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Time clock rounding can help streamline your payroll processes — if you do it right.
While having an employee who adds a few minutes to their time sheet each day might not seem like a huge deal, it can have a significant impact on your bottom line. For example, suppose an employee adds five minutes of extra time to their sheet every workday. There are approximately 260 workdays per year, so that equates to 1,300 minutes, or 21.67 hours, of extra work you’re paying that employee each year.
Some employers have turned to time clock rounding to counter this revenue loss, but this practice can present legal issues if it’s not done properly. It also may be less effective than you think at recouping lost wages.
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Time clock rounding is the rounding up or down of an employee’s hours worked. For example, if an employee clocks in at 9:02 a.m. and clocks out at 4:59 p.m., you might round their start time to 9 a.m. and their end time to 5 p.m. Many employers do so without ever realizing that time clock rounding is a formal concept with legal ramifications.
Although it’s not required under any labor laws, time clock rounding can help streamline your payroll processes. For example, if you pay an employee $15 per hour and they work 7 hours, 58 minutes, you must pay them $15 x 7 + $15 x (58/60) = $119.50. If you round up the time to eight hours, you can simply calculate $15 x 8 = $120, and the 50-cent difference is minimal.
Time clock rounding can also combat time theft and other forms of paying employees for work they haven’t done. If an employee has worked 8 hours, 2 minutes, rounding down to eight hours helps you regain some of the money lost to short employee breaks during paid work time. However, this nickel-and-diming is a less-compelling reason for rounding time clocks than easing your payroll calculations, as trying not to pay for breaks borders on micromanagement.
Within certain bounds, time clock rounding is entirely legal. According to the federal Fair Labor Standards Act (FLSA), employers that round time clocks must abide by the following requirements:
To remain legally compliant in your rounding, you must follow one of the three FLSA-approved rounding rules: 15-minute rounding, five-minute rounding or six-minute rounding.
Fifteen-minute rounding is the most common form of time clock rounding. It involves rounding up or down to the nearest quarter hour. Put in simpler terms, it rounds all start or end times to one ending in :00, :15, :30 or :45. This table of exact and rounded times should clarify:
Exact time | Rounded time |
---|---|
8:53 – 9:07 a.m. | 9:00 a.m. |
9:08 – 9:22 a.m. | 9:15 a.m. |
9:23 – 9:37 a.m. | 9:30 a.m. |
9:38 – 9:52 a.m. | 9:45 a.m. |
9:53 – 10:07 a.m. | 10:00 a.m. |
As an example, suppose you’re rounding an employee’s time for a shift that started at 10:01 a.m. and ended at 5:05 p.m. According to the 15-minute rule, you should round the employee’s start time to 10:00 a.m. and their end time to 5:00 p.m.
For the five-minute rounding approach, you round a given time zero to two minutes up or down. The following table shows how this rounding translates to five-minute intervals:
Exact time | Rounded time |
---|---|
8:58 – 9:02 a.m. | 9:00 a.m. |
9:03 – 9:07 a.m. | 9:05 a.m. |
9:08 – 9:12 a.m. | 9:10 a.m. |
9:13 – 9:17 a.m. | 9:15 a.m. |
9:18 – 9:22 a.m. | 9:20 a.m. |
The above pattern repeats every 20 minutes, so a 9:32 a.m. exact start time is rounded to 9:30 a.m. and a 9:54 a.m. start time is rounded to 9:55 a.m.
With six-minute rounding, you generate intervals that represent one-tenth of an hour, thus making payroll calculations much easier. This table shows how six-minute rounding works:
Exact time | Rounded time |
---|---|
8:58 – 9:03 a.m. | 9:00 a.m. |
9:04 – 9:09 a.m. | 9:06 a.m. |
9:10 – 9:15 a.m. | 9:12 a.m. |
9:16 – 9:21 a.m. | 9:18 a.m. |
9:22 – 9:27 a.m. | 9:24 a.m. |
9:28 – 9:33 a.m. | 9:30 a.m. |
The above pattern repeats every 30 minutes, so a 9:34 a.m. start time is rounded to 9:36 a.m. and a 9:49 a.m. start time is rounded to 9:48 a.m.
Consider the following challenges that can emerge if you round your time clocks:
To keep your time clock practices legally compliant while paying your employees fairly, follow these best practices:
As described above, time clock rounding can quickly become wage theft if you’re not careful. You can avoid this pitfall by looking at your rounding practices once per pay cycle to catch any cases of excessive wage withholding. For instance, if you frequently spot the 8:53 a.m. to 5:07 p.m. example described above, you may want to switch rounding approaches.
Yes, you’re rounding your employees’ time to make your calculations easier when running payroll, but you should avoid rounding in ways that more than slightly diminish your employees’ wages. If you find that your rounding regularly reduces what you pay your employees, consider switching to an approach that slightly overpays them. That’s a better outcome than being accused of, or sued for, underpayment or retro pay.
If you’re operating on a five-minute or six-minute rounding system, an employee just needs to work an extra few minutes to earn another one-twelfth or one-tenth of an hour’s pay. These amounts may be minuscule per shift, but over time, they can add up. When you see employees regularly taking advantage of your rounding system in this way, kindly ask them to clock out after they reach their exact amount of required work hours.
In some cases, rounding your employees’ hours can require you to pay for overtime. If so, you must pay your employees time and a half for those extra rounded fractions of hours. Doing so could throw off your payroll budget.
Conversely, resist the temptation to use rounding to avoid overtime pay and thus stay within a tight payroll budget. Withholding fairly earned wages can lead to lawsuits that ultimately prove more expensive than just paying in full in the first place.
If you round your time clocks, you’ll be less likely to find yourself in hot water with your employees if your policy is clear. State which FLSA-compliant rounding system you’ll use, and explain how employees can file wage grievances. [Read related: The Importance of Completing an FLSA Compliance Self-Audit.]
The potential for unhappy employees and lawsuits may prove more costly in the long run than just paying employees for their exact hours worked. Plus, with the best payroll software and the best time and attendance systems, the longtime concern of tedious calculations for fractions of hours worked is negligible.
Instead of delegating tasks around pay calculation to team members, use payroll software or choose a time and attendance system to automate the process and minimize errors. Start with these vendors when selecting the right platform for your needs:
Instead of manually calculating your employees’ pay based on the exact number of hours and minutes they worked, let software automate the process. Payroll services and time and attendance software excel at this, and payroll software often includes features for ensuring regulatory compliance. You’ll avoid hassle and stress while paying your employees the exact amounts they deserve.