
- Limited flexibility: Field staff, home office workers, or hybrid teams are harder to integrate if the system is tied to a single physical device.
For some small businesses with a clear on-site presence, terminals can still be the best fit; however, many modern teams prefer a more flexible time tracking solution.
3. Cloud-Based Time Tracking Software and Apps
Cloud-based time tracking systems, such as Timebutler, are often the most flexible solution for small businesses today. They usually combine a web interface with mobile apps. You can:
- Track time anywhere: in the office, on-site with customers, on the road, or in the home office via laptop, tablet, or smartphone.
- Record project or job time: assign hours directly to projects, cost centers, or customer orders.
- Generate reports: export working time, overtime, and absence data for payroll, controlling, or management at the click of a button.
Advantages
- Less paper and fewer Excel files: one central system instead of scattered lists and emails.
- Fewer alignment loops: supervisors and employees see the same data in real time.
- Clear responsibilities: rules for corrections, approvals, and overtime are built right into the system.
How To Choose the Right Time Tracking Software for Your Small Business
When choosing a time tracking system, you do not need an overwhelming feature checklist. Prioritize these five features.
1. Ease of Use and Quick Onboarding
A time tracking tool should be intuitive enough that employees understand it within minutes:
- Clear buttons for “start” and “stop.”
- Simple overviews of daily and weekly hours
- Logical workflows for corrections and approvals
If extensive training is needed, the system is often too complex for a small, busy team.
2. GDPR-Compliant Data Protection
Time tracking involves processing personal data. For legal security, you should make sure:
- Data is stored within the EU or under GDPR-compliant conditions.
- Retention periods and deletion rules for time data are clearly defined.
- Roles and permissions are configured (e.g., employees only see their own data, managers see team data, admins see everything).
Serious providers describe their data protection processes transparently and offer templates (like data processing agreements) to support your documentation.
3. Integration With Payroll and HR Processes
Time tracking becomes especially powerful when it fits smoothly into your existing workflows:
- Export of monthly hours and overtime for payroll accounting
- Reports on absences, vacation, and sick days
- Optional interfaces to payroll or HR software
Even if you are starting small, it is worth checking whether the system can grow with your requirements later.
4. Mobile Availability
Many small businesses operate outside traditional office settings, including trades, services, consulting, events, care services, and more. For them, mobile time tracking is essential:
- Native apps for iOS and Android
- Ideally, offline capability when reception is poor
- Clear views for field staff and supervisors
This also reduces the temptation to “reconstruct” times at the end of the week, which is neither accurate nor legally secure.
5. Transparent and Scalable Pricing
For small businesses, price clarity is crucial:
- Understandable pricing model (per user, per location, flat rate, etc.)
- No hidden costs for basic features such as exports, reports, or mobile apps
- Ability to start with a small plan and expand later as the team grows
Many small teams tell Timebutler they mainly want one thing: a tool that simply works — without long setup or confusing feature packages, and at a cost that fits a small business budget.
Implementing Digital Time Tracking in a Small Business: Step by Step
Introducing time tracking does not have to be a big project. In many small companies, the transition from Excel to a digital system is completed within a short time.
1. Clarify Your Requirements
Start with a few practical questions:
- Which working time models do we use (full-time, part-time, mini-jobs, flexible hours)?
- Do we need project or job time tracking, or is pure attendance enough?
- How many locations or teams are involved?
- Who will administer the system (e.g., owner, office manager, HR)?
This helps you choose a system that actually fits without unnecessary complexity.
2. Choose a Suitable System
Based on your requirements, decide whether you need:
- A web-based software and app (the most common solution for small businesses)
- A terminal-based solution (for example, for workshops or production)
- Or a combination of both (e.g., terminal in the workshop plus mobile app for field staff)
Tools like Timebutler focus on web and app-based time tracking and are particularly suitable for teams that work in different locations or in hybrid models.
3. Use a Test Phase
Most providers offer free trial periods of 14–30 days; Timebutler even provides a full six-week trial. Use this time to:
- Set up your working time rules (weekly hours, break rules, overtime handling, etc.)
- Create employees and test typical scenarios (vacation, sick leave, overtime, project time)
- Gather feedback from the team: What is intuitive, where do questions arise?
Hands-on testing reveals much more than theoretical feature comparisons.
4. Get the Team On Board
Time tracking only works if everyone participates. Keep the introduction simple and transparent:
- Explain why time tracking is being introduced (legal duty, transparency, protection for everyone).
- Briefly demonstrate how the system works, including logging in, starting and stopping times, and making corrections.
- Clarify who has access to which data and how privacy is protected.
If employees understand that the system also protects them (by providing proof of overtime and clear balances), they are more eager to adopt it.
5. Go Live and Phase Out Manual Lists
Once the system has proven itself in the test:
- Set a specific date from which all hours will be recorded digitally.
- Keep old Excel sheets or paper lists only as historical data.
- Watch the first one or two payroll cycles closely to identify and correct any issues early.
Most small teams report that after a brief adjustment period, nobody misses the manual time sheets.
Key Benefits of Digital Time Tracking for Small Businesses
Digital time tracking is more than a legal checkbox. In day-to-day operations, it brings very concrete advantages.
1. Time Savings in Administration
- No more manually transferring hours from paper to Excel.
- Automatic calculation of daily, weekly, and monthly working time.
- Faster payroll preparation because the base data is already complete and accurate.
2. Fewer Errors and More Legal Security
- Breaks, maximum daily working time, and rest periods can be checked automatically according to your rules and legal requirements.
- Overtime is recorded transparently and is no longer “lost” or remembered differently by employees and management.
- In cases of inspections or disputes, you can provide complete, structured records instead of stacks of loose paper.
3. Secure and Centralized Data Storage
- Time data is stored in the cloud instead of lying around on desks or in folders.
- Backups, access rights, and retention periods are handled centrally.
- Data can be exported at any time for audits or internal analysis.
4. Better Planning and Staffing
- Vacation, absences, and sickness can be viewed at a glance.
- Managers can identify peak times, overtime patterns, and workload trends.
- Future staffing and capacity planning become more reliable and data-based.
5. More Transparency and Trust in the Team
- Clear, shared data instead of subjective perceptions of “too much” or “too little” work.
- Employees can check their own hours and balances at any time.
- Fairness increases when everyone sees that the same rules apply to all.
Many small teams that use Timebutler report the same experience: once time tracking runs quietly in the background, everyday work feels noticeably lighter and less stressful.
Conclusion: From Legal Obligation to Real Relief
Whether your primary driver is legal compliance or the desire for more structure in your small business, digital time tracking is no longer a luxury. It helps you reliably fulfill current legal requirements, reduce administrative work, make working time and overtime transparent, and foster greater fairness and clarity within your team.
For small businesses, this ultimately means a greater focus on the core business and less time spent on wrestling with spreadsheets and paper forms.
Want to try it for yourself? Test Timebutler for free for six weeks and see how it fits into your team.
