Federal wage and hour laws do not require you to have a time clock. Whether you decide to have a time clock or not, you should have a reliable system in place for keeping track of your employees' hours.
Many companies use sign-in sheets that employees must complete when they come in, when they leave for lunch, when they return from lunch, and when they leave work for the day. They also request that the employee total the number of hours worked per day.
While you may rely on your employees to keep their time, it's up to you to make sure that what they put on that sheet is correct. If an employee totals his hours wrong and you don't catch the error, with the result that the employee appears to be underpaid, an auditor is not going to go to the employee for the problem — you'll be held responsible.
Determine how you will treat fractional parts of an hour. Generally,
you are required to determine precisely the compensable time of your employees,
including fractional parts of an hour. There is, however, an exception to the
rule: if you round off your time (for example, to the nearest tenth of an hour),
the practice is acceptable if it is shown that over a period of time, the
rounding results in the employees' getting paid for all the time they actually