However, some states have more favorable regulations regarding such leave (and other leaves of absence, for that matter). Therefore, even when the FLSA orders differently, if a state law has different regulations regarding labor law — the more favorable law to the employee prevails. 

In this text, we will:

• Define bereavement leave,
• Guide you on how to ask for bereavement leave,
• Answer some FAQs regarding bereavement leave, and 
• Go over bereavement leave in all 50 states, including Washington, D.C.

Let’s start.

What is bereavement leave?

Bereavement leave is time off that an employee takes amid the death of a close family member or friend. Such leave allows an employee to arrange and attend a funeral and deal with other matters after a loved one passes away. Bereavement leave is also often referred to as funeral leave or bereaved leave.

How does bereavement leave work?

An employee who’s lost an immediate family member may get a certain amount of time to stay at home and grieve. An immediate family member is usually:

• A spouse,
• A child, foster child, or step-child,
• A grandchild,
• A sibling, or
• A parent or grandparent.

Immediate family members may also include a former spouse, or relatives such as cousins, aunts, uncles, etc. Some companies even grant bereavement leave following the loss of a friend or a pet.   

Whether such leave will be granted or not (paid or unpaid) mainly depends on the agreement between an employer and the employee — but also the state in which an employee lives and works. 

How long is bereavement leave?

As said earlier, federal law doesn’t regulate bereavement leave, so the length of such leave is usually up to the employer or based on the company’s policies.

In general, many companies offer at least 3 paid days of bereavement leave amid the death of a close family member. As for extended relatives, grieving employees are granted at least 1 day off.

However, certain states stipulate other conditions regarding funeral leave that we will discuss later on in this text.

Is bereavement leave paid?

Similarly to the length of the bereaved leave, the question of offering paid bereavement leave is up to the employer. Companies may offer their employees both paid or unpaid leave of absence following the death of a loved one. 

Even though it is not required by law, offering bereavement leave shows support and gives employees time to grieve the loss of a loved one.

What is a typical bereavement leave policy?

When a company offers their employees bereavement leave, it is in the best interest of a business to craft a comprehensive bereavement policy (following federal and state laws when creating them).

A standard bereavement policy should include the following:

1. Eligibility — business owners should clearly state who qualifies for bereavement leave, whether eligible employees include only full-time employees or both full-time and part-time employees. Furthermore, eligibility may also refer to only state employees (depending on specific state laws) or both state and private employees.  
2. Duration — a bereavement leave policy must also state how much time off employees are entitled to receive in such circumstances. Again, this mainly depends on the employer, but they must be compliant with the state law regulations concerning bereaved leave (if there are any).  
3. Compensation — business owners may also decide whether they want to grant their employees leave of absence with or without pay. Again, if there are any state laws demanding the compensation of bereavement leave, employers must stick to them accordingly. 
4. Guidelines — also, business owners should clearly specify the guidelines for either the death of an immediate family member, extended relative, friend, or even a pet.
5. Documentation — the policy must also include what documentation is required for an employee to be able to request bereavement leave. Such documentation may include a copy of an obituary or death certificate, travel documents, etc.

How do I ask my boss for bereavement leave? 

Depending on the company’s policy or state regulations concerning bereaved leave, you must make sure you promptly inform your employer about taking time off. 

To be able to do that, try to follow these steps when requesting bereavement leave.

Step #1: Inform your employer 

First and foremost, make sure you notify your employer about the leave of absence you need to take without further delay. Depending on your company’s policy or state law, you may be required to send a prior notice via email or by contacting the HR department. Also, some companies may require you to fill out either an electronic or a paper form.

The important thing is to tell your employer about the leave you will need to take as soon as possible and provide other relevant information about your leave, such as travel plans, dates of your absence, and similar.

Step #2: Provide necessary documentation

Be prepared that your employer or HR department will ask you to provide evidence of your loved one’s passing before you take time off.

Along with the request for leave, your company may require you to provide a copy of an obituary or some other proof that your loved one’s passed away.

Step #3: Be aware of your company’s policy

You must be aware of the fact that your leave of absence directly depends on your company’s bereavement leave policy. If you’re not quite sure where to read the said policy, check your employee handbook to have a better understanding of your rights and responsibilities when requesting time off. 

As for bereavement absence, your company policy determines: 

• How much time off you will get, 
• Whether you will get a paid or unpaid leave, or 
• Whether funeral leave is separate from other types of leave (some companies may offer vacation days instead of a separate bereaved leave of absence).

Still, some companies don’t have official bereavement leave terms, so make sure you communicate your needs with your employer, manager, or HR department to understand your rights in such situations.

Step #4: Keep your colleagues in the loop

It is an unfortunate situation to lose somebody you love, but still, you must keep your work ethic and make sure your teammates are notified about your absence. Therefore, tell your colleagues about the time you will be absent and let them know about your current tasks and responsibilities. Also, leave them your contact details so that they can contact you if something urgent that needs immediate attention comes up.

State Bereavement Leave Laws and Legislation 2023

The following table will guide you into more detail about the 5 states providing bereavement leave in 2023. 

FAQs about bereavement leave 

If you haven’t found the answers you’re looking for regarding taking a funeral leave, here are some additional questions that may help you. 

How long should you take off work after a bereavement?

As stated before, the length of time you will take off depends on your company’s policy concerning funeral leave (or the state you live in). Still, if you feel the time you’ll be given to grieve is not enough, you may prolong your leave of absence and use your PTO days instead.  

What’s the difference between bereavement leave and compassionate leave?

Sometimes, these two terms are used interchangeably — but they don’t mean the same thing. Namely, bereavement leave is time off taken amid the death of a loved one, while compassionate leave is time off granted to an employee to tend to a sick dependant or relative due to different reasons.

Examples of circumstances when someone may take compassionate leave may include:

• When a family member is seriously ill or injured,
• To attend an urgent family matter,
• To care for a family member after an emergency such as crime, fire, flood, etc.

Does the federal law require employers to provide bereavement leave?

No, as mentioned earlier, federal law does not oblige an employer to provide their employees with bereavement leave. Whether an employee will be granted bereavement leave depends on the employer-employee agreement, the company’s policy, or the state where such employee lives and works.

What states require employers to provide bereavement leave? 

Even though Americans don’t have the right to take time off to grieve under federal law, there are states that require employers to offer such leave to their employees. In that case, the law that offers more benefits to the worker will supersede.

Currently, only 5 states oblige employers to provide bereaved leave to their employees, including:

• California,
• Illinois,
• Maryland,
• Oregon, and
• Washington. 

What states do not require employers to provide bereavement leave?

On the other side, states that don’t require employers to provide bereavement leave are:

• Alabama, 
• Alaska,
• Arizona,
• Arkansas,
• Colorado,
• Connecticut,
• Delaware,
• Florida,
• Georgia,
• Hawaii,
• Idaho,
• Indiana,
• Iowa,
• Kansas,
• Kentucky,
• Louisiana,
• Maine,
• Massachusetts, 
• Michigan,
• Minnesota,
• Mississippi,
• Missouri,
• Montana,
• Nebraska,
• Nevada,
• New Hampshire,
• New Jersey,
• New Mexico,
• New York,
• North Carolina,
• North Dakota,
• Ohio,
• Oklahoma,
• Pennsylvania,
• Rhode Island,
• South Carolina,
• South Dakota,
• Tennessee,
• Texas,
• Utah,
• Vermont, 
• Virginia,
• West Virginia,
• Wisconsin, and
• Wyoming. 

Can an employer provide bereaved leave, even if not mandated by state?

Yes. Even though there’s no federal law that mandates bereavement leave, that doesn’t mean an employer can’t offer their employees time off to grieve. Providing bereavement leave may increase employee morale and productivity in the workplace.

As a matter of fact, 88% of companies in the US offer their full-time employees paid bereavement leave based on the Society for HR Management (SHRM)’s report from 2018.

What are the benefits of employers providing bereaved leave?

Providing your employees with bereaved leave (paid or unpaid) leaves time for the grieved employee to heal after the loss of a loved one, hence encouraging a healthy work-life balance among workers. Moreover, it promotes a productive workplace and shows that you empathize with your employees during their loss. 

What if my employer doesn’t provide bereavement leave? What are my options?

If your company doesn’t offer bereavement leave, you can either use your vacation time or perhaps take time off under the Family and Medical Leave Act (FMLA). Namely, under this act, eligible employees have the right to take unpaid, job-protected leave for “specified family and medical reasons” of up to 12 workweeks (in a 12-month period). Still, make sure you qualify for such leave under the FMLA by reading the conditions and regulations thoroughly.

What if I’m self-employed and bereaved?

As a self-employed individual, you bear the costs of your time off taken due to bereavement purposes. Only company employees can be offered paid (or unpaid) bereaved leave of absence.

US bereavement leave — conclusion and disclaimer

We hope our comprehensive guide helped you get familiar with all of the relevant information regarding bereavement leave laws in the United States.

To obtain more information on bereavement leave laws for the state that require employers to offer their employees bereaved leave, follow the official links we:

• Provided as sources down below, and
• Used as sources in the State Labor Laws guides linked in this guide.

Please bear in mind — this bereavement leave laws guide was written in Q4 of 2023. Thus, it may not include changes introduced after it was published. 

We strongly advise you to consult the appropriate institutions and/or certified representatives before acting on any legal matters.

Clockify is not responsible for any losses or risks incurred should this guide be used without legal guidance.

Sources for the table:

California Bereavement Leave Law 

Illinois Bereavement Leave Law 

Maryland Bereavement Leave Law 

Oregon Bereavement Leave Law

Washington Bereavement Leave Law

Washington Paid Family and Medical Leave

One of the most obvious differences between the two is that Clockify offers various pricing options that are more affordable per user.

In its free plan, Clockify offers unlimited projects, clients, and users, while Toggl’s free plan is limited to 5 users only.

Also, in Clockify, you can track time in multiple ways, through a timer, a timesheet, the kiosk, or the auto tracker.

This guide will show you how to export your data from Toggl Track, and import it to Clockify and make the transition seamless.

If you want to see what Clockify has to offer besides time tracking, you can skip to the part where we cover Clockify web features (3. What else can you do in Clockify?), or you can explore our features page.

How to export data from Toggl and import to Clockify?

Once you’re logged in to Toggl, go to the Reports section and select the desired date range for which you want to export the data you need.

You can filter what you want to export, for example if you want to export certain projects only, and track time only for them in Clockify.

If you wish to import only projects and clients, for example, you can open the CSV file and manually delete all the columns except for projects and clients.

Or open your file in Excel to adjust what you want to import more easily.

When your file is ready to be imported to Clockify, go to the Clockify web app, and find the Import tab in the Settings.

Select your file, and the importer will analyze what projects, clients, tags, and tasks it needs to create.

When the import is done, you will receive a notification that the import was successful and you can check your newly imported time entries and projects.

To be imported correctly, the data in your CSV file needs to be in the right format.

Formatting rules to follow

In case you try to import and your CSV file doesn’t match the format for Clockify, Clockify will notify you can quickly put data in the right format before importing the CSV file again.

To put the data in the right format, you can use any text editor on your computer, or Excel for a more comprehensive overview.

To avoid any date or time format error, make sure that time format and date format in your Profile settings match the one in the file.

You can also change the format in the file but that takes a bit more work.

Clients, Projects, Tasks, Tags, and other information you want to import should be separated by a comma, with their category in the first row, and their values in each row below.

This is the summary of all the formatting rules to follow:

Summary of formatting rules

• Only Admins can do the import.
• If an item already exists, it will be skipped during the import. Only items that don’t already exist will be created.
• Tasks can’t be imported without its Project.
• The order of the columns is not important.
• Names are case sensitive.
• You can perform an import action for an unlimited number of times, but the file size is limited to 1MB.
• User’s email in Clockify and their email in the CSV file have to match.
• Required fields for time import: Email, Start date, Start time, Duration.
• Optional fields for time import: Billable, Description, Project, Task, Client, Tag (if some of these fields are marked as required in Clockify, they will be required in CSV too).
• If you don’t group projects by client, you should rename the client column in the CSV file accordingly.
• Duration in the CSV file should match the selected Duration format in workspace settings (hh:mm:ss or h:mm).
• Values in Start time and Start date columns in the CSV file should match your start and date formats from your profile settings.
• End date and end time are calculated automatically based on start time and duration.
• Projects will inherit initial private/public and billable/non-billable status based on New projects are by default workspace settings.
• If you don’t specify an entry’s billable status, it will be inherited from its project.
• Time entries are imported according to the time zone of the person who does the import.
• Hourly rates are inherited according to the hierarchy.
• Multiple tags can be imported by surrounding tags in double quotes and separating with a comma (e.g. “tag1, tag2, tag3”)

Once your imported data is ready and organized, you can proceed to explore other Clockify features and customize it to your needs.

What else can you do in Clockify?

If you have plenty of projects and team members, or just want to delegate some of the responsibilities to other team members, you can assign them the role of a manager.

Project managers can manage their projects and tasks, decide who will have access to the project, set project estimates, and create schedules.

While team managers can manage their team’s time, manage approval of their timesheets and time off.

Time off in Clockify gives you a way to manage employees’ absence with customized time off policies and holidays, so you can better allocate your resources.

The first step for profitability tracking is setting up the billable rates for revenue tracking and cost rates for labor cost tracking.

Rates in Clockify can be set the same way as in Toggl, for workspace, project, team members, project members, with an additional option to set task rates, as well.

This way you will have a more comprehensive view of how much each task contributes or takes away from your budget.

Another way to monitor your budget is to record expenses, which can be project related to project, or kept as a log of your internal expenses.

Expenses can be billed to a client, alongside your billable hours.

Billing is quite simple. If you just import your billable hours and expenses from a certain project to an invoice, you will be able to customize it and send it to a client.

Each invoice will have its status based on the payment and sent status, so you always know what has and hasn’t been billed, what is overdue, and what is partially paid.

In case you need further details on time entries or team members, you can always create custom fields for users or time logs.

Custom time entry fields will be visible in the Detailed report, so you have all the details you need at just a glance.

A great way to allocate your resources throughout the weeks is to use scheduling.

Scheduling helps you organize your projects and employees in a clear way, always having the information on each person’s daily capacity at a glance.

You can add important milestones to your schedules, shift timelines in case the project gets postponed, and repeat the schedule for the weeks ahead.

Why choose Clockify instead of Toggl?

If you would like a more affordable time tracking tool and more flexibility with your time tracking, Clockify is the right choice.

Besides choosing between methods you use to track time, you can also track time on different devices, and all your data will be synced.

If you would like to see how other time tracking or other features in Clockify work, make sure to check out Clockify YouTube channel, or explore the website for more details.

But, to achieve your final outcome, you’ll need to manage: 

• Human resources (the specialists involved in renovation), 
• Financial resources (the budget available for renovation), and 
• Physical resources (materials required for this project).

This scenario is a simplified version of resource management. The reality is that managing resources becomes even more challenging in a business context — especially when managing large or complex projects. To add to the problem, resources, such as talent and money, are often limited.

So, how to do more with less? 

You can find the answer in this guide as we cover these points:

• The types of resource management, 
• The stages involved in managing resources, and 
• Some expert tips to help you optimize your resource management.

Let’s get started.

What is resource management? 

Resource management refers to a set of practices and tools that help businesses make the best use of their resources, such as time, money, and people. The goal of resource management is to ensure the right resources are available at the right time for the right task or project.

Let’s put it another way.

Ever played a video game called Tetris? In this game, players must manipulate falling blocks of different shapes to fit them together efficiently within a confined space. If the blocks pile up and reach the top of the screen, the game ends.

Now, let’s replace the falling blocks with vital resources: 

• Time, 
• Money, 
• People,  
• Information, and 
• Materials. 

Resource management is all about skillfully putting these blocks together efficiently to achieve project success. 

For instance, if you are building a house, you will need to put together resources, such as:

• People (contractor or subcontractor),
• Time (2 years),
• Money ($350,000),
• Materials (bricks, tiles, paint, furniture, etc.), and 
• Information (knowledge about building permits and safety regulations).

Just as in Tetris, if you don’t manage these resources well, your project (and business) can suffer. The harsh consequences of poor resource management can include financial losses, missed opportunities, and even project failures. 

But, how exactly do you master the art of resource management?  

Before we get into the strategies, let’s first look at the types and stages of resource management.

What are the 5 types of resource management?

When we talk about the types of resource management, we are essentially talking about managing different types of resources. 

As we all know, people, time, and money are the most important resources every business needs. But, you may need other resources for efficient project management, such as raw materials and information.

Let’s look at these resources in some detail.

Type #1: Human resource management (HRM)

As the term suggests, human resource management is all about managing the most important resource of organizations — the human capital. In other words, HRM involves a set of practices and tools a company uses to: 

• Employ, 
• Compensate, 
• Train, 
• Nurture, and 
• Retain employees.

In their book Human Resource Management: The Key Concepts, authors Chris Rowley and Keith Jackson categorize HRM activities into these four groups:

• Employee resourcing — workforce planning, recruitment, candidate assessment, contracts of employment, and onboarding,
• Employee rewards — compensation strategies, performance evaluation, benefits, motivation, and rewards,
• Employee development — skills development, knowledge transfer, career and leadership development, and
• Employee relations — creating and implementing policies about workplace safety, discrimination and bullying, time tracking, legal compliance, work-life balance.

The purpose of HRM is to nurture and engage employees. According to Gartner’s research, a nurturing environment can then help businesses: 

• Achieve organizational goals,
• Manage other resources (such as money, materials, and data),
• Boost productivity,
• Retain top talent,
• Enhance customer satisfaction, and
• Improve revenue growth. 

Type #2: Financial resource management (FRM)

Financial resource management involves efficient handling of a business’ cash flow and other assets. Financial resources can include both:

• Internal resources — profits generated by sales, capital funding, investments, and assets that can be converted into cash, and
• External resources — credit and loans from banks, government agencies, and other external sources.

FRM includes the following activities:

• Budgeting — setting financial plans and limits for income and expenditures,
• Financial planning and forecasting — creating strategies for future financial performance,
• Cost control — reducing expenses to ensure the business stays profitable,
• Bookkeeping and accounting — recording, analyzing, and reporting financial transactions,
• Resource allocation — allocating funds and assets to different departments within an organization, 
• Financial risk assessment — evaluating potential financial threats and developing strategies to manage them,
• Asset management — monitoring and managing the inventory to maximize return on investment, and
• Regulatory compliance — adhering to legal and industry-specific financial regulations and standards.

The main goal of FRM is to ensure the business uses its cash and assets to stay profitable and competitive. This is more important than ever with lack of cash flow being the top reason for business failure, according to a 2022 Skynova survey.

On top of that, a different study found that 65.2% of businesses stayed profitable by optimizing their cash management practices.

These findings highlight the importance of effective FRM that helps businesses maximize their profitability and stay competitive.

Type #3: Time resource management (TRM)

Next up in our list is time management, which involves tools and strategies to make the most efficient use of time.

TRM involves the following activities and processes:

• Goal-setting — prioritizing and focusing on essential tasks and goals,
• Task scheduling — allocating time to activities to ensure each moment is purposefully assigned,
• Streamlining processes — reducing complexity to help utilize time efficiently,
• Promoting time discipline — encouraging a culture where everyone values efficient time management, 
• Adjusting workloads and priorities — using feedback to optimize workloads and schedules to boost productivity, and
• Tracking time — using time tracking apps to measure progress and allocate resources.

On top of all the other benefits each time management strategy comes with, time management techniques can also help individuals and organizations reduce procrastination and improve productivity.  

In fact, a study by Bain & Company found that efficient time management can help improve employee engagement while lowering costs and boosting productivity.

Another study titled Does time management work? A meta-analysis found that time management helps enhance employees’ job performance and well-being.

Type #4: Information resource management (IRM)

As defined in a research paper on information resource management, “IRM is a complex process involving the planning, developing, controlling, operating, and utilizing of organizational information resources.”

The purpose of IRM is to efficiently manage data resources to achieve business goals. For example, by gathering and analyzing customer purchase history, businesses can create personalized marketing messages to improve customer experience.

In the example we gave above, you saw that a house owner needs to possess specific information, such as knowledge of building permits, price of materials, etc., to complete their project.

Here are the aspects of information resource management:

• Knowledge management — organizing and facilitating access to data in the form of documents, digital content, reports, and intellectual assets,
• Data analytics — making informed decisions based on data and analytics,
• Data cleansing — removing duplicate or unwanted data to improve data quality, 
• Maintaining data repositories — creating a centralized database to offer a unified view of the company’s data, 
• Data governance — establishing policies and standardized practices related to data management, 
• Data security and compliance — protecting critical data by using methods, such as access control, encryption, and other security measures, and
• Information infrastructure — managing the tools that store and handle data, such as software, hardware, and network resources.

Type #5: Physical resource management

This type of resource management involves managing your business’ tangible physical assets — office equipment, building, vehicles, and raw materials. 

For instance, a business that offers laundry services will need to manage physical resources, such as washing machines, dryers, irons, steamers, tables, etc.

The primary goal of physical resource management is to use these assets efficiently to achieve the desired goals. 

These are some of the aspects and activities linked to physical resource management:

• Acquiring resources — purchasing or renting new physical resources as needed,
• Asset maintenance — scheduling regular maintenance to optimize the assets’ functionality and lifespan,
• Inventory control — managing inventory levels to ensure that essential materials and supplies are available when needed,
• Asset tracking — using technology, such as asset tracking systems or software, to monitor the location, condition, and usage of physical resources, and
• Resource optimization — identifying opportunities to enhance the efficiency and cost-effectiveness of physical assets.

What are the stages of resource management?

The stages involved in resource management can depend on the complexity of the project and the type of resources being managed.  

For instance, in the case of software product design, it all starts with understanding the project scope, according to Zoran Vizmeg, Project Manager at CAKE.com. He lists the following stages of resource management:

• Step #1: Identifying resource needs — the project team, the product team, and the codebase team discuss the project requirements, complexity, and feasibility.
• Step #2: Assessing and planning resources — with the help of the team, the project manager then creates a project roadmap, defines each task, and estimates the resource requirements.
• Step #3: Allocating resources — the project manager assigns tasks to individual developers or teams.
• Step #4: Scheduling resources — the manager creates a detailed schedule for each task with the help of a scheduling tool, such as Clockify.
• Step #5: Monitoring resources — the project team monitors the project and resources. 
• Step #6: Adapting based on feedback — based on feedback from the codebase team, developers, and the project team, the project manager fine tunes resource management.

Thanks to his expertise in project management, Zoran helped us craft the stages of resource management. Let’s look at these various stages involved in resource management in some detail. 

Stage 1: Identifying resource needs

In this initial stage, organizations identify the resources required to achieve specific goals or projects. This can include human resources, financial resources, specific materials, equipment, and others.

The following questions can help you identify the resources you need for the project:

• What is the scope of the project (budget, timeline, goals, and deliverables)?
• What resources do we need to successfully complete the project?
• How much of these resources do we need and when do we need them?
• Do we need any external resources, such as specialized equipment or experts?
• What skills are necessary to complete the project tasks? 
• How can we access the required resources?
• Do we need backup resources and if yes, where do we find them?

Project managers can use several tools and techniques to estimate project resource needs:

• Expert judgment — consulting experts well-versed in the type of project,
• Alternative analysis — comparing different ways to accomplish tasks and identifying the most suitable or cost-effective resources,
• Published industry data — looking at published data on project resource estimation in industry-specific journals, books, articles, and surveys,
• Project management software — selecting the right software with features that help them find the best combination of resources they need, and
• Historic internal data — drawing insights from the organization’s historical data, such as purchase, time tracking, and accounting records.

Stage 2: Assessing and planning resources

The next step is to conduct a thorough assessment of required resources. This involves determining the: 

• Availability, 
• Quantity, 
• Quality, and 
• Capabilities of the required resources.  

If your organization does not have all the resources you need, you may need to invest in the required resources.

For instance, an initial assessment of available human resources helps a company understand if there is a lack of necessary skills for an IT project. The company can now make informed decisions on hiring skilled developers or upskilling its team members. 

This is also the stage where project managers create a detailed project roadmap to understand the resource requirements, according to Zoran.

Stage 3: Allocating resources 

Now that you know what resources you need, the next step is to assign them (human, financial, time resources, materials, etc.) to each task or project. The goal of resource allocation is to distribute resources in the best possible way to optimize productivity, lower costs, and achieve the desired results.

For example, a junior graphic designer may need 2 days to complete a design task, while an experienced designer may need only 3 hours. If your design project has a tight deadline, assigning the senior designer is obviously the best way to ensure the task gets completed on time.

As Zoran Vizmeg, our contributor, explains, the third stage of resource management in the IT company means communicating with the development team in order to assign those newly created tasks to developers and confirming estimation. 

Here’s a real-world example of successful resource allocation from the book Human Resource Management: Linking Strategy to Practice. 

Trader Joe’s, a grocery store, is known for its customer-centric approach. With an aim of making their shoppers happy, they choose employees who are naturally outgoing, upbeat, and have a strong customer focus, in addition to a sense of humor. 

Therefore, by allocating their resources the best possible way and selecting the right person for the job, the company gained a competitive advantage and remained profitable.

Stage 4: Scheduling resources

Resource scheduling involves creating a timeline or schedule explaining when and how you will use resources. This process ensures that resources are allocated at the right time and in the right amounts.

While there are many methods you can use to schedule your resources, two of the most commonly used ones are Gantt chart and Critical Path Method (CPM). 

A Gantt chart provides you with a visual representation of your tasks and their timelines.

For example, in the Gantt chart given below, you can see the time taken to complete each task and associated activities. The responsible departments are color-coded along with the assignees for each activity.

On the other hand, Critical Path Method (CPM) involves identifying the logical sequence of tasks and dependencies in a project. In other words, each project usually consists of multiple tasks, and some tasks may be dependent on other tasks. 

For instance, if the project is to build a botanical garden, you cannot plant trees until the site is leveled and soil is prepared. 

Stage 5: Monitoring and control

Once resources are allocated and tasks are underway, ongoing monitoring is essential. This process involves: 

• Tracking resource usage and project progress, and 
• Making adjustments as needed to ensure that goals are met.

According to Zoran, this is also the time when the team “solves bumps on the road that they didn’t see during the planning phase.”

Let’s say a construction project is underway. As the project progresses, the project manager closely monitors how employees use resources. They could use construction timesheets, such as Clockify, to ensure that workers are on-site as scheduled and are productive.

Resource monitoring also includes tracking costs associated with labor, equipment, and materials. If actual costs exceed the budgeted costs for a resource category, the project manager can then take corrective actions. These actions can include measures to identify areas that require cost optimization, seeking approval for budget adjustments, or reallocating resources.

For instance, if the material costs are over budget for a construction project, the project team may decide to use alternative materials to meet the project requirements.

Stage 6: Feedback and adaptation

At defined intervals, organizations need to evaluate the performance and results achieved. This feedback helps improve future resource planning efforts.

Zoran believes communication and constructive feedback are the keys to identifying areas for improvement:

“Communication is important in every part of our lives, especially at work. If we want to grow, we need to get feedback in order to recognise which part of our personal development needs to be improved. If we don’t get any constructive feedback, we can hardly detect what can be improved.”

Sometimes, projects or priorities change, or unforeseen circumstances arise. In such cases, project managers need to reallocate resources to address new needs or challenges.

Based on the evaluation and lessons learned, organizations adapt their resource planning strategies and processes for future projects or planning cycles.

Why is resource management important?

Given that lack of talent, time, and budget are the key obstacles to organizational success, managing these limited resources is more important now than ever.

Let’s see why it’s crucial for project managers and companies to manage their resources properly: 

• Improvement in productivity and profitability — when companies use resources efficiently, they can boost productivity and revenue. A McKinsey study shows that firms that prioritize human capital development earn a profit of over $1 million and emerge as “superstars.”
• Securing a competitive advantage — organizations that manage their resources well are often more competitive. For instance, smart data management helped 53% of manufacturers create a competitive advantage for their companies, according to IBM research. 
• Increasing employee engagement — making the best use of the time, skills, and competencies of employees can boost morale and job satisfaction. 

Yet, most organizations struggle to manage their resources, with the consequences often being profound. In an analysis of 16,000 projects, Bent Flyvbjerg, co-author of How Big Things Get Done, found that just 8.5% of companies were able to stick to their planned budgets and timelines.

Underutilizing resources can also have negative consequences, particularly in big projects. For example, when oil rigs use just 77% of their production resources, the industry suffers a revenue loss of $200 billion each year, according to a McKinsey study.  

This brings us to the question: how to improve resource management?

How to improve resource management? 

The key to effective resource management is to understand the project’s scope and resource requirements thoroughly. To help you out with that, here are some tips for optimizing resource management.

Tip #1: Be proactive and keep an eye on progress

In the sections above, you learned about the typical stages of a software designing project that Zoran described. By following an established process, Zoran can avoid last-minute scrambles and shortage of resources for any future projects.

While resource managers cannot foresee every possible outcome, being proactive and planning ahead can help them manage resources wisely.

One way to manage resources efficiently is to create a resource management policy. Here are some questions that your resource management policy needs to address:

• Who is responsible for managing resources? 
• How will you assess resource requirements?
• How will you allocate resources?
• What procedures will you put in place to address resource shortages?
• What tools will you use to monitor resource utilization?

Another way to be proactive is to anticipate future resource needs. 

An easy way to anticipate future resource needs is to use a project forecasting tool such as Clockify. The software uses current data on budget, time, and schedules to make predictions about how the project is likely to perform in the future.

In Clockify, you can keep an eye on project progress 

In fact, a case study on streamlining resource management further confirms the importance of estimating future resource needs. 

Namely, an IT company owner sets the monthly estimates for projects at the beginning of each month which helps them forecast the hours of work the team needs to achieve these estimates. This habit helps the owner know exactly how the project is going and whether it is taking up more time than expected. It also helps establish a time management culture in the company.

Tip #2: Foster open communication and coordination

While resource or project managers are typically accountable for resource management, it is important to involve all stakeholders in the process. Depending on the type of project, the stakeholders can include the project team, HR, finance, and purchase departments. 

In addition to creating a collaborative environment, it is important to encourage ongoing communication between these stakeholders.

Ongoing communication makes it easy for team members to share resource needs, challenges, and ideas to improve resource management.

According to Michael Shick, PMP and assistant professor of project management at Western Carolina University, the foundation for open communication needs to be set in the project initiation stage:

“Open communication and feedback helps to decrease misunderstandings, which in turn should promote enhanced work performance and productivity. Additionally, open communication helps to build trust and fosters understanding, suggesting the significance of open dialogue.”

We can see how important ongoing communication and coordination is by looking at  the often quoted example of the Airbus A380 (the world’s largest passenger airplane) project.

Airbus had hired multiple design teams and component manufacturers spread across countries to manufacture Airbus A380. A lack of clear and transparent communication between various teams led to multiple issues during the aircraft’s production. As a result, the project suffered delays, cost overruns, material, and manpower shortages.

Tip #3: Track and monitor resource utilization on a regular basis

Resource monitoring and control play a vital role in ensuring that you are utilizing the resources in the best possible way. 

But how frequently should you monitor resource utilization? A survey on resource utilization by the Resource Management Institute (RMI) shows that most organizations measure resource utilization on a weekly or monthly basis. This is also a recommended practice.

Regular monitoring is also a great way of preventing issues, such as underutilization or overutilization of resources and resource-related delays or cost overruns.

For example, by monitoring overtime hours, companies can identify how they distribute overtime and whether some employees can take over more work so that others don’t work overtime. This can help prevent burnout and keep employees motivated.

In addition, tracking the time spent on each task can easily help identify wasted time and make additional changes where needed. 

Tip #4: Train resource managers

Resource managers need to have a broad skill set — ranging from project management related skills to the ability to communicate and manage people. 

However, RMI’s survey titled Profession of Being an RM/RMO Leader shows that 92% of organizations find it hard or very hard to find skilled resource managers. And, this is one of the key factors that can hamper effective resource management.

The good news is, like most other skills, learning and practicing are the keys to mastering resource management.

By investing in resource management training, organizations can empower their workforce with the essential skill sets. These training initiatives can include: 

• Courses in resource allocation methodologies, 
• Project management frameworks, and 
• Soft skills development.

According to Elizabeth Harrin, experienced project manager and author of Managing Multiple Projects, one of the biggest challenges lies in making sure all members of the team, particularly the less experienced, have the opportunity to learn. 

“We’d all like the best, most experienced, well-trained people to be on our projects, but that would mean junior and less experienced people would never get a chance to practice their skills. If you want your staff to stay with you long term, you should look for ways to provide them with experiences that stretch their abilities and help them develop as professionals.”

How to manage resources with Clockify 

Why do you need tools such as Clockify to manage resources? Here’s a compelling reason — the above-mentioned RMI’s survey on resource utilization found that the lack of automation tools is one of the biggest inhibitors of effective resource management. 

Surprisingly, 57% of survey respondents said they rely on spreadsheets for resource management despite the availability of resource management tools.

As a resource management software, Clockify streamlines various aspects of resource management. From scheduling tasks to tracking project progress, there are many features that help you fast-track resource management. Let’s see how.

Clockify enables you to plan and visualize your projects and milestones. You can:

• Organize your projects by clients, 
• Create tasks within these projects, and 
• Define the timelines for each task and project.

With Clockify, you can quickly determine who on your team is busy and who is available for new assignments. Later on, you can easily assign new tasks and define work schedules. This visibility is crucial for resource allocation and ensuring that work is evenly distributed.

Clockify offers time tracking capabilities — allowing your team to log their hours accurately. This feature helps you monitor work progress, productivity, and time utilization.

This tool also allows you to set budgets for each task and project. You can then track and compare the actual versus estimated time and expenses to optimize resource management.

Conclusion: Plan ahead and track to optimize resource management

Given the constraints of time, money, and talent in today’s business landscape, effective resource management is the key to project success. 

To ensure you’re making the most of your resources, remember to: 

• Understand the project scope, 
• Plan ahead, 
• Allocate wisely, and 
• Continuously track resource usage. 

By implementing the strategies we’ve listed, not only can you optimize resource management, but you can also boost productivity and gain a competitive edge.

Above all, be strategically hawk-eyed on your resources and invest in training resource managers. Now, you’ll be well on your way to achieving your organizational goals.

Depending on whether you live in a right-to-work state or not, you may have to join a union at your company or pay union dues and fees.

If you’d like to learn more about the states which have and have not passed the right-to-work law, stick with us.

In this right-to-work states guide, we’ll:

• Explain what a right-to-work law is,
• Define a right-to-work state,
• Tell you which US states have right-to-work laws and which do not,
• Let you know if there are any federal right-to-work laws, and
• Provide you with some answers to frequently asked questions related to right-to-work states.   

What is a right-to-work law?

According to the Federal Reserve Board, the right-to-work law in the US is a law that says that workers are not required to join a union at their workplace “as a condition of their employment.”

In other words, in the United States, a right-to-work law is a law that gives workers the freedom to choose whether they want to join a labor union at the company they are working for or not. 

What is a right-to-work state in the US?

As the Legal Information Institute of Cornell University puts it, a right-to-work state is a state that “has a law prohibiting union security agreements.”

Furthermore, according to the National Labor Relations Board (NLRB), in the US states where union-security agreements are prohibited, “it is up to each employee at a workplace to decide whether or not to join the union and pay dues.” 

According to the abovementioned source, if workers are represented by unions, such employees have to pay union dues. Union dues are the amounts that such workers need to pay within 30 days after they are hired.

What states are right-to-work states? 

While some states in the US have right-to-work laws, others do not. To see all US states and their status when it comes to right-to-work laws, take a look at the table below. 

We also included the “Notes” section in the table to explain any additional laws and regulations regarding labor unions and workers’ rights in the US.

This table refers to workers who are employed by the federal, state, or local government (it does not refer to private-sector employees). 

State	Right-to-work law	Notes
Alabama		/
Alaska		Following the Janus v. American Federation of State, County and Municipal Employees (AFSCME) decision, Attorney General Kevin G. Clarkson released a formal statement saying that the state of Alaska is not allowed to withdraw union dues and fees from an employee’s paycheck unless the employee gives them the authorization to do so.
Arizona		/
Arkansas		/
California		According to California’s State Employer-Employee Relations Act, state employees have the right to form or join the labor union or refrain from doing so. However, a nonmember may have to pay their “fair share fee,” that is, their employer may withdraw a certain fee from their wages for the union’s representational services.
Colorado		According to the Colorado Labor Peace Act, employees at most workplaces have the right to form or join a labor union or refrain from doing so. However, an employer has the right to enter into an all-union agreement (an agreement requiring employees to be union members or pay union fees if they are not members) with the employees’ representative.
Connecticut		Under Connecticut’s Labor Relations Act, most employers cannot require an employee to join a labor union or refrain from doing so. However, an employer is allowed to make an agreement with the employees’ representative that requires membership as a condition of employment. Under Connecticut’s collective bargaining laws following the Janus v. AFSCME decision, public employers cannot deduct union fees from an employee who’s a nonmember unless the employee gives them the authorization to do so.
Delaware		According to Delaware’s Public Employment Relations Act, public employees have the right to form or join labor unions or refrain from doing so. However, an employer has the right to enter into a collective bargaining agreement with the employees’ representative where they may require that each nonmember pays a fair share fee through their wages.
District of Columbia		According to the Code of the District of Columbia, Section 1–617.06, all employees have the right to form or join a labor union or refrain from doing so. However, an employee may have to become a member of a union as a condition of employment if there’s an agreement requiring so. Furthermore, if there is no such agreement, and the employee chooses not to become a union member, they may still have to pay union fees (a portion of union dues intended for representational services).
Florida		/
Georgia		/
Hawaii		According to the Hawaiʻi Revised Statutes, Section 89-3, public employees have the right to join or form a labor union or refrain from doing so. However, an employer may enter into a collective bargaining agreement saying that each employee is required to join the labor union or pay an identical amount of labor dues as a condition of employment.
Idaho		/
Illinois		According to the Illinois Public Labor Relations Act, public employees have the right to form or join labor unions or refrain from doing so. However, an employer may enter into a collective bargaining agreement with the employees’ representative where they may require that each nonmember pays a fair share fee through their wages.
Indiana		/
Iowa		/
Kansas		/
Kentucky		/
Louisiana		/
Maine		According to the Maine Municipal Public Employees Labor Relations Law, public employees have the right to form or join a labor union or refrain from doing so. However, an employee may be required to pay a fair share fee for the union’s representational services.
Maryland		According to the Maryland Labor and Employment Statute, any type of promise (whether oral or written) of becoming or not becoming a member of a union made between an employee and an employer is invalid. Furthermore, as Maryland Collective Bargaining Law indicates, state employees have the right to form or join a labor union or refrain from doing so. However, an employee may be required to pay union fees if they are represented by that union.
Massachusetts		According to Massachusetts Labor Relations Law, employees at most workplaces have the right to form or join a labor union or refrain from doing so. However, an employer may enter into an agreement with the employees’ representative that requires membership as a condition of employment. Furthermore, an employer may require each employee to pay a fee for the union’s representational services if there’s a collective bargaining agreement that states so.
Michigan		In 2023, the Senate introduced Bill No. 34 which repealed Michigan’s right-to-work law. Under this Bill, private-sector employers may now enter into a collective bargaining agreement with the labor union and require each employee who’s a part of the bargaining unit to pay a fair share fee.
Minnesota		According to Minnesota Statutes, Section 179A.06, public employees have the right to form or join a labor union or refrain from doing so. However, an employer may enter into an all-union agreement with the employees’ representative. Moreover, employees who are nonmembers may also be required to pay their fair share fee for the union’s representational services.
Mississippi		/
Missouri		/
Montana		According to the Montana Code Annotated, Section 39-31-201, public employees have the right to form or join a labor union or bargain collectively through an agreement. Whether they may refrain from joining a union is not clearly stated. Furthermore, each state employee who’s represented by the union may be required to pay a union fee if there’s a collective bargaining agreement that states so.
Nebraska		/
Nevada		/
New Hampshire		According to the New Hampshire Public Employee Labor Relations Act, public employers cannot deny their employees the right to form or join a labor union or bargain collectively through an agreement. Furthermore, employees may be required to pay certain fees to a union if they are represented by that union.
New Jersey		/
New Mexico		According to New Mexico House Bill 85, employers who are not governed by the NLRA have the right to enter into union-security agreements with labor organizations.
New York		As the New York State Public Employees’ Fair Employment Act declares, public employees have the right to form or join a labor union or refrain from doing so. However, an employer may enter into an agreement with the employees’ representative that requires membership as a condition of employment.
North Carolina		/
North Dakota		/
Ohio		Under the Ohio Revised Code, Section 4113.02, any type of promise (whether oral or written) of becoming or not becoming a member of a union made between an employee and an employer is invalid. Moreover, public employees have the right to form or join a labor union or refrain from doing so. However, an employer may enter into an agreement requiring a nonmember to pay a fair share fee for the union’s representational services as a condition of employment.
Oklahoma		/
Oregon		Under Oregon Revised Statutes, Section 663.110, employees at most workplaces have the right to form or join a labor union or refrain from doing so. However, an employer has the right to enter into an agreement with a labor union that requires each employee to become a member of a union as a condition of employment.
Pennsylvania		According to the Pennsylvania Labor Relations Act, employees at most workplaces have the right to form or join a labor union or bargain collectively through an agreement. Furthermore, an employer may enter into an agreement with the employees’ representative that requires membership as a condition of employment.
Rhode Island		As the Rhode Island Labor Relations Act states, employees at most workplaces have the right to form or join a labor union or refrain from doing so. However, an employer may enter into an agreement with the employees’ representative that requires membership as a condition of employment. Moreover, an employee who’s a nonmember may be required to pay certain fees to a union if they are represented by that union.
South Carolina		/
South Dakota		/
Tennessee		/
Texas		/
Utah		/
Vermont		According to Vermont’s State Employees Labor Relations Act, a state employee has the right to form or join a labor union or refrain from doing so. However, an employer may enter into an agreement with the employees’ representative that requires membership as a condition of employment. Furthermore, an employee who’s a nonmember may be required to pay their fair share fee for the union’s representational services.
Virginia		/
Washington		Under the Revised Code of Washington, Section 41.80.050, state employees have the right to form or join a labor union or refrain from doing so. Furthermore, an employee who’s a nonmember may be required to pay their fair share fee for the union’s representational services.
West Virginia		/
Wisconsin		/
Wyoming		/

What are the federal right-to-work laws? 

The National Labor Relations Act (NLRA) is the only right-to-work law on a federal level in the US, and it only refers to certain private employers. 

According to the NLRB, the National Labor Relations Act is a “federal law that grants employees the right to form or join unions, engage in protected, concerted activities to address or improve working conditions, or refrain from engaging in these activities.”

In addition, the National Labor Relations Act covers only private-sector employees. 

When it comes to public employees, their right-to-work rights depend on laws and regulations issued by each state individually.

FAQs about right-to-work states

To provide you with some additional information regarding right-to-work states, we’ve answered some of the frequently asked questions on this topic, so check out the section below.

To sum up, what states are right-to-work states? 

In total, there are 28 US states that have right-to-work laws.

The following is a list of right-to-work states:

• Alabama,
• Arizona,
• Arkansas,
• Florida,
• Georgia,
• Idaho,
• Indiana,
• Iowa,
• Kansas,
• Kentucky,
• Louisiana,
• Mississippi,
• Missouri,
• Nebraska,
• Nevada,
• New Jersey,
• North Carolina,
• North Dakota,
• Oklahoma,
• South Carolina,
• South Dakota,
• Tennessee,
• Texas,
• Utah,
• Virginia,
• West Virginia,
• Wisconsin, and
• Wyoming.

To sum up, what states are not right-to-work states?

There are 23 US states in total that do not have right-to-work laws.

The following is a list of states that are not right-to-work states:

• Alaska,
• California,
• Colorado,
• Connecticut,
• Delaware,
• District of Columbia,
• Hawaii,
• Illinois,
• Maine,
• Maryland,
• Massachusetts,
• Michigan,
• Minnesota,
• Montana,
• New Hampshire,
• New Mexico,
• New York,
• Ohio,
• Oregon,
• Pennsylvania,
• Rhode Island,
• Vermont, and
• Washington.

What is the history of right-to-work laws?

Originally, the phrase “right to work” was coined by French socialist leader Louis Blanc long before the first right-to-work law was ever enacted. 

According to research on the history of right-to-work claims, Louis Blanc believed that society — that is, the state — should provide employment to everyone. He also believed that every man should have a “right to work.”

In the early 1940s, the term “right to work” was popularized by Vance Muse, a Texas businessman and conservative lobbyist. He started the “right to work” movement with the idea of fighting unionization of the workers in the US. 

On July 5, 1935, former president of the US, Franklin Roosevelt, signed the National Labor Relations Act — better known as the “Wagner Act.”

According to the National Archives, the motive behind the Wagner Act was to give certain freedom to employees such as “the right to self-organization, to form, join, or assist labor organizations, to bargain collectively through representatives of their own choosing, and to engage in concerted activities for the purpose of collective bargaining or other mutual aid and protection.” 

In 1947, the law called the “Taft-Hartley Act” was enacted, whose purpose was to modify the Wagner Act by further regulating unions.   

As the National Labor Relations Board states, the Taft-Hartley Act was supposed to protect workers from certain “unfair practices by unions” such as coercion or discrimination by unions. 

According to the US Representative Joe Wilson’s office, in February 2023, Congressman Joe Wilson reintroduced the National Right to Work Act to Congress. With this act, Wilson wanted to ensure the freedom of choice for all US employees regarding union membership and paying union dues. 

However, this act still hasn’t become an official US act.

Right-to-work vs. at-will employment laws — how do they differ? 

According to the Bureau of Labor Statistics, at-will employment is a legal doctrine indicating that “people should be free to enter into employment contracts of a specified duration.” However, it also indicates that either employer or employee can terminate such a contract for any reason, at any time, unless there’s an employment agreement to state otherwise.

While right-to-work laws protect employees against being forced to join a union during their employment, at-will employment laws give both employers and employees certain rights upon the termination of employment.

Who is covered under right-to-work laws?

According to the National Labor Relations Board, most private-sector workers are covered by the National Labor Relations Act. This act is only applicable on a federal level. 

To be more specific, the NLRA refers to most private-sector employers, such as:

• Manufacturers,
• Retailers,
• Private healthcare facilities, and others.

The US employees who work for these private-sector employers have the right to choose whether they want to form or join a labor union at their workplace or refrain from joining it. In other words, their decision doesn’t affect their employment.

On the other hand, the NLRA does not cover:

• Workers that are employed by federal, state, or local government,
• Agricultural workers,
• Independent contractors, 
• Workers that are employed by a parent/spouse, and others.

As for those workers not covered by the NLRA, their right-to-work laws vary from state to state, as we already explained in the table above. These right-to-work laws define whether a certain employee may have to join a labor union as a condition of employment or pay union fees, for instance.

When it comes to paying union dues and fees, the rights of the US workers depend on:

• State laws, and 
• Courts’ decisions. 

Moreover, under the NLRA, employers have the right to enter into agreements with labor organizations, such as all-union agreements. These agreements may require all employees in a bargaining unit to pay fees to a labor union or even become union members.

Do I have the right to work in the US?

Whether you have the right to work in the US or not mainly depends on your work authorization, that is, whether you’re eligible to work in the US or not. 

Being work authorized means that you’re legally allowed to be employed in the US.

Furthermore, US citizens, whether they were born in the US or not but have acquired US citizenship, are automatically authorized to work in the US. 

On the other hand, if you’re not a US citizen, you may still be able to work legally in the US, but under certain conditions. 

As the United States Citizenship and Immigration Services explains, you may be authorized to work in the US if you have an employment-based immigrant visa, for instance. With this type of visa, you can work in the US permanently.

Then again, if you intend to work in the US for a certain period of time, you may apply for a nonimmigrant visa. 

As the US Department of State’s Bureau of Consular Affairs also adds, it’s up to either the US embassy or consulate where you apply for a visa to decide what type of visa you qualify for.   

Right-to-work states — Conclusion and disclaimer

If you work in the US and want to know if you’ll need to join a union or pay union dues and fees at your workplace as a condition of employment, be sure to check:

• What your rights under the federal law (the NLRA) are and whether you’re covered by it, and
• If the state you live in has its own right-to-work law.

We hope our right-to-work states guide for 2023 has helped you better understand the concept and regulations regarding right-to-work laws in the United States.

To get more information on right-to-work laws and other labor laws for each state:

• Follow the links provided as sources at the end of our guide, and
• Visit the State Labor Laws section of our website.

Please bear in mind that this article was written in Q4 of 2023. Thus, it may not include changes introduced after it was published. 

We strongly advise you to consult the appropriate institutions and/or certified representatives before acting on any legal matters.

Clockify is not responsible for any losses or risks incurred should this guide be used without legal guidance.

Sources for the table:

States with right-to-work laws:

Alabama Legislature

Arizona Revised Statutes

Arkansas Bureau Legislative Services

Florida Legislature

Georgia Department of Labor

Idaho State & Federal Resources for Business

Indiana Department of Labor

Iowa Legislature

Kansas State Legislature

Kentucky Government Official Website

Louisiana State Legislature

Mississippi Secretary of State

Missouri Senate

Nebraska Legislature

Nevada Legislature

New Jersey Legislature

North Carolina General Assembly

North Dakota Legislative Branch

Oklahoma Senate

South Carolina Legislature

South Dakota Legislature

Tennessee Government Official Website

Texas Attorney General’s Office

Utah Legislature

Virginia Law

West Virginia Legislature

Wisconsin State Legislature

Wyoming Legislature

States with no right-to-work laws:

Alaska Governor’s Office

California Legislature

Colorado Legislature

Connecticut General Assembly

Connecticut’s Official State Website

DC Office of the City Administrator

District of Columbia Code 

Delaware Code

Hawaii Department of Labor and Industrial Relations

Hawaii State Legislature 

Illinois Statutes

Maine Legislature

Maryland Labor Relations Board

Maryland General Assembly

Maryland State Labor Relations Board

Massachusetts General Court

Massachusetts General Law

Massachusetts Legislature

Michigan Legislature

Minnesota Legislature

Minnesota Revisor’s Office

Montana Code Annotated

Montana Government Official Website

New Hampshire City of Concord

New Hampshire Public Employee Labor Relations Board

New Mexico Legislature

New York State Public Employment Relations Board

NYS Public Employment Relations Board

Ohio Laws

Ohio Legislative

Ohio Legislature 

Oregon Legislature

Pennsylvania General Assembly

Rhode Island General Assembly

Rhode Island Legislation

Vermont General Assembly

Vermont Legislature

Washington Legislature

Washington State Legislature

To ensure you’re fully protected from overworking and being improperly compensated for hours worked, you need to understand overtime laws on both the federal and state levels.

This article covers:

• Definition of overtime laws,
• Federal overtime regulations,
• Overtime laws by state for 2023, and
• Additional overtime provisions. 

What are overtime laws?

Overtime laws are rules that determine payment, limits to working hours, and other types of regulations regarding the hours worked beyond the regular workweek or workday.

In most states, a regular workweek consists of 40 hours of work within 168 consecutive hours. 

The US Department of Labor defines hours worked as “all time an employee must be on duty, or at the place of work.”

Overtime laws ensure workers are properly reimbursed for working longer hours. Overtime regulations protect workers from being overworked and underpaid. 

Overtime laws by state 

The following table shows US overtime laws by state.

It contains information on whether a specific state has its own overtime law or relies completely on federal regulations. Moreover, the table shows daily or weekly limits set for regular working hours. 

Every hour worked above the daily or weekly limit set counts as overtime. 

The table below shows info on overtime laws for permanently inhabited US territories.

All US states have a weekly overtime limit, meaning that an employee can work more than 8 hours on some days and they still won’t be paid overtime if their weekly number of hours worked is below the limit. 

However, some states, such as Alaska, California, Colorado, and Nevada, have limits on the number of hours an employee works in a day before their time is calculated as overtime. So, even if employees work fewer hours than their weekly limit, any hour worked beyond 8 hours a day is considered overtime. 

Furthermore, certain states regulate the number of days a regular workweek consists of. For instance, in California and Kentucky, a workweek consists of 6 consecutive days. Every hour worked on the 7th consecutive day counts as overtime. If an employee works on the 7th consecutive day, their work is considered overtime regardless of the number of hours they worked on the days prior. 

What are the federal overtime laws?

According to the FLSA overtime regulations, all covered employees have to receive pay for overtime work. Federal regulations define overtime as time worked over 40 hours during a workweek. 

The rate for overtime is one and a half times the regular hourly pay rate:

Hourly rate x 1.5 = overtime rate

FLSA covers employees working in the following organizations:

• Companies with sales volume or business done of at least $500,000, and
• Businesses providing medical or nursing care, hospitals, schools, and government agencies.

Furthermore, workers involved in interstate commerce and domestic service employees are also covered by the FLSA.

Who is exempt from overtime pay in the US?

Exempt employees are those who are ineligible for overtime pay even if they work beyond the weekly or daily overtime hours cap.

The FLSA also has an extensive list of exemptions regarding the coverage of employees. 

Most overtime exemptions fall under these categories:

• Executive exemption, 
• Administrative exemption, 
• Professional exemption,
• Computer employee exemption,
• Outside sales exemption,
• Blue-Collar workers, and
• Highly compensated employees. 

For each exemption category, the FLSA further defines requirements that must be met for an employee to be considered exempt. The requirements mainly include the type of job performed, job duties, and salary level. However, for more specifics on each exemption category it’s always best to consult with the official FLSA website.

FAQs about US overtime laws

In case you’re still wondering about specifics regarding overtime, we’ve compiled some of the most frequently asked questions on overtime laws and answered them for you.

1. When did overtime start in the USA?

The first official overtime regulation on the federal level came with the passing of the Fair Labor Standards Act (FLSA). The act came into effect in 1938 and it contained provisions on minimum wage, child labor, and overtime pay.

Initially, the FLSA defined overtime as any hours worked above a 44-hour workweek. Two years later, the FLSA issued an amendment reducing the limit to a 40-hour per week. 

In fact, over the years, the FLSA overtime regulations were amended multiple times. The amendments mainly changed overtime exemptions — particularly the ones concerning salary levels for exempt employees. 

2. What states have the best overtime laws?

Overtime laws are similar in most states since most of them follow the FLSA 40-hour rule. However, some states have introduced their own state regulations on daily and weekly overtime — making their overtime conditions better than in other states.

In states with weekly overtime rules only, workers could work however many hours in a day is required, and they still wouldn’t be reimbursed for overtime if their weekly hours worked didn’t add up to more than 40 hours. 

By setting daily overtime regulations, these states have ensured their workers are adequately compensated for each hour worked beyond their regular working hours. 

States with daily overtime rules are:

• Alaska,
• California,
• Colorado, and
• Nevada. 

3. How to determine whether state or federal overtime laws apply?

Defense attorney and partner at Schmidt and Clark LLP, Mike Schmidt, explains that the federal law applies to FLSA-covered employees:

“Generally, it depends on two main factors: the type of work you do and your employer’s annual revenue. If your job involves activities like interstate commerce, production of goods for interstate commerce, or if you work for a company with an annual revenue of at least $500,000, then federal overtime laws, outlined in the Fair Labor Standards Act (FLSA), are likely to apply.”

Schmidt adds that, in case an employee isn’t covered by the FLSA or lives in a state with its own overtime regulations, they have to look into the state law as these regulations might be more favorable:

“Some states have their own overtime laws that might be more generous to employees than federal laws. For instance, California has daily overtime laws, which means you could be entitled to overtime pay if you work more than a certain number of hours in a single day, regardless of your weekly total.”

4. How does overtime work in California?

In California, hours worked beyond 8 hours a day are considered overtime. The overtime rate per hour is 1.5 times the regular hourly rate for work beyond 8 hours and up to (and including) 12 hours a day.  

Moreover, if an employee works 12 hours or more a day, their overtime rate is 2 times the regular hourly rate after 12 hours of work. 

In addition, the regular workweek consists of 6 days in California, meaning that working on the 7th consecutive day counts as overtime. 

The first 8 hours worked on the 7th day are paid 1.5 times the regular hourly rate, while hours worked beyond 8 hours are compensated at 2 times the regular hourly rate.  

5. How is overtime calculated based on federal regulations?

On the federal level, every hour beyond the 40-hour workweek is reimbursed at the rate of 1.5 times the regular hourly rate. 

Let’s say your hourly rate is $30, and you worked 42 hours during a week. That’s 40 regular working hours and 2 additional hours of overtime tracked. Your weekly pay for regular hours worked will be:

$30 x 40 hours of regular work = $1,200

And your pay for overtime is:

$30 x 1.5 (the overtime rate) x 2 hours of overtime = $90

So, your total earnings for that week will be:

$1,200 + $90 = $1,290 

Overtime work is calculated differently in states that allow a longer regular workweek (above 40 hours), such as Kansas and Minnesota. Moreover, in states with daily overtime, you should also be mindful of the hours worked during the day. 

6. How to calculate overtime in states with daily overtime?

In states with daily overtime, any hour worked beyond 8 or 12 hours per day (depending on the state) is considered overtime. This means employees can be paid for overtime even if they don’t work more than 40 hours during the week. 

Let’s assume that an employee in Nevada who is paid an hourly rate of $40 worked 8 hours on Monday, Tuesday, and Wednesday, 10 hours on Thursday, and 6 hours on Friday. 

Their hours worked during the week are:

8 hours x 3 days + 10 hours + 6 hours = 40 hours

So, looking at the weekly overtime limit in Nevada only, we might conclude that this employee isn’t eligible for overtime pay, as they didn’t work more than 40 hours during the week. 

However, Nevada’s overtime regulations include daily overtime with the limit set to 8 hours a day. This employee worked 10 hours on Thursday, which means they worked 2 hours overtime and are eligible for overtime pay.

So, we’ll calculate their weekly pay by first adding up regular hours worked:

8 hours x 4 (Mon-Thu) + 6 hours (Fri) = 38 hours

Their pay for regular hours worked is:

38 hours x $40 = $1,520

Then, we should add the overtime. The overtime hourly pay for this worker is:

$40 x 1.5 = $60

An employee worked 2 hours of overtime on Thursday:

2 hours x $60 = $120

Their weekly earnings are:

$1,520 + $120 = $1,640

So, this employee earned a total of $1,640 during the week in question. 

7. How much overtime is too much? 

Federal regulations do not impose a limit on the overtime hours an employee aged 16 or above can work. 

However, certain states have regulations that limit the number of working days in a week to 6. These states are:

• Illinois,
• New York (for certain occupations),
• Wisconsin (minors and workers in factory and retail establishments), and
• California (with exceptions).

Furthermore, in California, workers have the right to refuse to work more than 72 hours a week without being sanctioned. 

In addition, in Maine, employees can’t work for more than 80 hours of overtime in a consecutive period of 2 weeks. 

8. Is overtime mandatory in the US? 

Overtime work is not mandatory in the United States. But, reimbursing workers properly for working overtime is mandatory, according to the federal overtime law.

9. Is unpaid overtime illegal in the US?

Yes, it is illegal not to pay the overtime rate to a US employee who worked overtime in a specific week. 

This regulation, however, applies only to covered, non-exempt employees. 

10. Do salaried employees get overtime in the US?

Most salaried employees in the United States fall under overtime exemptions. This means that they’re excluded from the federal overtime regulations and not eligible for overtime pay.

However, as of 2023, most salaried white-collar workers (executive, administrative, professional, and outside sales employees) who make less than $684 per week, which is $35,500 yearly before taxes, are eligible for overtime pay.

→ Note: This is just an informatory text. For more information on exemption categories and criteria, visit the official FLSA website.  

Overtime laws by state — conclusion and disclaimer

Hopefully, our guide helped you understand federal and state overtime laws in the United States.

You can get more information on overtime laws for each state by following the official links:

• Provided as sources at the end of this article, and
• Used as sources in the State Labor Laws.

Please bear in mind — this article was written in Q4 of 2023. Thus, it may not include changes introduced after it was published. 

We strongly advise you to consult the appropriate institutions and/or certified representatives before acting on any legal matters.

Clockify is not responsible for any losses or risks incurred should this guide be used without legal guidance.

Sources for the tables:

US states:

• Alabama Department of Revenue
• Alaska Department of Labor and Workforce Development
• Arizona State Legislature
• Arkansas Department of Labor and Licensing
• BOLI Oregon
• Colorado Department of Labor and Employment
• Commonwealth of Massachusetts
• Connecticut Department of Labor
• Delaware Department of Human Resources
• DOL Georgia
• Guide to Idaho Labor Laws
• Illinois Department of Labor
• Indiana State Personnel Department
• Iowa Department of Administrative Services
• Kansas Department of Labor
• Kentucky Education and Labor Cabinet
• Louisiana State Civil Service
• Maine Legislature
• Maryland Department of Labor
• Michigan Department of Labor and Economic Opportunity
• Minnesota Department of Labor and Industry
• Mississippi Department of Employment Security
• Missouri Department of Labor and Industrial Relations
• Montana Department of Labor and Industry
• Nebraska Department of Labor
• Nevada Department of Business & Industry
• New Hampshire Department of Labor
• New Jersey Department of Labor and Workforce Development
• New Mexico Courts
• New York State Attorney General
• North Carolina Department of Labor
• North Dakota Wage & Hour Questions
• Office of the Attorney General for the District of Columbia
• Ohio Laws and Administrative Rules
• Pennsylvania Department of Labor & Industry
• South Carolina Department of Agriculture
• South Dakota Department of Labor & Regulation
• State of California Department of Labor and Industrial Relations
• State of Hawaii Wage Standards Division
• State of Oklahoma Office of Management and Enterprise Services
• State of Rhode Island Department of Labor and Training
• Tennessee Department of Human Resources
• Texas Government Code
• The Florida Senate
• Utah State Legislature
• Vermont Department of Labor
• Virginia Legislative Information System
• Washington State Department of Labor & Industries
• West Virginia Division of Labor
• Wisconsin Prevailing Wage Laws
• Wyoming Workforce Services

US territories:

• Department of Labor, Government of Guam
• Federal minimum wage in American Samoa
• Federal minimum wage in the Commonwealth of the Northern Mariana Islands
• US Virgin Islands Department of Labor 
• US Wage and Hour Division, Puerto Rico

This guide will help you understand how calculating federal taxes works, but at the same time, our free calculator will help you estimate taxes for the current filing year. 

While we are on the subject of taxes, to be able to calculate federal tax withholdings, make sure you have your Form W–4 close by to follow the guidelines below and fill in the necessary information accordingly. Form W–4 will help you have a better insight into your filing status, dependents, multiple jobs (if you have them), or any other necessary information.

What is federal income tax?

Levied by the IRS, federal income taxes are taxes all individuals, businesses, and legal entities have to pay based on their annual earnings (including salaries, wages, tips, etc.) Federal income tax rates range from 10% to 37% and depend on the taxpayer’s filing status and annual income.

The government uses the money collected from taxes to fund the economy of each state. In other words, tax revenue is used for education, health, transportation, infrastructure, etc.

How does federal income tax withholding work?

Employees must be aware of federal income taxes withheld from their paychecks — such taxes are withheld by the employer from each paycheck. 

The amount of those deductions largely depends on:

• Your income, and 
• Information in your Form W–4.

Form W–4 is the IRS document where you will provide information such as your:

• Filing status,
• Number of dependents,
• Number of children,
• Additional jobs,
• Allowances, etc.

Each time you start a new job or go through any changes that would affect the Form W–4 information — such as, for instance, changing your address — it’s your responsibility to adjust your Form W–4 accordingly.

Bear in mind that by filling out your Form W–4 accurately, you can avoid overpaying or even owing money to the IRS during tax season.

What does federal income tax withholding include?

Employees may see two types of federal taxes on their paychecks:

1. Federal withholding, and 
2. Federal Insurance Contributions Act (FICA) withholding.

Federal withholding

Federal withholding mainly depends on your income and filing status — i.e. the amount you earn and the information you provide on Form W–4. 

To calculate your income tax withholding, look at the chart below and determine your tax brackets first. Tax brackets indicate the tax rate you must pay on each part of your income.

Federal withholding tax brackets 2023

So, for instance, a single taxpayer who earned $40,000 in 2022 will pay 10% of the first $11,000 of that income, and the next (and last) portion will be taxed at 12%. This tax system is called the progressive tax system, which means that the more you earn, the higher the tax rate you will have to pay.

FICA withholding

Apart from income tax withholding, FICA taxes are also deducted from each paycheck. By paying FICA taxes, you contribute to your Social Security and Medicare funds which you will be allowed to use after you retire.

The following are withholding rates regarding both: 

• Social Security taxes — The total tax rate is 12.4% (6.2% is paid by the employer and 6.2% by the employee up to the taxable maximum of $160,200 for 2023), and
• Medicare taxes — The total tax rate is 2.9% (1.45% is paid by the employer and 1.45% by the employee).

Self-employed individuals pay the combined employee and employer amount  — 12.4% Social Security tax (on up to $160,200) and 2.9% Medicare tax (on the entire net earnings). Moreover, self-employed individuals whose earnings exceed $200,000 pay an additional 0.9% in Medicare taxes.

The deductions your taxable income is subjected to 

The above-mentioned taxes are fixed amounts, and you cannot avoid paying them. Luckily, your taxable income is subject to deductions — amounts that may significantly lower your taxable income. This means that you don’t pay taxes on such items.

Taxpayers may choose between 2 types of deductions:

1. Standard deduction — Fixed amount that is based on your age, filing status, or whether you are disabled or dependent (see more information on cases when you can’t use the standard deduction), or 
2. Itemized deduction — Not fixed and includes mortgage interests, charitable contributions, disaster losses, medical or dental bills, etc.

Don’t forget to add deductions in the calculator above — and bear in mind that you can only choose to claim one type of deduction.

Standard deduction

According to the IRS, as of the tax year 2023, the standard deduction ranges are the following:

• For single filers — $13,850,
• For married, filing jointly — $27,700,
• For married, filing separately — $13,850, and
• For head of households — $20,800.

Itemized deduction

People usually choose the standard deduction. However, if you decide to itemize deductions, you must:

• Keep the receipts off all your expenses, and
• List the types and amounts in the Schedule A of Form 1040.

Who is exempt from federal income taxes? 

Still, there are some circumstances when certain individuals or organizations are freed from paying federal income taxes, and they are considered tax-exempt.

The following are tax-exempt individuals or organizations:

• Nonprofit organizations — Religious, humanitarian, the Red Cross, churches, etc.
• Low-income taxpayers — Individuals who are not required to pay taxes since their earnings are below the tax threshold, meaning their income is not higher than the standard deduction. For instance, a single taxpayer under 65 years of age who earns less than $12,950 a year is considered a low-income taxpayer — according to the Tax Year 2022 Filing Thresholds by Filing Status.
• Individuals who qualify for the Earned Income Tax Credit (EITC) — Eligible individuals are those with low to moderate incomes (with or without dependents), and the credit amount depends on their filing status and the number of qualifying dependents. The said credit lowers the amount of taxes owed to the government.
• US citizens or resident aliens of the United States working in a foreign country — According to the Foreign Earned Income Exclusion, such individuals are not required to pay taxes on income of up to $120,000 earned working abroad (for the year 2023).

Federal taxes — summary

The following is a breakdown of federal taxes that apply across the US and concern employees and employers.

Employees are responsible for paying:

• Federal income tax — The tax rate depends on your earnings and the information you provide on your W–4, 
• FICA taxes — Consist of Social Security tax (employees’ share is 6.2%) and Medicare taxes (employees pay 1.45%), and
• Self-employment tax (SE) — This tax applies to the self-employed and amounts to 15.3%.

On the other side, employers are required to pay:

• FICA taxes — 6.2% for Social Security, 1.45% for Medicare taxes, and
• Federal Unemployment Tax Act (FUTA) — The tax rate equals 6% and applies to the first $7,000 of employees’ wages.

Finally, both employers and employees are required to pay:

• FICA taxes — They equally pay FICA taxes that consist of Social Security taxes and Medicare taxes each paying 7.65% for every payday (Social Security tax: 6.2% and Medicare tax: 1.45%).

Federal paycheck calculator conclusion/disclaimer

We hope you find this federal paycheck calculator and accompanying explanations helpful. We advise you to pay attention to the information we’ve highlighted and the links we’ve provided, to make sure you calculate your federal withholdings correctly. 

Please note that this calculator was created in Q2 2023, so any changes regarding tax brackets or related regulations that were included later than that may not be included in this guide. 

Bear in mind that the results you get using our calculators may not be entirely accurate or complete and there might be deviations. We strongly advise you to consult with the appropriate institutions and/or certified representatives before acting on any legal matters.

Clockify is not responsible for any losses or risks incurred should this guide (or its calculators) be used without further guidance from legal or tax advisors.

Nowadays, taking care of your mental health is perfectly normal, and the stigma surrounding it is extinguished. 

In fact, the World Health Organization notes that around 12 billion working days are lost every year to mental health issues, either due to absence from work or lack of productivity.

Many organizations and employers around the world understand how a mental illness can affect an employee’s overall wellbeing, which has led to introducing mental health leave of absence.

Therefore, many employees might want to know the following:

• What is a mental health leave of absence?
• How do you recognize you need a mental health leave?
• What are your options for taking such leave?
• How do you ask for a mental health leave?
• Why should you take a mental health leave?

What is a mental health leave of absence?

Simply put, a mental health leave of absence represents time off from work (paid or unpaid) that employees use to deal with an underlying mental condition.

Generally, such leave is characterized by taking the time to: 

• Diagnose the mental condition at hand,
• Seek professional treatment,
• Treat the mental condition, and
• Recuperate.

Most employees that are eligible for taking a mental health leave do so for self-treatment, but nowadays, many employers and institutions include policies that allow employees to take the said leave to take care of a family member with a mental condition.

For that purpose, eligible employees may use the US Family and Medical Leave Act (FMLA) to take a mental health leave. This act protects all employees across the states, whether they’re struggling with a physical or mental disease.

It is important to note, however, that the FMLA provisions apply when the condition in question is “serious.” 

According to the FMLA, a serious condition may involve:

• Inpatient care (hospital treatment that requires admission), or
• Continued treatment by a healthcare provider.

However, there are different types of labor laws and provisions that protect employees across the world where different conditions apply, but we’ll talk more on that in the following paragraphs.

Mental health statistics in the workplace

Before we go into details regarding the intricacies of mental health leaves of absence, it might be good to go through some statistics regarding mental health issues in the workplace, and how mental disorders affect employees all around the world:

• In June 2022, the World Health Organization published an extensive report that serves as an overview of mental health issues globally. The statistics in the report show that 15% of all employees have a diagnosed mental disorder.
• Not showing up for work and losing valuable working hours due to taking mental health leave ultimately costs money. According to the World Health Organization, mental disorders cost the global economy over $1 trillion in lost productivity annually.
• A study found that working women are two times more likely to have a common mental health problem than employed men — 19.8% vs 10.9%.
• According to a post-pandemic survey conducted in 2021, 87% of employees reported they believe that employers could help minimize the effects of stress they deal with on a daily basis.
• Due to the stigma surrounding mental health issues, most workers are generally not open to talking about the physical illnesses and issues they might face. On the other hand, according to a study from OHW+, only 14% of employees are open to discussing their mental health issues in the workplace.

How do you recognize you need mental health leave?

In one way or another, we all go through different types of mental difficulties on a daily level. That can be stress and anxiety over work or something more extreme, such as diagnosed mental disorders.

Once you feel like your work is suffering and you cannot focus on the task at hand, this may be a sign you need a leave of absence. But, how do you know for sure?

You can oftentimes recognize that someone is battling with a debilitating mental illness through physical and emotional signs. Some could seem harmless, while others can be cause for alarm.

If we’re talking about physical signs, some of the most common ones include:

• Weight fluctuations (major changes in eating habits/frequency),
• Lack of energy (tiredness),
• Various and frequent headaches,
• Nausea, and
• Changes in sex drive.

However, since most of these signs could point to something else, people tend to disregard them as symptoms of a mental illness. 

On the other hand, emotional symptoms are usually direct indicators that an underlying mental disease could be the root of your problems.

The most frequent emotional signs of a mental disease include:

• Mood changes,
• Sensitivity or apathy,
• Irritability,
• Sleep cycle fluctuations,
• General stress and anxiety, and
• Uncharacteristic behavior.

Still, diagnosing a specific disorder from these symptoms is highly unlikely since many mental diseases exhibit in similar manners. Therefore, it’s important to note to visit a doctor to determine what the disease in question is.

On that note, the World Health Organization (WHO) finds the following as some of the most common mental disorders:

• Anxiety disorders,
• Depression,
• Bipolar disorder,
• Post-Traumatic Stress Disorder (PTSD),
• Eating disorders, and
• Disruptive behavior and dissocial disorders.

In any case, the first step to determining what the underlying problem is should be visiting a doctor’s office and performing all the necessary tests. Once the root of the problem is diagnosed, it’s time to focus on getting better and taking a break.

Can you take time off of work for mental health?

Most countries around the world offer the most generalized sick leave (paid or unpaid) to their employees to tend to their health. Now, depending on the place of your employment, laws and policies will vary, and employers do have a say in some regulatory measures.

Still, physical health has the upper hand when it comes to sick days and leaves of absence, but mental health is slowly catching up, as is the case with US and FMLA. Some of the more advanced countries in the world have taken measures to ensure that no differentiation has been made between the two, such as the UK.

For example, a UK employee has the right to take up to 28 weeks of unpaid leave per year to tend to a disease, whether it’s physical or mental.

Also, Dutch employees are entitled to 70% of their paycheck during sick leave that can last up to 2 years with no repercussions. The Dutch government sick leave policy makes no distinction between physical or mental wellbeing when it comes to absence from work.

Furthermore, there are 12 US states that offer state-approved paid FMLA plans for employees and/or their loved ones that deal with mental issues.

All in all, your work contract will probably state if your employer offers any days for mental health issues, so checking with them is your best option.

How long can you take off of work for mental health reasons?

The exact number of days you can be absent from work depends on two factors:

• Country/state policies regarding mental health, and
• Employer-set policies.

Also, an important factor that can affect your absence is the disease itself. If continuous treatment is necessary for your type of disease and you cannot work until it is completed — i.e. you’re not capable of working — most policies will classify you as “incompetent to work” and you’ll be granted sufficient time to recuperate and get back to work.

Again, your contractual obligations set by the employer might state otherwise, which is why you should always contact your HR or your employer directly.

What are your options for taking time off of work for mental health reasons in the US?

Mental issues pose physical problems, and most physicians will list out the physical symptoms as the “culprits” for your leave of absence. If your place of employment does not include mental health conditions for leave of absence, the doctor’s note will most probably include a physical condition that could grant you a temporary leave.

However, this will not always be the case, and you’ll have to resort to mental health leave policies. Some of the most common policies in the US include:

• Federal Family and Medical Leave Act,
• State Family and Medical Leave Act,
• Employer-set mental health leave of absence policy, and
• Premium insurance policies.

Federal Family and Medical Leave Act

As previously mentioned, the FMLA entitles all eligible employees to take job-protected unpaid leave of absence for family-related reasons, or in our case, a mental health condition. Under Fact Sheet #280, a mental illness is considered a serious illness, and therefore, employees can use the FMLA to tend to diagnosing and treating a mental condition.

Under the FMLA, an employee can take time off to tend to:

• A serious illness (characterized by inpatient care and/or continued treatment) that renders them incapable of performing the essential functions of their job (12 weeks),
• Take care for a family member with a mental health condition (12 weeks),
• Take care for an adult child with a mental health condition (12 weeks), and
• Take care of a covered service member and eligible veterans with a serious illness (26 weeks).

It should be noted that the eligibility for taking time off under FMLA for mental reasons is the same as for physical conditions, which include that:

• The employee has worked for a covered employer for at least 12 months,
• The employee has completed at least 1,250 working hours in the span of 12 months, and
• The employee works in a location with 50 other employees within 75 miles.

State Family and Medical Leave Act

The FMLA applies to all US employees but if the state plan offers more benefits to the employee, it will take precedence.

In fact, there are 12 US states at the moment that offer paid Family and Medical Leave Act that includes mental health absences:

• California, 
• Colorado, 
• Connecticut, 
• Delaware, 
• Maine, 
• Maryland, 
• Massachusetts, 
• New Jersey, 
• New York, 
• Oregon, 
• Rhode Island, and 
• Washington.

Still, eligibility for each of these states differ, and you should check your local labor laws to find out more information regarding mental health leave of absence.

Employer-set mental health leave of absence policy

Many employers offer benefits and extended leaves of absence when it comes to mental health. That’s why you should always talk to your employer first and see if the employer-set policy offers better benefits than the FMLA.

For example, famous names such as Microsoft, Walmart, and Nike offer paid vacation and personal days for employees struggling with stress and overwork.

Premium insurance policies

Unfortunately, the US FMLA does not require employers to offer paid leave of absence, which is why many employees resort to paying premium insurance policies that include mental health protection. It’s not the best solution, but it does offer some financial support in times of need. 

How to tell your boss you’re struggling and ask for a leave of absence?

After diagnosing the problem and choosing the right option for your leave of absence, the next natural step is to tell your boss and ask for the said leave.

So, what is the best approach?

The first step should be realizing you’re both human and full of understanding. It might seem cliche, but it’s in your boss’ best interest that you are healthy and ready for work. However, bear in mind that there are certain expectations from you as an employee, which is why finding a compromise should be your top priority.

Therefore, plan out the conversation in advance and think of the following:

• How comfortable are you to speak about your mental issues?
• Is the work itself the problem or is it an external factor?
• Can you find a way to help yourself and your employer?

Since it almost always depends on the situation at hand, there is no definitive answer on how to approach the conversation, but hopefully, these questions will lead you in the right direction.

However, when it comes to asking for the leave itself, there are a couple of tips that should help you.

Tip #1: Be honest

Naturally, talking about your health problems is hard, especially if you’re struggling mentally. However, you need to understand that what’s said between you and your employer, stays between the two of you under the confidentiality of your employment contract.

Also, honesty in such situations could be the best approach since it evokes empathy and respect for being candid, and it will almost always pan out.

Tip #2: Be respectful

Asking time off for a projected period of time is reasonable, but do not abuse your position. If, for example, your physician believes that the treatment shouldn’t last for more than 2 months, ask your employer for a 2-month leave of absence.

Reaching a compromise will go a long way to establishing trust with your employer, and it will also strengthen your relationship, which will surely come handy in the future.

Tip #3: Choose a specific time to ask for a mental health leave

It might seem arbitrary but choosing the right time to speak with your employer could be beneficial, especially if you’re asking for an employer-set policy leave. Request the meeting when the workload is light and find a private area to discuss your leave.

Tip #4: Prepare the necessary documents for your leave

If your boss is stickler for the rules and regulations or simply wants to know if everything you claim is legitimate, you should have all your medical documentation ready. 

This could include:

• Doctor’s notes,
• Prescriptions, and
• Inpatient documentation (if any).

Tip #5: Delegate your tasks

Even if you already suspect that your employer will approve your leave of absence, it might not be a bad idea to find a colleague that will cover some of your responsibilities while you’re away. Such action could show resolve and determination that your boss will appreciate and you’ll return the favor to your colleague in the future.

What can you do on your mental health leave?

Needless to say, the most important thing is to take care of yourself and focus on your or a family member’s wellbeing. On the other hand, taking a prolonged leave gives you time to focus on some other aspects of your health and life.

Tip #1: Take care of your physical health

Improving your immune system and your overall physical health will do wonders for your mental health as well. Working out, detoxing, and taking vitamins could be the way to improving your health score.

In fact, a study from the National Center for Biotechnology states that regular physical exercise can have mental health benefits, including:

• Better sleep,
• Stress relief,
• Increased energy,
• Weight reduction, and
• Reduced tiredness.

Tip #2: Find a support system

You can use the extra time you have on your hands to join a support group for mental illnesses. Of course, it all depends on the type of condition you have but it’s always a good idea to talk with other people and hear what they are going through.

Furthermore, building a strong system of support and people around you will help you deal with the problem you’re trying to solve.

Tip #3: Reconnect with your family and friends

Spending time around loved ones is always good for the mind, no matter the mental condition. 

In fact, being around people you care about goes a long way in:

• Reducing your stress levels,
• Boosting your self-esteem, and 
• Eliminating loneliness.

How do you explain absence due to mental health?

Naturally, your colleagues will wonder where you are, especially if you have a relationship with them outside of work. On the other hand, dealing with mental health issues is a big part of your privacy, which is why there has to be a middle ground, in terms of what you should and shouldn’t share.

Here’s some advice on what you can say or do in such situations.

Advice #1: Share what you’re comfortable with

In most cases, you’re obligated to notify your superior and HR on the exact nature of your mental health issue and your leave of absence. However, you don’t have to be as specific with your colleagues if you don’t feel comfortable.

If you feel embarrassed or uncomfortable speaking about your condition, simply say you’ve taken some personal time to tend to private issues.

Advice #2: Write a letter to your colleagues

Writing your thoughts and emotions might seem over the top but it can be helpful in expressing yourself and letting others know how important the upcoming period is to you.

Furthermore, writing a letter eliminates the need for live conversation, which can help you open up and be more relaxed while talking about your issues — if you choose to share the details.

Advice #3: Ask for discreetness

If you work in a large company, it’s only natural that you don’t want everyone to know what you’re going through. In that case, you will probably share the details with the colleagues you talk or see on a daily basis.

If you have a solid relationship with them, be honest and ask them to be discreet with the information you’ll share with them.

Frequently Asked Questions regarding mental health leave

Finally, we come to the FAQ section with some of the most common questions you might want to read about mental illnesses and employee leaves. 

Can mental health leave be paid?

Depending on your place of residence and employment, yes, your mental health leave could be covered by:

• Your health insurance,
• Your employer, or
• State-issued mental health plan, such as FMLA.

However, you should always read your work contract and check with your employer before you ask for the leave of absence.

Can mental health leave be part of employees’ compensation?

If a strong case can be made that working conditions have caused the mental illness or condition, you could be eligible for compensation. Still, such cases are rare, and they usually depend on various factors, such as:

• State and place of employment,
• Type of work,
• Working conditions, and
• Employer policies.

What famous companies provide mental health leave?

Naturally, most employees wish to work for top companies that offer the best benefits. Since mental health importance is slowly picking up, the “top” companies have started offering both mental health days and leave of absence in some cases.

Some of the most popular names you’ve probably heard of include:

• Nike,
• Walmart,
• Pinterest,
• Microsoft,
• Drip,
• Linkedin, and
• SAP.

Of course, the absolute list is much longer, so if you’re suffering from a mental disease and you’re applying for a job, make sure to check with the HR department if the company offers mental health leave of absence.

What are some of the most common reasons for taking mental health leave of absence?

As we previously mentioned, according to WHO, some of the most common mental health issues for taking a leave of absence include:

• Anxiety,
• Depression,
• Burnout,
• Stress,
• Bipolar disorder,
• PTSD, and
• Disruptive behavior and dissocial disorders.

What is an employee assistance program?

An employee assistance program (EAP) represents a work-based community that offers help to working employees to deal with individual problems and needs.

In most cases, companies and employers hire consultants and professionals that offer courses and counseling sessions for employees in need. Nowadays, such programs exist outside the office, and their purpose ranges from work-related issues and violence to many extreme issues.

Final thoughts: Mental health leave is equally important as any other leave of absence

Recognizing the significance of mental health in their professional lives, employers and employees are embracing the idea that mental health challenges are as valid as physical ones — deserving of attention and support.

Mental diseases are nothing to be ashamed of, and there is no reason to hide them. If you feel like you’re regressing and not giving it your maximum due to illness, it’s time to get help. And, don’t worry, your job will be waiting for you.

But how can contractors and their sidekicks (subcontractors) make it all happen? 

Well, that’s why you’re here.

In this article, we’ll cover:

• What construction bidding is and how it works,
• Why efficient bidding is critical for profit, and
• How to follow some crucial steps in construction bidding for the best results.

Let’s dive right in.

What is construction bidding?

Construction bidding is a procedure where general contractors (GC) submit formal written offers to clients (also known as property owners or project owners) to complete a construction project within a given timeframe. 

In other words, a client asks general contractors to bid on their projects in order to get hired to do a job. In industry slang, experts refer to this as bid solicitation (more on that later). After bid solicitation, the general contractor talks to subcontractors to check their availability and get more detailed information on specialized services, like plumbing or electrical.

As we already mentioned, the terms property owner, project owner, and client are used interchangeably and mean the same thing — the person or entity that solicits, reviews, and approves bids from contractors.

To survive on the market, a construction company has to learn to prepare a competitive contractor bid. But competitive doesn’t only mean the bid with the lowest price. In fact, the word competitive usually entails a carefully crafted blend of cost, profit, and quality.

Thus, the goal of any contractor during construction bidding is to win as many contracts as possible by balancing the following aspects:

• Money they earn from doing the job, 
• Cost of the material and labor, and 
• Quality they deliver to the client.

Contractors submit their bids during tenders, but more on that later. 

Next, let’s take a look at how to differentiate between construction bidding and construction estimating.

Construction bidding vs. estimating

Making a profit in the construction industry is hard. 

According to a report by the National Association of Home Builders, construction companies scored a net profit of just 7% in 2020 (which is the total earnings after deducting all expenses from the income generated). 

To earn more, contractors can’t just bid on more projects — and that’s where bidding and estimating jump on stage. 

Construction estimating is part of construction bidding. More precisely, estimating requires the contractor to forecast expenses for building the structure. After collecting the cost information for labor and materials, the contractor feeds it into their construction bid. In all cases, estimating precedes bidding.

If done wrong, estimating may lead to significant losses after signing the contract with the property owner. For a project to make a profit, here’s a short list of items that need to go into cost estimation:

• Equipment, materials, and labor,
• Feasibility studies,
• Insurance and taxes,
• Field supervision,
• Testing and inspection, etc.

Besides, bidding and estimating require a mutually distinct set of skills. 

For example, the person overseeing the bidding process needs to nurture a strategic mindset and thereby:

• Look at the project from a bird’s-eye view, and
• Set measurable and realistic objectives.

In contrast, the individual in charge of the estimation of costs — also called estimator and cost estimator — has to be a magician in task delegation and project management.

What’s more, smaller contractors often pay one person to handle their contractor bid and estimating procedures. Yet, that’s not the best way to go, especially for large and recurring projects. Construction experts typically recommend hiring separate professionals to handle the bid and estimation.

We created a simple table below to make the major traits of construction bidding and construction estimating more tangible:

Types of construction bids

A construction bid is a series of documents sent to the client for review and approval. Apart from the cost estimation, a construction bid includes the scope of work for the whole project.

Property owners and other clients solicit contractor bids from contractors via 5 bidding types, also called tendering options or tenders:

• Open tendering,
• Negotiated tendering,
• Selective tendering, 
• Serial tendering, and
• Framework tendering.

To clarify, a tender is an invitation to participate in a competition and win a contract. On the other hand, a bid is the contractor’s response to the tender — i.e., the contractor collects documentation needed to compete for the contract.

In short, tenders and bids are 2 sides of the same coin. In the following paragraphs, we’ll cover the 5 tendering options in more detail.

Let’s dive right in.

Construction bid type #1: Open tendering

Open tendering (also called open bidding) means that the property owner invites all interested contractors to submit their bids. Hence its name — open tendering, where anyone can submit a contractor bid.

Property owners usually use open tendering on government projects. 

For larger projects, clients may establish a pre-qualification process to hire the most suitable contractors for the job.

According to Kumar Neeraj Jha, a construction expert and author of Construction Project Management: Theory and Practice, open tendering is a low-stakes game to a certain extent:

“The risk involved in the project is less here. The owner specifies some minimum eligible criteria for issue of the tender document. If these criteria are satisfied by a contractor, the tender document is issued to him.”

Pros of open tendering in construction: 

• Provides greater accountability and transparency than other bid types, and
• Allows up-and-coming general contractors to land their first projects.

Cons of open tendering in construction: 

• Highly competitive as it is open to anyone interested in applying, and
• Sometimes criticized as costly for contractors after they get involved in the tendering process.

Construction bid type #2: Negotiated tendering

With negotiated tendering, the client approaches one contractor to bid on the project. Some of the reasons for this include the contractor’s track record and their previous relationship with the client. In other words, the project owner has more trust that the contractor will do as they claim in their construction bid.

In most cases, clients pick the negotiated tendering option for highly specialized projects, like building factories, warehouses, or power plants.

Unlike open tendering, where everyone gets to take part in the bidding process, negotiated tendering can be anti-competitive and exclusive.

Pros of negotiated tendering in construction:

• A great option for providers of highly specialized construction projects, and 
• In case of security concerns and emergencies, clients prefer negotiated tendering. 

Cons of negotiated tendering in construction:

• Some experts think it lacks accountability due to its exclusivist nature, and
• Leads to a reduction of available jobs to other contractors.

Construction bid type #3: Selective tendering

Selective tendering is a more complex, advanced form of negotiated tendering. Simply put, selective tendering means that the client approaches a select, experienced, and trusted group of contractors to bid on the project. That’s unlike negotiated tendering — where the client approaches a single contractor.

When a restricted number of bidders is invited to bid, the property owner retains the right to select the bids they want — no matter their high prices. We can understand selective tendering as a pre-selection phase of suppliers who compete to win the project.

In fact, selective tendering is the most common type of tendering on private construction projects. Some of the main criteria that clients consider with this type of tendering include:

• Performance on past projects,
• Relationship with the client, and
• Expertise in specific fields.

In any case, a selective tender ensures greater quality control for the client.

Pros of selective tendering in construction: 

• More efficient than open tendering since it takes very little time, and
• Only truly qualified general contractors get an invitation to submit a bid.

Cons of selective tendering in construction:

• May introduce bias since clients are prompted to constantly go back to the same contractors, and
• The price of the contract is typically higher than during open tendering.

Construction bid type #4: Serial tendering

Serial tendering is one of the rarest approaches but still applicable in some cases. Serial tendering happens when the property owner wants to get a series of similar projects done within a specific timeframe. 

A good example of serial tendering is when a housing developer plans to build dozens of residential homes in a single year. To avoid the backbreaking work of selecting bids for every separate project, they opt for choosing just one general contractor to handle all those similar housing contracts.

Pros of serial tendering in construction: 

• Many experts believe it’s less costly for both the client and the contractor, and
• Timely payments by the client due to breaking up payments into increments. 

Cons of serial tendering in construction:

• Contractors often have to wait for weeks or even 1-2 months to hear back from the client, and
• Long-term planning turns into a nightmare, because of lots of uncertainty.

Construction bid type #5: Framework tendering

With framework tendering, the project owner compares several bids against quality and prices. 

As a second step, they pick 2 or more contractors to execute the construction project. In other words, each bidder — i.e., contractor — gets their rightful place in the project scheme. For instance, one contractor may work on internal design, in contrast, the second contractor could be charged with handling the fences and outside aspects of a project.

In some cases, connoisseurs refer to framework tendering as joint ventures. In any event, this type of construction bid mostly concerns itself with complex and large projects.

Pros of framework tendering in construction:

• A great starting point for future government-funded projects, especially in the EU, and
• Due to their length, contracts can provide long-term revenue for the contractor. 

Cons of framework tendering in construction:

• Bidders often invest a lot of money and efforts to get this type of contract, but sometimes they don’t win the bid, leading to serious financial issues, and
• Unlike other construction bid types, framework tendering lacks the flexibility in terms of customization and negotiation.

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Now that we got bid types out of the way, let’s explore a few tried-and-tested steps you can take during construction bidding.

What are the steps in construction bidding?

To succeed in construction bidding, contractors must follow a strict series of actions. 

In the following paragraphs, we’ll present 6 steps that general contractors should follow to win more bids, including:

1. Soliciting bids,
2. Subcontracting,
3. Submitting bids,
4. Selecting bids,
5. Forming and signing the contract, and
6. Delivering the project.

Without further ado, let’s get started with the most important steps in construction bidding.

Step #1: Soliciting bids

As a first step, property owners invite general contractors to submit construction bids. Industry specialists often call this the bid solicitation stage. 

At this point of the bidding process and depending on the tender type, the general contractor needs to consider the following documents:

• Request for proposal (RFP): an official client-issued document announcing the project, clarifying the project’s scope, and inviting contractors to submit bids,
• Request for quote or qualifications (RFQ): a formal process where a client asks a group of selected contractors to submit bids for construction projects, and
• Invitation for bid (IFB): an official document that general contractors send to subcontractors with a request to provide pricing for specialized construction services.

These application packages also include information like specifications, drawings, questionnaires, bid date and time — and sometimes even a draft contract. In fact, the client may also share information on whether the project will be public (government-issued) or private (commercial).

Apart from company-related documents for the general contractor, the client often requests subcontractor information as well. After all, the client wants to know who they’ll be dealing with day in and day out.

The bidding process starts as soon as all bid documents are shared with bidders, like RFP, RFQ, and IFB, as we mentioned above.

Step #2: Subcontracting

In the second step of the bidding process, the general contractor asks subcontractors for bids to perform specialized services for the project. For example, these may include plumbing, electrical, and related technical services.

As soon as a subcontractor submits bids to the general contractor, the latter feeds all subcontractor information into the official construction bid which is sent to the client in the following bidding phase.

During this subcontractor bidding process, the general contractor often selects subcontractors they’ve worked with on past projects. Apart from that, the general contractor also skims bid websites (with databases of subcontractors) to get the best subs, as they’re often referred to in industry slang.

With the information on costs collected from the subcontractors, the general contractor estimates a realistic cost using the following construction bidding tools:

• Blueprints or construction plans: a detailed drawing of the project’s particulars, 
• Material quantity takeoffs: a list of physical materials the contractor needs to complete the construction project, and 
• Bill of quantities: an in-depth description of each cost for the project.

According to Kumar Neeraj Jha, the author of the construction book we referenced earlier, subcontractors make up a vital part of the construction puzzle:

“The process of managing the subcontractor right from their selection till the subcontract is closed out is essential for the success of a project, given the fact that in some projects more than half of the project value is subcontracted.” 

Step #3: Submitting bids

The third step in the bidding process involves contractors busting out their calculators and submitting their documentation on project costs, project timeline, and their business information. It’s like a beauty pageant — but for construction companies.

In any case, remember that the bid documents should be easy to follow and include items such as:

• Materials and equipment,
• Labor costs,
• Overhead costs, 
• Subcontractor expenses, and
• Profit margin.

When contractors consider this information, they are more likely to offer a competitive bid to the client. 

But whatever you do in the bidding process, never forget to include precise timelines.

In some projects, the client requests that the general contractor submit a bid bond together with the bid. The bid bond guarantees that the project will be completed as per the submitted bid.

Bonus tip: Collect your insurance documentation, like general liability insurance, workers’ compensation insurance, and builders risk insurance. If the contractor submits this documentation, they can increase the chances of winning the project.

Step #4: Selecting bids

The next step entails selecting a few competitive bids (or just one) that grab the client’s attention. Typically, clients use a scoring system to rank all bids. 

As a rule of thumb, non-government project owners consider the following strong points of a contractor, including:

• Price and detailed cost explanations,
• Scheduling philosophy, such as workflow optimization,
• Experience on similar contracts, 
• Personnel resumes of staff members, 
• Safety records for past projects, and
• Other criteria relevant to the project.

In rare cases, the client may want to interview the general contractor in more depth.

The same principles apply to government-funded projects as well, but with a big difference — government clients give priority to price over all other aspects.

During bid selection, the client implements bid leveling. Bid leveling simply entails a concerted effort by the client to standardize their bid format. In turn, bid leveling enables the client to properly compare the differences and similarities between a wide range of bidders. 

Step #5: Forming and signing the contract

As soon as the client has selected the most suitable bid, they’ll discuss all terms and the final pricing structure with the general contractor. So, yes, contractors often have room for negotiation between bid submission and contract formation.

To make things clearer, the contract needs to contain the following:

• Contract drawings,
• Detailed project specifications, 
• General conditions of contract,
• Special conditions of contract, and
• Agreement (i.e., actual document signed by both parties).

To get the most out of the project, contractors should consult legal experts first. The reason is that a construction contract is only valid if it considers 3 legal aspects, including: 

1. Offer: one entity vows to do one thing in exchange for the other entity doing another thing,
2. Acceptance: all parties agree to all terms from the original offer (i.e., contractor bid), and
3. Consideration: the contract has to be mutually beneficial or, in other words, both entities have to receive benefits and provide value.

So far, so good? Great! 

Let’s get to the sixth and final step in construction bidding.

Bonus step: Delivering the project

Although not officially part of the bidding process, project delivery can reveal how professional and knowledgeable the contractor actually is. If the project is done well, the contractor may expect to be hired by the same client in the future.

Simply put, the general contractor selects the project delivery method before the bidding starts. The chosen project delivery method has a role to play before, during, and after bidding.

In a nutshell, methods of project delivery include:

• Design-Bid-Build: the traditional method wherein the property owner hires a designer separate from contractors. As soon as the project design is ready, the property owner solicits bids from contractors to implement the design.
• Construction Management at Risk (CMAR): different firms are in charge of design and construction.
• Design-Build (D-B): a single contractor takes care of construction and design.
• Integrated Project Delivery (IPD): as one of the newest methods in project delivery, the IPD method means that the property owner, architect, and contractor work as a big team to share the risk among themselves equally.

By carefully selecting the project delivery method, the general contractor can ensure that their project is completed efficiently, on time, and within budget.

How to bid on construction jobs (+ expert tips)? 

Since you’re reading this article, you probably have a few doubts about construction jobs. So, we consulted experts and dove deep into the literature.

In particular, we’ll explore a few sound tips to supercharge your construction bid as a contractor.

Let’s get to it.

Tip #1: Evaluate project requirements

Competitive bidding is all about knowing which projects to bid on and which ones to skip.

In other words, be realistic — don’t bid on projects you know you’ll have difficulty implementing. 

While you’re at it, find out as many details as possible about the items from this construction bid checklist:

• Relevant documentation,
• Existing conditions of the construction site,
• Schedule, 
• Project scope,
• Terms of payment,
• Costs, and
• Contact information.

Kumar Neeraj Jha, the author of Construction Project Management: Theory and Practice we mentioned a couple of times already, differentiates between what he calls the right and wrong contractor:

“The terms ‘right’ and ‘wrong’ contractor are subjective. The term ‘right contractor’ signifies ‘fitness of purpose’ for the proposed project. The term ‘right contractor’ has nothing to do with a large or small contractor, since it may so happen that the large contractor may not be the right contractor for a proposed project if it is of low value.”

So, note that you may be the right fit for the project even though you are a small contractor.

Bonus tip: When subcontractors or contractors are unsure about specific project areas, things can easily go sideways. That’s why we recommend always checking with the clients to avoid any confusion. In fact, unaddressed uncertainties can lead to catastrophic losses in money and time.

Tip #2: Estimate costs 

Proper cost estimation is the bread and butter of successful construction bids. In fact, countless companies still struggle with things like market price changes, inadequate risk management, and deficient resource management — all leading to subpar cost estimates (expected project expenses).

To learn more about cost estimates, we contacted Greg Batista, CEO of G. Batista Engineering and Construction. Greg emphasized the importance of ensuring that bids take into account all relevant factors:

“Precise cost estimation — encompassing materials, labor, and contingencies — ensures competitive and realistic bids.”

But apart from that, general contractors must remember that preparing cost estimates isn’t cheap. Authors of Estimating Building Costs claim that cost estimates can make or break your business operations:

“The cost of preparing estimates is accounted for under general overhead or the cost of doing business. If a contractor is unsuccessful in too many bids, then the cumulative cost of estimating is high and the volume of work on hand will curtail business growth and threaten corporate survival.”

So, be wise with respect to which projects you bid on!

Tip #3: Showcase experience

In almost all cases, the property owner will ask the contractor to present them with compelling evidence of executing similar projects in the last few years. In other words, field experience and good reference material from other clients make all the difference.

Construction expert Greg Batista had a few more nuggets of wisdom to share when he said that presenting yourself as an experienced contractor — with documentation to back it up — always pays dividends:

“Highlighting past successes, certifications, and unique qualifications builds trust with clients. Tailoring each bid to the specific project demonstrates professionalism and dedication, increasing the likelihood of winning contracts.”

Speaking of experience, the best unit of measurement for assessing your successful bids is the bid-hit ratio. This measure lets you in on your won and lost bids. So, what is it?

In a nutshell, a bid-hit ratio documents how many contracts a general contractor has won after bidding. Say your bid-hit ratio is 5:1 — this means that you typically win 1 out of every 5 bids. A decent bid-hit ratio for private projects is 4:1, and a proper bid-hit ratio for public projects adds up to 10:1.

Tip #4: Use software to track time and improve bidding efficiency 

During the process of collecting documents and completing other bidding-related tasks, contractors need to efficiently create reliable bids and manage subcontractors. Also, they need software to see costs at a glance and present them to potential clients transparently.

For that purpose, contractors can use Clockify’s construction timesheet to track:

• Overhead, 
• Labor, 
• Materials, and 
• Other costs.

With a digital construction timesheet, contractors can easily:

• See who works on what and when, and
• Mark work hours as billable or non-billable. 

Likewise, during the first 3 bid stages, contractors have to invest significant time to collect and submit documentation. To tackle unnecessary delays in managing bid documents, you can make use of Clockify for scheduling purposes.

With Clockify, you can easily arrange time and workforce resources by:

• Visualizing and planning projects in a way that tracks bid solicitation and subcontracting,
• Assigning designers, architects, and subcontractors to projects, and
• Adding milestones.

All these functionalities allow you to continue preparing competitive, on-time bids for the best results with clients.

Tip #5: Get to know the competition (and the client)

In the construction industry, competition is often fierce. General practice suggests that clients need to receive at least 3 contractor bids for the bidding process to qualify as fair (except when the clients themselves pick a single contractor or a group of contractors in the bid solicitation phase).

In reality, many bid solicitations attract dozens — and even hundreds — of bids. 

Brian Greenhalgh, the author of the Introduction to Estimating for Construction, writes that it’s all about offering additional value to the client:

“The key objective is to offer better underlying value to a client than the competition, which is done through a combination of: defining client value, establishing supplier relationships, integrating activities, managing costs collaboratively, developing continuous improvement.”

Another solution for outlasting the competition is submitting your bid before everyone else does. Clients are also human. As a result, they’re more likely to review the first 5-10 bids they received in more depth than skimming through hundreds of others.

In a nutshell, you need to better understand how long it takes your competitors to submit their bids. Perhaps you can even learn from them by exploring construction bidding networks and marketplaces.

Tip #6: Take your time with your construction bid

A quote attributed to Benjamin Franklin is that “great haste makes great waste”.

With the constraints we mentioned in the previous section, you also need to learn how to take your time in collecting data for your construction bid. Don’t just fire off your bids in an attempt to bid on as many tenders as possible.

So, it’s about striking the perfect balance between being faster than your competitors and taking sufficient time to prepare a proper bid.

In most cases, clients provide a few weeks for prospective bidders to apply with their construction bid. That’s ample time for evaluating project requirements, estimating costs, and getting to know the competition (and the client).

We reached out to Alaa Abdelhamid — a construction specialist and the CEO of Behind the Hard Hat. Alaa says that a few weeks should be enough time to prepare a decent bid:

“​​Commercial construction and government projects typically take around 2 to 3 weeks [to bid on].”

Why is efficient construction bidding important?

Efficient construction bidding helps contractors maintain profitability and win more bids. It’s no wonder then that general contractors want to submit more competitive bids in shorter periods. In fact, submitting more competitive bids often translates into more contracts won.

The upcoming segment discusses the 3 greatest benefits of efficient construction bidding. For a general overview, efficient construction bidding:

• Saves time and other resources,
• Increases profit, and
• Amplifies your professional network.

Let’s explore each benefit in more detail.

Benefit #1: Efficient bidding raises the bid-hit ratio

The more efficiently a contractor submits high-quality bids, the more contracts they’ll win. In turn, the bid-hit ratio improves in time.

That’s why construction expert Greg Batista says that efficient construction bidding benefits the general contractor long-term:

“Efficient bidding increases the chances of winning contracts, leading to a steady flow of projects and a stronger market position. Additionally, it saves time and resources, allowing contractors to focus on executing successful projects while maximizing their potential for growth and success in the construction industry.”

Benefit #2: Efficient bidding increases customer satisfaction

When bidders apply for multiple projects with top-notch construction bids, they can significantly increase their earnings. 

Yet, at the end of the day, what matters most is how happy the client is with how you handled the construction project.

Construction expert Alaa Abdelhamid we referenced earlier told us that nothing beats merging your industry proficiency and resources for improved profits:

“Efficient bidding — meaning a contractor bids jobs that are aligned with his expertise and resources — leads to a balanced equilibrium between customer satisfaction and the pathway to revenue-enhancing profitability. This methodology culminates in the cultivation of a reputable contractor image, fostering expansion in project acquisition, and ultimately yielding improved margins.”

Bonus tip: To make your bids even more efficient, you can consider bid management as your next upgrade. Simply put, a bid manager is a person solely in charge of reviewing tenders and submitting construction bids to clients. Bid management also helps contractors reduce manual errors and automate repetitive tasks.

Benefit #3: Efficient bidding amplifies your professional network

A huge network of professionals goes a long way in the construction industry. This network can be enhanced by:

• Representatives of potential clients, 
• Architects and designers, 
• Subcontractors, and
• Other construction vendors and professionals.

For example, general contractors may be familiar with hundreds of subcontractors with whom they can bid on big tenders. So, the sooner general contractors build a wide-ranging professional network, the bigger their chances of being efficient in collecting bid documents.

Also, working with the best of the best says something about you as a contractor. Implicitly, it means that others value working with you. All this translates into trust among prospective clients. In other words, the more high-quality projects you get done with the help of your professional network, the greater the possibility of landing new contracts.

This time, Alaa Abdelhamid thinks that efficient construction bidding is the basis from which all contractors can either make or break their business:

“Efficient bidding acts as a foundation for establishing trust, fostering recurring client relationships, and consequently driving the scalable expansion of the business. It enables the contractor to win more jobs, leading to increased exposure and enhanced collaboration with all stakeholders in the industry.”

So, here are a few quick tips on how to build a professional network in the construction industry:

• Improve work performance so you have something to show for,
• Harness the power of social media to showcase your expertise,
• Build relationships with industry stakeholders, and
• Reach out to prospective clients every once in a while.

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Note: We advise you to consult with a construction bidding professional before submitting your construction bids. Clockify is not responsible for any losses incurred should this construction bidding guide be used without additional expert guidance.

Wrap-up: A proper construction bid is all about cost estimates and learning about the client and competition

An exemplary construction bid relies on a substantial data set, not on mere hunches. 

This article discussed making your next construction bid more competitive and winning more contracts. In short, here are the main takeaways:

• Avoid bidding on every tender you see — some aren’t worth your time and effort,
• Create a pool of dependable subcontractors who can help you with specialized projects,
• Estimate costs in-depth and do it way before you submit your bid,
• Strike a balance between sending your bid before everyone else and overthinking it,
• Consider using time-tracking and construction software to make things run smoothly, and
• Consult experts with industry experience and peers before you send your next bid.

Just don’t forget to wear your tool belt and hard hat during the bidding process. You know, to really sell the image.

Good luck!

Glossary of basic construction bidding terms

• Bid-hit ratio (sometimes called a win rate) — A bid-hit ratio keeps track of how many projects a contractor has won after bidding.
• Bid bond (sometimes called bid security) — A legal guarantee (or agreement) that acts as an assurance that the general contractor will fulfill their obligations on a construction project.
• Construction management at risk (CMAR) — A project delivery method wherein different construction firms are in charge of construction and design.
• Cost estimate — The projected expenses for the project for which the contractor is bidding.
• Design-Bid-Build — A much-used project delivery method wherein the client hires a designer to complete project design before construction can start. Then, the client solicits bids from contractors to implement the design. With this project delivery method, overlaps between construction and design are avoided.
• Design-Build (D-B) — A project delivery method wherein a single contractor takes care of design and construction.
• Guaranteed maximum price (GMP) — The amount the property owner will pay the contractor upon project completion. If the contractor crosses the GMP threshold, the construction manager is taking over all risks, like increased project costs.
• General contractor (GC) — A type of contractor who sends bids to clients and hires subcontractors to complete specialized work.
• Invitation for bid (IFB) — An official document that general contractors share with subcontractors, asking them to provide pricing for specialized construction services.
• Integrated Project Delivery (IPD) — A recently developed project delivery method; it means that the property owner, architect, and contractor work as a large team to share the risk among themselves equally.
• Net profit margin — The number general contractors get when they subtract all expenses from their sales. In other words, it’s how much actual profit they have made.
• Request for proposal (RFP) — An official client-issued document announcing the project, explaining the project’s scope, and asking contractors to submit bids.
• Request for quote (RFQ) — A formal process where a client asks a group of general contractors to submit bids to work on construction projects.
• Subcontractor — A type of contractor that operates under the general contractor; i.e., the subcontractor offers specialized services for which the general contractor pays them, like plumbing.
• Tender and tendering — An invitation of a client to a construction company or general contractor to submit bids for a project.

Sources for the table:

Apfelbaum, A. (2010). Construction Cost Management: Cost Engineering, Cost Controls & Controlled

Greenhalgh, B. (2013). Introduction to Estimating for Construction

Hanák, T., Drozdová, A., & Marović, I. (2021). Bidding Strategy in Construction Public Procurement: A Contractor’s Perspective https://doi.org/10.3390/buildings11020047 

Harvard Law School (2023), How To Avoid a Business Contract Bidding War

National Association of Home Builders (2022); Profit Margins Fall as Balance Sheets Grow https://www.nahb.org/blog/2022/04/eye-post 

Neeraj Jha, K. (2011). Construction Project Management: Theory and Practice

Popescu C.M., Phaobunjong K., Ovararin N., (2003). Estimating Building Costs

Salman, A. (2022). Selection of Construction Bidders Using the Analytical Hierarchy Process and Friedman Theory. Frontiers in Built Environment, 7, 815022 https://doi.org/10.3389/fbuil.2021.815022 

Wibowo, Mochamad & Astana, I Nyoman & H.A., Rusdi. (2015). An Analysis of Bidding Strategy, Project Performance and Company Performance Relationship in Construction. Procedia Engineering http://dx.doi.org/10.1016/j.proeng.2015.11.015 

If yes, one of the suitable career options to explore is cost accounting.

As a vital aspect of financial management that focuses on measuring, analyzing, and controlling costs, cost accounting is an intriguing career pathway for those with a flair for numbers and precision.

In this article, we take a close look at the principles, advantages, and various methodologies associated with cost accounting. 

We also explore the key differences between cost accounting and financial accounting, and the skills you need to become a cost accountant.  

But first, let’s look at what cost accounting means.

What is cost accounting?

Cost accounting involves determining all the costs a company incurs when manufacturing a product (a smartphone, a car, or steel, etc.) or delivering a service (bookkeeping, social media management, etc.).

The primary aim of cost accounting is to help the management understand their costs and make informed decisions on controlling expenses and maximizing profit.

Cost accountants classify costs into different categories, such as:

• Direct costs (the cost involved in manufacturing a product or delivering a service), and
• Indirect costs or overhead costs (such as administration, taxes, and insurance that are not directly related to production).

Now, let’s look at what the practice of cost accounting involves.

According to the Statements of Federal Financial Accounting Standards (SFFAS) that describes the accounting standards and terms, cost accountancy is:

“Any disclosed or established accounting method or technique which is used for measurement of cost, assignment of cost to accounting periods, and assignment of cost to cost objects.“

But, what are cost objects and accounting periods?

Let’s go over these and other key terms used in this field:

• Cost object — any product, item, activity, or department in an organization whose cost you measure. 
• Cost centers — a specific location, department, function, activity, or individual in an organization that contributes to the costs.
• Cost driver — a factor that influences the cost of a product or activity (for example, the number of raw materials you order, the quality of a product, etc.). 
• Cost allocation — involves assigning a company’s total costs to specific cost centers or cost objects.
• Accounting period — also called the financial period or reporting period, the accounting period is the time span for which a company prepares its financial statements.

Now, let’s look at what a cost accountant’s role is.

What is the role of a cost accountant?

The primary role of a cost accountant is to calculate, track, and manage the costs associated with a company’s products or services. Cost accountants play a crucial role in helping the management make informed financial decisions. 

Some key responsibilities of a cost accountant include:

• Cost analysis — understanding the various costs a company incurs in manufacturing a product or delivering a service, including direct and indirect costs. 
• Cost allocation — assigning costs to different cost centers, products, departments, or projects.
• Budgeting and forecasting — helping the management prepare budgets and financial forecasts by providing data on costs and revenue.
• Inventory management — monitoring inventory levels to help the management identify inventory control issues, such as low stock or overstocking.
• Variance analysis — calculating the differences between actual costs and budgeted costs.  
• Pricing decisions — providing support in determining product or service prices by considering the cost structure, market conditions, and competition.
• Process improvement — identifying areas of inefficiency and recommending process improvements.
• Financial reporting — preparing cost-related reports, cost sheets, and financial reports.
• Compliance and regulation — ensuring compliance with accounting standards, industry regulations, and tax laws. 
• Cost control — suggesting ways to control costs and helping implement cost control strategies to maximize profit.
• Strategic decisions — assisting management in evaluating the financial viability of potential projects, investments, or business decisions.

Elements of cost accounting

According to statistician and author of Cost accounting and costing methods, Harold J. Wheldon, the cost of manufacturing a product or delivering a service can be grouped under 4 different categories: materials, labor, direct expenses, and overheads.

These types of costs are also known as the ‘elements of cost accounting.’ 

Let’s see what each of them means:

• Material — the expenses related to purchasing materials used in the production process. It includes the cost of raw materials, components, packaging, and any other materials that form part of the finished goods/services.
• Labor — expenses related to employing workers directly involved in the production or service delivery. Labor includes wages, salaries, benefits, and other direct labor costs.
• Other direct costs — these are directly linked to specific cost units but are not categorized as materials, labor, or overhead costs. Examples include subcontractor fees, equipment rental, transportation costs, and specialized services.
• Overhead (indirect costs) — the indirect expenses that support production or service delivery but cannot be directly linked to production. These costs include rent, utilities, administration, depreciation, maintenance, etc.

When you add up the cost of direct materials, direct labor, and direct expenses that are involved in the production of goods, you get prime cost. When you add the prime cost and overhead/indirect costs, you get works cost or factory cost. In other words, works cost is the sum of all the elements of cost accounting.

Next, by adding the works cost to the cost of administration, selling, and distribution, you get the total cost of sales, which is the cost of manufacturing a product or delivering a service. 

Here is an image that makes it easy to understand these costs:

How cost accounting works

Cost accounting starts with the process of recording costs involved in producing goods or services. These costs include direct costs (e.g., raw materials, direct labor) and indirect costs (e.g., overhead expenses like rent, utilities, and depreciation). 

Let’s look at the steps of cost accounting to understand how it works.

Step #1: Classify costs and calculate direct costs

As described in the book titled Cost Accounting: Principles & Practice, the first step in cost accounting should be classifying labor, materials, and other expenses as direct and indirect costs. 

However, it’s important to note that materials, labor, and other expenses can be both direct and indirect.

Direct costs are the ones you would directly incur when producing goods or services.

Here are some examples of direct costs in each of the categories:

• Direct materials — lumber, steel, fiber, or wood required for production (that become part of the finished goods/services),
• Direct labor — carpenter, machine operator, designer, etc., involved in the production, and
• Other direct expenses — rental of machinery/equipment, transportation of machines.

Indirect costs, while being important for operations, are not directly linked to production activities.

These are the examples of indirect costs in each of the categories:

• Indirect materials — fuel for transport, stationary, consumables, office furniture (that are not part of the finished goods/services),
• Indirect labor — management, office administration, security personnel, etc., and
• Other indirect expenses — utilities, sales, marketing, depreciation, taxes, insurance, etc.

Step #2: Calculate the prime cost

The next step is to calculate the prime cost using this formula:

Prime cost = Direct labor + Direct materials + Direct expenses

Step #3: Calculate the works cost

This is the sum of prime cost and production overheads. The formula goes as follows:

Works cost = Prime cost + Production/factory overheads

Step #4: Calculate the production cost

Next, calculate the cost of sales by adding up works (factory) cost and administration overheads.

Cost of sales = Works cost + administration overheads

Step #5: Calculate the total cost of sales

Now, add up all the above costs to arrive at the total cost of sales:

Total cost of sales = Production cost + marketing/advertising and distribution costs

Examples of cost accounting

These examples will help you better understand how cost accounting works.

Cost accounting example #1

XXX company has recorded these expenses in producing 2,000 units of smartphones in the first quarter of 2023:

• Raw material purchase — $12,000
• Direct wages — $50,000
• Other direct expenses — $10,000
• Factory overhead — $10,000
• Office rent and administration — $30,000
• Distribution — $25,000
• Advertising — $2,500
• Market research — $1,000

The company has earned a sales revenue of $130,000 in the same period.

The cost accountant now prepares a cost sheet to reflect the expenses and the revenue.

By looking at the cost sheet, we see that the cost of production of 2,000 units of smartphones ($140,500) is more than the sales revenue ($130,000), resulting in a loss of $10,500.

Let’s look at another example to understand how cost accounting works.

Cost accounting example #2

A company earned a revenue of $89,000 in June 2023 from the sales of product X. The company has a record of the costs of the raw materials purchased, salaries paid, and other expenses:

• Raw materials — $20,000
• Direct wages — $25,000
• Other direct expenses — $12,000
• Factory overhead — $5,000
• Administration — $11,000
• Marketing — $800
• Distribution — $15,000

Here’s what a cost sheet a cost accountant prepares to calculate the cost of production and the net profit would look like: 

The cost sheet shows that the company’s revenue ($89,000) is higher than the production costs ($88,800) allowing it to earn a profit of $200 in the month of June 2023. 

When the revenue a company earns by selling its product is more than the cost it incurs in making the product, it earns a profit. On the other hand, when the cost of manufacturing a product is more than the revenue, the company suffers a loss.

As you can see from these examples, cost accounting can be done on a monthly basis (example #2), quarterly basis (example #1), or for any other time period to understand the cost of production and plan the budget for upcoming projects.

Cost accounting vs. financial accounting and management accounting: Key differences

Let’s see how cost accounting compares with other branches of accounting — financial accounting and management accounting.

Financial accounting vs cost accounting

Financial accounting deals with assessing the overall financial health of a business.

Financial accountants specialize in: 

• Recording, 
• Summarizing, and 
• Reporting a business’s financial transactions through financial statements.

These financial statements (including income statements, balance sheets, and cash flow statements) offer a detailed view of a company’s financial performance and status over a specific period. 

The primary goal of financial accounting is to allow shareholders, investors, regulators, creditors, and the public to see how a company has performed in a specific time period. In contrast, cost accounting aims to determine and track the actual cost of production.

Financial accounting, unlike cost accounting, follows one of these accounting standards:

• Generally Accepted Accounting Principles (GAAP) that are the accounting standards, principles, and procedures that are practiced in the US, or,
• International Financial Reporting Standards (IFRS), which is a set of global accounting standards developed by the International Accounting Standards Board (IASB). 

While the objectives and processes may differ between cost accounting and financial accounting, both are essential for management accounting, the next topic of our discussion.

Management accounting vs cost accounting

While cost accounting is concerned with tracking and comparing the cost of production, the primary goal of management accounting is to analyze and interpret the financial information (revenue, production costs, profit, loss, etc.) obtained through both financial and cost accounting. 

The management accounting relies on the financial reports from cost accounting and financial accounting to make informed decisions on the company’s economic growth.

This table gives you an overview of the differences between cost accounting, financial accounting, and management accounting.

What are the 4 types of cost accounting?

While businesses use many types of cost accounting methods to manage and analyze their costs efficiently, we are going to focus on 4 main types of cost accounting:

• Standard costing,
• Activity-based accounting,
• Marginal costing, and
• Lean accounting.

The choice of a method usually depends on the industry, the nature of the products or services, and the company’s resources, needs and goals.

Type #1: Standard costing

Standard costing is an approach to accounting that companies use to estimate expenses and revenue based on predetermined cost standards.

The cost standards are set for all aspects of operation or production, including the cost of materials, labor, overheads, and indirect costs.

Here’s an easy way to understand the concept of standard costing given by the authors of Managerial Accounting: Creating Value in a Dynamic Business Environment, Ronald. W. Hilton and David E. Platt.

They compare standard costs to a ‘thermostat.’ Just as you can set ‘standard’ temperatures using a thermostat, you can set standards for the company’s expenses and monitor them with standard costing.

According to Alexander Berger, the author of Standard Costing, Variance Analysis, and Decision-Making, standard costing is most suited for manufacturing companies where production activities tend to be repetitive. However, Hilton and Platt write that many firms in the service industry also use standard costing. 

For instance, American Airlines sets standards for maintenance and fuel costs, while Allstate, an insurance company, sets standards for the time it takes to process an application.

Some commonly used methods to set cost standards include: 

• Historical records of expenses, 
• Engineering studies, and 
• Consultation with cost accountants, suppliers, and other industry experts.

But, estimating the expenses and profit with standard costing is just one part of the story. The other part is about calculating the actual expenses and revenue (often different from the estimated numbers) at the end of the year.

This is where variance analysis comes into the picture. 

What is variance analysis?

Variance analysis is all about finding out how the actual costs vary when compared with the planned or budgeted costs.

Here is the simple formula to calculate variance:

Variance = Actual costs/revenue – Planned costs/revenue

Based on the answer you get after this calculation, the variance can be:

• Favorable — the actual cost is lower than the planned cost (the result of the calculation is a positive number), or
• Unfavorable — the actual cost incurred is higher than the planned cost (the calculation result is a negative number).

Type #2: Activity-based accounting (ABC)

According to accounting expert and author, Peter B.B. Turney, activity-based accounting method (ABC) is based on the premise that “products require activities and each activity consumes a certain number of resources.”

In simple words, this means that some activities (such as, operating a machine) are involved in making a product, and each of these activities involve costs.

In contrast to standard costing, which assigns pre-determined costs to materials and labor, ABC assigns costs to the actual resources used up in each activity.

For example, to manufacture a mobile phone, the company needs to purchase raw materials. In addition to the cost of raw materials, the cost accountant also calculates the time the purchasing manager spends acquiring the raw materials.

Type #3: Marginal costing

To put it simply, marginal costs are the additional costs a company incurs when manufacturing or selling one unit more than the current level of production.

A ‘unit’ in this context can mean any measure of goods, such as a dozen cars or a single smartphone.

For instance, let’s say a company manufactures 500 pairs of shoes per month and their total cost of production is $1,000.

However, the company decided to step up production and make 1,000 pairs of shoes next month and their production cost is now $2,000.

In this case, the marginal cost of production of an extra pair of shoes is:

Change in production cost between the old level of production to the new level (2,000-1,000) ÷ change in the number of units produced (1,000-500) = 1000÷500 = $2

The marginal cost of manufacturing an extra pair of shoes is $2.

Companies use marginal costing to see how to step up production to maximize profit. 

For instance, if the cost of manufacturing an additional unit is less than the revenue they earn by selling the unit, the company can make a profit.

Conversely, if the cost of manufacturing an additional unit is more than the revenue they can earn by selling it, they will suffer a loss. In this case, the company has to reduce production to remain profitable.

Type #4: Lean accounting

As another method of cost accounting, lean accounting is particularly suited for ‘lean organizations’ or companies that follow the ‘lean management’ practices.

The focus of lean management is to eliminate waste, make small, ongoing improvements in processes, and boost efficiency.

Instead of being a single ‘method’ of cost accounting, lean accounting involves a set of practices and principles designed to boost lean management.

One of the practices used in lean accounting is value stream costing, which visualizes and analyzes the entire value stream (all the processes and activities involved in production).

A technique used to visualize the processes is value stream mapping (VSM). This is a visual representation of all the components and processes required to manufacture a product or deliver a service.  

Once you create a visual stream map, you can identify all the activities and resources required for each value stream. The next step is to prepare an income statement (the detailed cost breakdown for each value stream).

Finally, you can identify and eliminate waste and boost efficiency.

While these are some of the commonly used methods of cost accounting, there are also other forms of cost accounting, such as process accounting and project accounting.

What are the advantages of cost accounting?

By providing vital data on actual costs, cost accounting supports financial planning, cost control, pricing decisions, and much more.

Advantage #1: Cost accounting helps companies find the exact cost of product or service 

To understand the importance of cost accounting, we contacted Michelle Delker, an experienced CPA and founder of The William Stanley CFO Group, a financial services firm. She explains that cost accounting has multiple benefits, such as helping companies find the exact cost of product or service:

“One of the main advantages of cost accounting is the ability to calculate the exact cost of a product or service, empowering companies to determine profitable selling prices. It also aids in understanding cost behavior, assisting businesses in making logical budgeting decisions, and identifying wasteful processes.”

Thus, cost accounting provides vital information about the cost of production — including a breakup of materials, plant capacity, labor, and costs.  

This allows companies to: 

• Calculate and forecast their expenses accurately, 
• Allocate resources efficiently, and 
• Set realistic financial goals. 

By understanding the costs involved in different aspects of the business, managers can make informed decisions about resource allocation and budgeting.

Advantage #2: Cost accounting helps with identifying wasteful activities

One of the primary purposes of cost accounting is to identify profitable and unprofitable activities. 

A case in point is the 2022 study titled Advantages of the Cost Accounting View for Entrepreneurs in Improving Productivity and Financial Stability.

In this study, 90.20% of the surveyed managers agreed that cost accounting helps them identify unprofitable activities. This, in turn, leads to improved financial risk management.

By analyzing costs and performance data, cost accountants can pinpoint areas where wastage, inefficiencies, or losses occur, such as idle time/idle capacity, sub-optimal utilization of resources, and wastage of materials.

Advantage #3: Cost accounting helps determine product pricing

According to a survey titled Cost Accounting System and Its Impact on Service Pricing in Vodafone, 77% of the participants agreed that cost accounting plays a key role in determining service pricing.

How does cost accounting help set product/service pricing?

As you know by now, cost accounting involves calculating the total cost of manufacturing a product or service by calculating the cost of direct materials, labor, and overheads. 

Once you know the total cost, you can add a profit (or markup) to set the price of your product or service. For example, let’s say a company uses cost accounting to calculate the total cost of manufacturing one smartphone as $500. The company can now add a markup of $200 to set the price of the smartphone as $700. 

The right pricing strategy is particularly important in competitive markets, where pricing decisions can impact a company’s profitability. 

For instance, if you price your product too low, there is a risk of consumers perceiving the product to be inferior to your competitors’ products. If you price it too high, your consumers may opt to buy from your competitors who offer a lower selling price. In both cases, your company’s sales and profit can take a hit.

By calculating the actual cost of manufacturing a product or delivering a service (that involves materials, labor, overheads, and other direct expenses), cost accounting helps companies find the right selling price to ensure profit.

Advantage #4: Cost accounting helps with tracking inventory on an ongoing basis

The process of cost accounting involves continuously updating inventory levels. This helps management get real-time information about the quantity and value of the stock on hand. 

Thanks to these insights, companies can: 

• Better manage inventory, 
• Prevent stock outs or overstocking, and 
• Make timely purchasing decisions.  

The findings of the above-cited study on advantages of cost accounting confirms this benefit of cost accounting.

In this study, 85% of the surveyed financial managers said cost accounting helps reduce the cost of inventory by enabling stock control.

Advantage #5: Cost accounting tracks cost behavior enabling cost comparison

By tracking costs on an ongoing basis, cost accountants can compare:

• The cost of each product a company manufactures,
• The cost incurred in different time periods, and
• The costs incurred by each department in a company. 

How does it help you make these comparisons?

Let’s say a company makes two products: X and Y. Using cost accounting, the company calculates the total cost of manufacturing X as well as Y. By comparing the costs, the company can understand which product is more profitable and which one needs pricing adjustments or cost control.

Similarly, if an organization has several departments (production, engineering, sales, design, etc.), cost accounting helps calculate the overheads incurred by each department. Management can then identify the departments that have higher overhead costs and look at ways to reduce these costs.

Finally, by recording cost data for each year (or month), cost accountants can compare what the cost of production has been for the selected period. 

These comparisons offer valuable insights into cost trends, cost efficiencies, and the organization’s overall financial performance. Cost accounting methods, such as marginal costing, also helps understand cost behavior which refers to how costs change in response to changes in production volumes.

Managers can then use this information to benchmark against competitors and make data-driven decisions about resource allocation and process optimization.

Advantage #6: Cost accounting helps with identifying areas with higher profit potential

Unlike financial accounting, which is typically carried out annually, cost accounting is carried out on an as-needed basis to help the management understand and compare the cost of production.

Frequent analysis offers insights into the profitability of different products, services, or projects. As a result, companies can rely on cost accounting to understand which products or services are more profitable and which ones need tweaking in terms of pricing or production efficiency.

Advantage #7: Cost accounting assists in informed budget and investment decisions

Whether it is determining the optimal output levels, deciding whether to make or buy certain components, replacing old equipment, or introducing new products — cost accounting helps the management evaluate the financial impact of each decision. 

This reduces the risk of making hasty decisions and allows management to align their choices with the organization’s long-term goals.

Advantage #8: Cost accounting supports performance evaluation

Cost accounting involves comparing actual costs against standard costs. Management can set performance targets based on the results of this comparison to motivate their staff. Apart from providing a clear direction on what the staff should work towards, the standards used in cost accounting also help design incentives based on performance evaluation.

What are the disadvantages of cost accounting?

Cost accountancy has been developed through a process of trial and error, which means instead of being an exact science, it is an acquired skill based on practice. 

Here are the disadvantages of cost accounting to keep in mind.

Disadvantage #1: Cost accounting is not a standardized system of accounting

Unlike financial accounting, cost accounting is not compliant with GAAP or IFRS and does not use a standard format or procedure to prepare the cost information.

As each company uses its own format for cost accounting, it can be difficult to compare cost data of different companies or different departments. Besides, as there is no uniform method followed, there is a possibility of two different cost accountants obtaining different results with the same information. 

In addition, there is no uniform way of determining the standard costs that cost accounting methods, such as standard costing, rely on. When cost standards are inaccurate, the final cost data and analysis can also be inaccurate.

Disadvantage #2: Cost accounting does not give a holistic picture of costs

Financial experts, such as Michelle Delkercost, warn that cost accounting may not give a complete view of the company’s financial situation in addition to being a resource-heavy accounting method:

“One of the disadvantages is that cost accounting may not always provide a holistic view of the company’s financial condition as it primarily focuses on individual costs rather than the entity’s overall financial performance. Additionally, it can be time-consuming and require significant resources, like experienced accountants and advanced accounting systems.”

Some methods of cost accounting, such as standard accounting and marginal costing, assume variable costs (costs that change when the production volume changes, such as raw materials or labor) to be constant. 

In addition, these methods of cost accounting also ignore fixed costs (costs that remain constant regardless of changes in production volume, such as monthly office rent or insurance premiums).

As no cost is exact or constant at any given time, these assumptions can lead to suboptimal decisions on budget planning, pricing, etc. 

Traditional methods of cost accounting are based on ‘standard’ costs and historical data. As said above, costs do not remain constant and using past/historical data to calculate the current cost of production can increase the chances of the results of cost accounting being inaccurate.

Disadvantage #3: Cost accounting can be resource-heavy

Yet another limitation of cost accounting is that it can be expensive to implement, particularly for smaller businesses. Companies need to invest in hiring experienced cost accountants and advanced tools to record, track, and report costs. The additional expenditure may reduce the profit the company earns.

FAQs about cost accounting 

Have more questions about cost accounting as a career option? In this section, you can find the answers to those questions.

How can I learn cost accounting easily?

While there is no short-cut to learning cost accounting, you can become a successful cost accountant by following these steps:

• Obtain a bachelor’s degree — if you want to learn more about cost accounting, try pursuing a bachelor’s degree in accounting, finance, or a related field, such as business. Some universities offer specialized programs in cost accounting or management accounting.
• Gain practical experience — seek internships or entry-level positions in accounting or finance departments to gain practical experience and exposure to cost accounting principles.
• Pursue master’s degree (optional) — consider pursuing a master’s degree in accounting or a related field to enhance your knowledge and career prospects.
• Acquire professional certifications — certifications, such as Certified Management Accountant (CMA) offered by the Institute of Management Accountants (IMA) can help you showcase specialized expertise. If you want to work in businesses that are publicly traded, you will need to obtain a Certified Public Accountant (CPA) certification by passing the CPA exam conducted by the American Institute of Certified Public Accountants (AICPA). 
• Attend workshops and take up additional courses — deepen your understanding of cost accounting principles through self-study, workshops, or professional development courses.
• Join professional associations — by joining relevant professional associations in the accounting field, you can network, access resources, and stay updated with industry trends.
• Gain experience — seek opportunities to work in cost accounting roles within organizations where you can apply your knowledge and skills in real-world scenarios.
• Stay updated with the latest developments — subscribe to journals and research materials to stay updated on any changes in accounting regulations and cost accounting practices. You may also need to take continuing education courses to maintain your license.

Are cost accountants in demand?

Yes! There are a number of sources that confirm that cost accountants are in demand and will continue to be sought after over the next decade.

For instance, the Bureau of Labor Statistics (BLS) projects an employment growth rate of 6% for accountants and auditors. Considering that the average growth percentage is 5% for all occupations, you can see that accountants have no reason to worry about finding open positions.

Between 2021 and 2031, 81,800 new positions are set to be available in this field, according to BLS data.

That’s not all. According to the list of the Best Business Jobs for 2023 accounting gets a ranking of #14, making it one of the best business jobs.

Yet another proof comes from Robert Half’s survey. This survey shows that cost accountants are the most sought-after experts among all finance and accounting professionals.

What skills are needed for cost accounting?

Cost accountants need to be able to manage and analyze financial data.

But, given the fast-paced changes in the business world, what are the other skills cost accountants need to be future-ready? 

Here are some essential skills needed for cost accounting:

• Math and analytical skills: Cost accountants must also have strong analytical abilities to understand complex financial data, follow cost trends, and make informed decisions.
• Attention to detail: As even small errors can have significant implications, attention to detail is vital to ensure accuracy in cost calculations and reporting.
• Digital skills and data analysis: According to AICPA and CIMA (The Chartered Institute of Management Accountants), cost accountants can gain a competitive advantage by keeping pace with new technological trends, such as data analytics and cybersecurity.
• Communication: Cost accountants should be able to effectively communicate complex financial information to managers, investors, and other decision-makers.
• Ethical conduct: Ethical behavior is critical for cost accountants to maintain the integrity of financial information and ensure compliance with accounting standards and regulations.
• Familiarity with blockchain/cryptocurrency: Accountants need to know how to account for and report digital assets in financial statements. A survey conducted by Blockdata shows that 81 out of the world’s top 100 public companies actively carry out transactions involving blockchain. 
• Accounting tools: Proficiency in accounting software is important for error-free and efficient cost data management. 

The right tools can help cost accountants get a unified view of costs and revenue data across all operations and departments.  

Why is time management important for cost accounting? 

Cost accountants often work on multiple projects, clients, or tasks. As a result, these professionals need to cultivate time management skills to be able to:

• Prioritize projects, clients, and/or tasks,
• Track costs of materials, labor, and other direct and indirect expenses, 
• Ensure accurate client billing, and
• Meet the monthly or yearly deadlines for reporting.

This is where time tracking and billing software, such as Clockify, can help. With this free tool, you can prioritize tasks by adding multiple projects and tasks, set time estimates, and filter them to know which ones to prioritize.

You can also create and track costs related to different cost components like materials, labor, and other direct and indirect costs.

Clockify also allows you to set hourly rates for employees, projects, or tasks and calculate billable hours accurately.

In addition, cost accountants can share reports with clients and give them access to data in real-time using Clockify.

Final thoughts: Mastering cost accounting is easy with the right knowledge and tools

Cost accounting, as you have probably already realized by now, is an indispensable part of any company’s financial management.

In this guide, we have explored the basic concepts of cost accounting with real-life examples. We have also looked at the difference between financial accounting and cost accounting while touching upon the skills you need to become a cost accountant.

Beyond technical competencies, aspiring cost accountants should know how to use the right accounting software and sharpen their skills related to communication, data analysis, and time management.

Armed with the right skills and knowledge, you can make a meaningful impact within the organization and the broader financial landscape.

Sources for the table:

• Cost Accounting: Principles & Practice
• Cost Accounting: A Decision-oriented Approach

However, if your business and team are growing, this guide will help you learn more about how to get the most out of Clockify.

Clockify’s extra features: Overview

TRACKING

Targets & Reminders

Clockify lets you set different time-tracking targets for different teams or members.

Example: Your part-time employees might need to track only 4 hours a day, while full-time employees need to track 8 hours a day, and 40 hours a week.

You can send out reminders to team members who haven’t logged enough hours, or who have logged too many hours on a certain day, week, or month.

For each reminder, you choose who will be notified – only those team members, their team managers, or all admins.

Breaks

In the same way you track the time you spend on work, you can also track the time you spend on breaks.

If you’re using a tracker, you just need to switch from tracker mode to break mode and start the clock.

The same goes for when you’re tracking time through a kiosk. Just click a break button, and the timer will start ticking.

And, in the timesheet, you choose the default break project you’ve previously set for tracking breaks and enter the time you spent on a break.

Custom fields & Required fields 

If you want to keep track of additional information for time entries or in user profiles, you can create custom time fields and custom user fields.

Custom fields can be in the form of a text, number, link, switch button, or a single or multiple selection list.

Custom time entry fields will be visible in the tracker part, and custom user fields will be visible in the user profile.

You can also choose for which projects a custom time entry field will be visible, and determine its default value.

Clockify will prevent users from saving incomplete entries if some of the fields are marked as required (works both for default and custom fields).

Import time

If you’ve been using another way of noting your team’s work hours, and you want to continue where you left off, Clockify gives you the option to import your timesheets (in CSV format).

Kiosk customization & PIN

A kiosk is a way to track time in Clockify. It can be used on any device with an internet connection.

Kiosk customization lets you add your company’s logo and choose how long the kiosk is open when launched.

This is useful when different teams have different shift schedules, so you can set multiple kiosk stations across different locations and customize the length of active sessions.

Personal PIN codes let your team members log in to track their time on a kiosk with their PIN code, which increases overall security and accuracy of time tracking.

QuickBooks integration

Clockify integrates with QuickBooks, so you can send recorded time from Clockify for billing and accounting in QuickBooks.

By connecting Clockify with QuickBooks, you will be able to sync users and customers, and automatically add any missing information (users, or customers/projects).

REPORTING

Estimates & Alerts

Clockify gives you a way to stay on top of project deadlines and budgets by setting up their time and budget estimates.

Time estimates can be set in total for the whole project completion, or you can set it for each task on a project if you want to track the progress in more detail.

Both options can be set to reset every month, so each time a new month starts, dedicated hours to that project or a task will renew.

If your time estimate is set for the whole project, you can choose whether that time will include non-billable hours.

This way you ensure that non-billable activities (e.g. meetings) don’t take away from the overall time you have at your disposal to complete the project.

The budget estimate works the same. It can be set for the whole project in total, or as task-based.

It can reset every month – which is great for retainer contracts.

The budget can also include billable expenses if a portion of it is allocated for occasional expenses.

Then, by tracking your billable activities and billable expenses, you will be able to see the current status and remaining budget.

Labor cost & profit

Clockify gives you a way of tracking your total generated revenues and labor costs, so you have an accurate representation of your business’s profitability – at any given time period.

To set the ground for profit analysis, you first need to set up billable rates (for revenues) and cost rates (for costs).

Your profitability can be tracked for the whole organization, per team member, team, project, task, client, or team member on a project.

Depending on how detailed you want your profit analysis to be, you can set more or less specific billable rates and cost rates.

As your team tracks time on their work, Clockify will pick up the rates information and you will be able to see revenues, costs, and profits in Reports, and export them for further analysis.

Team reports

There are two types of Team reports in Clockify: Attendance and Assignment reports.

The Attendance report shows you the daily start and end time for each member, allows you to compare the team’s work capacity with the actual hours worked, and see their daily time off.

The Assignments report shows you the difference between the scheduled and tracked hours, with a progress bar demonstrating the difference visually.

Both reports give you the option to filter out displayed information in multiple ways, and export reports in a customized view.

Example: Attendance report can show you overtime hours for certain team members only, that are larger than 1h and smaller than 3h, or overtime hours that are exactly 2h long.

Example: Assignments report can show you the progress for multiple projects of one client. Or the comparison between the progress pace of different teams allocated to similar projects.

Expense report

All your expenses will be visible on the Expense report, where you can filter them by team, client, project, category, status, note, or date. This report can also be exported.

GPS tracking

GPS tracking lets you see where your on-field employees currently are (e.g. which client site), and when was the last time they were active.

This is possible only if your team is using the Clockify app on their mobile (iOS, Android).

You can also use the GPS tracking feature to replay the team’s daily routes and check if their transportation routes or allocation on sites could be optimized.

Audit log & Time audit

With a time audit, you can find all entries that are too short/long or are missing information such as a project or a task.

The Audit log shows you all the changes made to a time entry by a certain user on a particular date.

This is useful when you have to provide a justification for afterward changes to an already recorded and approved timesheet.

For example, government agencies like DCAA require you to keep precise records with audit trails for all changes.

You can run audits for a particular date or time period, for a specific user, or for an action that was made (e.g. creation, edits, deletion).

Audit logs older than 1 year are automatically deleted, so you can regularly export your audit log reports as CSV files.

Scheduled reports

Scheduled reports give you a way to receive custom reports every day, week, or month, without repeating the process of filtering and exporting data regularly.

The report will be received via email, and you can choose who will receive it and how often.

Project templates

If your team often works on similar projects, you can organize work much easier with project templates.

When you create your typical project for the first time, save it as a template, so next time you’re adding a new project, you can choose this template as a basis.

The newly created project will inherit its task structure and settings, but you will be able to edit it further.

Forecasting

Clockify forecasting gives you a way to track and foresee your progress on a project.

It takes into consideration the estimates, schedules, and tracked time to warn you if and by how much you will exceed the deadline or remain within it.

Based on that, you can then adjust the estimates, or re-schedule your team.

Customize reports & Time rounding

Besides filtering, Clockify gives you the option to customize reports even further every time you export them.

You can choose which columns to display in reports, no matter if it’s in CSV, Excel, or PDF format.

For example, if you’re sharing the report with a client, you might want to exclude the information on employee IDs or any notes a time entry has.

You can also round time entries up, down, or to the nearest value so reports provide a quick and easy overview.

Screenshots

The screenshotting option is available only on Clockify desktop apps (Windows, Mac, Linux).

Screenshots are taken only while the timer is running and can’t be taken without the user’s knowledge (if active, all users receive a notification).

Screenshots are taken every 5 minutes and are by default blurred for privacy and security reasons, but they can also be taken in higher resolution.

Decimal format

Activating decimal format will enable you to see, enter, and export time in decimal format.

When you export your data it will be displayed as such, so you get the prepared numbers for further calculations or analysis.

MANAGEMENT

Time off

Your team’s time off is managed through Holidays and Policies. The difference is that Holidays don’t require the approval process, unlike Policies which usually do.

Both Holidays and Policies will have a dedicated color to distinguish them easily, and a list of people they apply to.

Holidays can be set to repeat annually on selected dates. And Policies can be customized even further, by choosing if they will:

• be expressed in days or hours, 
• require approval, 
• have a negative balance so users can request time off even if they don’t have accrued days, 
• automatically accrue each year, and
• be possible to request half a day off.

Time off requests can be filtered by status (pending, approved, rejected), team member, and date or time period, and then exported for your internal log.

The Timeline tab gives you an overview of who is absent, for how long, and based on which time off policy or holiday.

The Balance tab shows how many days team members have used and how many time off days they have left.

You can also manually add or remove time off days from their balance, see their history of time off changes, and export data for your internal logs.

Approval

No matter what type of business you’re in, you’re bound to need some kind of approval, whether it’s for work hours, team time off, or expenses.

Example: If the law requires that recorded work hours should be reviewed by at least two people (e.g. employee and manager), timesheet approval will make sure this is respected.

However your team tracks their time, their work hours will be visible in the Timesheet section.

From there, they can review it and submit the timesheet for manager approval.

Submitted timesheets and expenses will have a “pending approval” label, so you know they’ve already been submitted.

You can review pending requests and reject or approve them one by one, or glance over the main information and approve all timesheets with one click.

Example: Say you work 40 hours a week and someone submits a timesheet with 37 hours, and you see that the employee took 3 hours off that week, you can instantly know this timesheet can be approved.

Pending requests can show more details and be edited if you just click on them.

You can also remind Team Managers to approve their team’s timesheets and remind all members who haven’t, to submit their timesheets.

All approved or rejected timesheets and expenses will be visible in the Archive tab, where you can filter them by date, team, and status.

Scheduling

In Clockify you can make schedules in two ways:

• by allocating people to projects (Project View)
• by allocating projects to people (Team View)

However you make your schedules, you will see the same information in both views.

In the Project View, you start by adding projects to the list and then allocating people to them.

This view is perfect if your starting point is a time estimate or a project deadline, so you know how much time to allocate daily, weekly, or monthly.

Here you can also add milestones to a project timeline and mark any important dates or events.

When creating an assignment, you can set its start time, mark it as billable, repeat the assignment for “x” number of weeks, and add a personal note for more detailed instructions.

Once published, team members will be able to see their assignments in Calendar and start tracking time on them.

Team view lets you make schedules based on the team’s working capacity. Creating an assignment functions the same as in Project View.

If you schedule someone over their capacity, Clockify will warn you so you can edit the schedule or edit their capacity directly there.

You can still schedule people over their capacity to keep track of overtime hours, and once they track time on the assignment, their overtime hours will appear in the Attendance Report.

Expenses

Whether you’re tracking expenses to bill them to clients, or for your internal recordings, they provide a significant insight into how well you manage your budgets.

Expense categories in Clockify are a way to segment your expenses, and they can represent any frequent expense type that occurs on your day-to-day.

Expenses can be recorded in sum (e.g. Lunch expense), or based on their unit price (e.g. Travel expense with a unit “gas price per mile”).

If an expense is billable, it will be included in the budget of a project that’s tied to it.

You can also submit expenses for approval if they need to be reviewed or corrected.

Invoicing

Clockify gives you a way of billing your services and expenses to clients right from the app.

Invoices are created by choosing which clients to bill, and which projects to import the billable hours and expenses from.

You can also change currencies for each invoice, control which fields will be displayed, and change the legal entity you bill from (if you have multiple).

Each invoice can include taxes or discounts you may have for that client or invoice specifically.

You can customize email templates when sharing an invoice, both when sending it out for the first time and when reminding people.

Once created, you will be able to track invoice status from unsent, sent, paid, partially paid, or overdue.

Partially paid invoices will have a date on which the payment was made and its amount, so you know how much remains to be paid.

Edit profiles & Bulk edit

Bulk editing allows you to edit multiple entries, projects, and users at once.

Example: You can bulk edit daily working capacity for multiple people at the same time. Or add a new task to multiple projects at once.

Lock time & Add for others

To ensure your time logs and recorded expenses stay accurate, you can use timesheet locking after a certain time period or a specific date.

This will prevent regular users from changing previous entries.

You can lock entries before a specific day in the year, automatically set weekly or monthly locking days, or lock all entries older than “x” number of days, weeks, or months. 

However, as an admin, you can see your team’s timesheets and add time on their behalf, even after the time has been locked.

You can do that in the member’s Timesheet or Calendar, or in the Detailed Report for multiple people at once.

Manager roles

Your processes will be better optimized if you make sure everyone has the right permissions to manage work based on their level of responsibility.

In Clockify there are multiple role levels: Owner, Admin, Project Managers, Team Managers, and Regular Users.

Each role has a different set of permissions, but Manager roles are crucial for optimal project, task, and team management. 

Delegating manager roles helps you speed up the approval process (timesheet, expenses, or time off approval), and better your project management (optimal scheduling decisions, budget control, etc.).

Hide time & pages

You can set different access permissions for different users, so some users won’t be able to see other people’s entries or see projects, teams, or reports.

Example: Not all users need access to Reports, as it’s mostly used by Admins and Managers.

Single sign-on

Single sign-on (SSO) is an authentication system that enables users to log in to multiple tools with a single ID and password.

Clockify can connect to your single sign-on system, so your team can still use one way to log in to it. You would just need to add a custom subdomain for your organization.

Clockify supports SAML2 and OAuth2 protocols used by all major identity providers (OneLogin, Okta, Bitium, Azure, Rippling, JumpCloud, Google, Azure, Okta, Facebook, Github, etc.).

Two-factor Authentication

If you’re paying additional attention to security, Clockify gives you an option to enable 2FA for users to type in a code sent to their email address, prior to log-in.

Data regions

Instead of just globally, your data can be stored in different geographic regions, which is often needed for legal compliance with national laws and regulations.

While you’re creating a new account, you can choose from the following regional locations for you to store data in the USA, Australia, Germany, or the UK.

How to test out all the extra features?

If you aren’t sure Clockify’s extra features will be right for your team, you can activate a free trial for 7 days and test out features yourself. No credit card is required.

Be sure to explore all Clockify features in-depth and check out our other guides for more information.