Time Tracking in Projects: Why It Is Needed and How It Stops Being a Nuisance

Why is time tracking so unpopular in many companies?

In many small companies, time is tracked only when there is no other way: because a customer pays by effort, because the tax audit asks, or because a project has obviously gone off the rails. Employees experience this as control, the owner as a tiresome obligation. The result is timesheets filled in from memory on Friday that reveal more about memory than about the work.

Yet the numbers are valuable. Without them, it is impossible to say whether a fixed price was sufficient or how long similar projects will take in the future. This leads to the guiding question of this article: What does a small company need project time tracking for, what does the law require, and how is it introduced so that it informs rather than annoys?

To answer it, we first clarify the two kinds of time tracking and the legal situation. Then we present the thinking model, Goodhart’s law, and look at what research knows about workplace monitoring. This is followed by two perspectives, rules for time tracking that does not annoy, a worked example, and a step for this week.

Whoever counts hours to judge people gets good hours. Whoever counts them to understand projects gets honest ones.

Working time or project time: two kinds of time tracking

Time tracking refers to two different things. Working time recording captures when and how long someone worked: start, end, duration, breaks. It serves occupational safety, such as compliance with maximum working hours and rest periods. Project time tracking captures what the time was used for: which project, which phase, which activity. It serves billing, post-calculation, and planning.

Both can be combined in one tool but should remain conceptually separate. Working time is an obligation toward employees. Project time is a tool for the company. Whoever mixes the two easily turns a learning tool into an instrument of control.

What does the law require? The situation in November 2026

On May 14, 2019, the European Court of Justice ruled that member states must require employers to set up an objective, reliable, and accessible system for recording daily working time (Case C-55/18). In its decision of September 13, 2022 (1 ABR 22/21), Germany’s Federal Labor Court found that this obligation already follows from the German Occupational Safety and Health Act. Since then, employers must record their employees’ entire working time; no particular form has been prescribed so far.

In June 2026, the German Federal Ministry of Labor and Social Affairs presented a ministry draft amending the Working Hours Act. According to specialist portals, it provides for electronic recording of the start, end, and duration of working time, generally on the same day, as well as a weekly instead of a daily maximum working time. Sources report differently on transition periods and exemptions for small companies. According to these reports, no cabinet decision had been made by fall 2026. Until an amendment is passed, the existing Working Hours Act applies.

For project time, there is no general legal obligation. It can, however, arise from contracts, for example with billing by effort or with subsidized projects that require proof.

The thinking model: Goodhart’s law

In 1975, the British economist Charles Goodhart formulated an observation about monetary policy that became known far beyond it. In the widely used wording by the anthropologist Marilyn Strathern (1997), it reads: When a measure becomes a target, it ceases to be a good measure. The reason is human. As soon as people are judged by a number, they begin to steer the number rather than the thing it is meant to measure.

Applied to time tracking, this means: if project hours are used to understand how long work takes, the numbers are valuable. If they are used to compare employees or to show who has worked enough, the numbers change. Hours are booked to the project that still has budget. Overruns disappear into a general category. And whoever finishes quickly still books the planned time because coming in under plan might look suspicious. The numbers then look good and say nothing anymore.

An analogy makes this tangible. A bathroom scale helps as long as you step on it honestly. If the number becomes a test you must pass, you weigh yourself in the morning without shoes, and after breakfast you would rather not step on it at all. The scale still measures precisely, but no longer what you wanted to know.

What research shows about tracking and monitoring

Project time tracking is not surveillance software. But it touches the same question: how do people react to having their work recorded? Siegel, König, and Lazar (2022) presented a meta-analysis on this with 70 independent samples and 233 effect sizes. Electronic monitoring slightly lowered job satisfaction, with a correlation of r = −0.10, and slightly increased stress, with r = 0.11. The authors found no relationship with performance. Another finding is notable: where monitoring was combined with performance targets and feedback, the negative effects tended to increase.

How much the type of tracking matters is shown by Hamrick, Zafar, LePine, and a further author (2025). In a first study, they surveyed 400 full-time employees working remotely in the UK and the US in three waves one month apart, and they confirmed the results in a second study. They distinguished two forms of monitoring by supervisors. Interactional monitoring, that is, questions, conversations, and joint reviews, was experienced more as a challenge, and employees subsequently voiced suggestions for improvement more often. Observational monitoring, that is, software recording in the background, was experienced more as a hindrance, and employees stayed silent more often. The more complex the work, the stronger both effects.

The limits belong here too. Both studies examine monitoring in a broader sense, not project time tracking in a trade business or an engineering office. The effects in the meta-analysis are small. The direction is nonetheless clear: tracking experienced as control costs satisfaction and openness without improving performance. Tracking that is talked about, by contrast, can lead to improvements.

Control or learning tool? Two perspectives

There are two readings of what project times are for. The first sees them as an instrument of control: whoever records their hours works more carefully, and the owner sees who is fully utilized and who is not. This view is widespread, and it is not entirely wrong, because without numbers, overload and idle time remain invisible.

The second sees them as a learning tool: the numbers show which project phases regularly take longer than calculated, which customers need more coordination, and how well the company estimates. The findings of Siegel and colleagues and of Hamrick and colleagues support this, as does Goodhart’s law. Only those who have no reason to embellish the numbers deliver numbers one can learn from.

I consider the second reading the sound one, and it includes the legitimate concern of the first. Overload can also be recognized in project figures if they are viewed per team and week. Whoever compares individuals by their hours, by contrast, loses precisely the honesty they depend on. Why trust in a team gains little from control is described in the essay on trust in the team.

How time tracking stops being a nuisance: rules and a worked example

• State the purpose openly: before introduction, explain what the numbers will be used for and what explicitly not.
• Few categories: at most eight activity types and only the current projects to choose from. Whoever has to search books incorrectly.
• Record when switching: time is booked when switching activities or at the end of the day at the latest, not on Friday from memory.
• Coarse grid: quarter hours are enough. Minute-level precision costs more time than it brings insight.
• Evaluation per project: evaluate per project, phase, and activity, not as a ranking of people.
• Discuss together: once a month, deviations between calculation and actuals are discussed in the team, with the question of what will make the next calculation better.

A worked example shows what this looks like. A planning office calculated a fixed-price project at 120 hours. It recorded 150 hours. The total alone only says that the project cost money. Only the breakdown by phase shows where.

The largest deviation lies not in the actual work but in coordination with the customer. Two decisions follow: limit and name coordination rounds in future quotes, and calculate more time for clarification with customers of this kind. How such actual figures become a robust post-calculation is described in the guide to the contribution margin per order. How deviations become visible during the project is shown in the guide to project controlling for small businesses.

Project times are also the best basis for the next estimate. The guide to capacity planning explains that experience with similar tasks is a better yardstick than the plan for the current one. And whoever calculates hourly rates should know how much of the paid time actually goes into projects. The article on how to calculate process costs assumes practically usable time of 80 percent; recorded project times show whether that holds for your own company.

Conclusion: what project time tracking is needed for

The question at the start was
a small company needs project time tracking for, what the law requires, and how it is introduced without annoying. The answer separates two things. Working time must already be recorded today under the Federal Labor Court’s ruling; a reform with an electronic obligation has been announced but not yet passed. Project time is voluntary and serves post-calculation, billing, and better estimates.

As shown, the value of project times depends above all on how they are used. According to Goodhart’s law and the findings on monitoring, numbers used to control people deliver embellished values and less openness. Numbers evaluated per project and discussed together improve the next calculation. The sober observation is: time tracking is not a nuisance because of the minutes it costs, but because of the distrust one can sense in it.

What you can put into practice right away

1. Check how working time is recorded in your company and clarify open questions on the legal situation with your advisors.
2. Choose a current fixed-price project and define at most eight activity types for project time.
3. Explain to the team in writing what the project times will be used for and what not.
4. After the project is completed, compare calculation and actuals per phase.
5. Derive a change for the next calculation from the largest deviation.