What is Time Rounding?
Employee time rounding is the practice of adjusting raw employee punch times to a nearest time increment. In the USA it’s common to see rounding to the nearest 10th of an hour or the nearest 15 minutes.
Why should it be Used?
Typically time rounding is used for two reasons. The first is historical, rounding simplified the payroll calculation process but obviously given the advent of computerized time clock systems this reason is largely redundant. The second reason is to provide for a minimum block of recognizable work for employees. This typically prevents employees from accumulating a minute or two a day of extra work by punching in slightly before their scheduled start and punching out slightly late. It also prevents employers from deducting time from employee payroll in the event that employees punch in just a few seconds late or punch out just a few seconds early.
The reasoning behind this is fairly simple, obviously employees cannot all punch in or out at exactly their scheduled start and finish times so leeway is allowed.
What Does US Federal Law Say About Time Rounding?
The US Department of Labor allows for rounding of time punches. Specifically it allows for a rounding scheme to the nearest 15 minutes but only if that scheme is applied impartially and consistently. For example, it allows for a time of 5:07PM to be rounded down to 5:00PM and 5:08PM to be rounded up to 5:15PM. The DOL requires that rules applied to punching in and out are applied consistently though. So, while it allows a punch in time of 8:53AM to be rounded up to 9:00AM it then requires an employer to round the punch out time for the day from 5:08PM to 5:15PM. Employers cannot apply different rules to punching in and out in an effort to minimize recorded hours.
What Does California Law Say About Time Rounding?
In 2013 a California court found that Federal law should be applied in the case of Silva v. See’s Candy Shops. See’s Candy Shops were using an electronic time card system that allowed a 10 minute grace period before shift start and at shift end and employees were specifically instructed not to work during the 10 minute grace period. Additionally a nearest 5 minute rounding rule was applied by the time clock system. The basis of the employee’s claim was that the rounding policy combined with the grace period was not impartially applied and resulted in employee underpayment. Obviously the employee claimed the exact opposite and their expert witness produced evidence that the time clock system rounding policy actually resulted in more pay being given to employees.
The details of the case are complex enough to not warrant further discussion here but the upshot of the finding was that time clock rounding is fine as long as it doesn’t result in employees being underpaid and that it is fair and neutral. Of course no-one should take that as confirmation that California employers have carte blanche on time clock rounding!
What Precautions Should Employers Take?
The first precaution employers should take is that any rounding system is applied fairly and without bias and without resulting in employees being underpaid. Rounding should be carried out automatically by your time clock system without the need for manual intervention. Additionally the time clock system should maintain a record of the raw hours worked so that audits can be carried out to ensure employees are not being underpaid due to rounding.
Procedurally employers must take care to control employees punching in and out in a fashion that could result in seemingly unfair time clock records. For example, if employees consistently arrive at work early to make coffee or chat with their workmates do not allow them to punch in early if they are not actually working. Similarly, if employees take time to wind down at the end of their shift make sure they punch out first.
Do not allow Rounding to Hide Actual Work
Employers should be careful that their rounding policy is not being used (deliberately or not) to hide actual work being done outside of scheduled work time. If employees are doing small amounts of real work outside of their normal shifts then a policy should be put in place to allow supervisors to record these times in the time clock system and have them affect wage calculations.
Is Time Clock Rounding Fair?
Yes, time clock rounding can be fair if a rounding policy is equitable and applied impartially then it should not result in either a net gain or loss to either employees or employers. It can greatly simplify wage and payroll calculations and allow for much simpler and easy to understand reports, again for both employees and employers.
Time Clock MTS and Time Clock Rounding
Time Clock MTS has a comprehensive time rounding system that can be switched on via the Tools->Options->Payroll Settings menu. It allows for selection of rounding increment (minute, 1/10 hour, 15 minutes or 30 minutes) and has three rounding schemes. The schemes are Normal, Least Quantity and Maximum Quantity.
- Normal Rounding – Times less than half the rounding increment will be rounded up, and greater than or equal to the rounding increment will be rounded up. For example with a 15 minute increment, 7:52AM will be rounded down to 7:45AM and 7:53AM will be rounded up to 8:00AM.
- Least Quantity – This should not be used for calculation of payroll as it is not compliant with DOL regulations. It may, however, be a valid rounding scheme if needing to track time spent working on jobs. This scheme results in all Clock ins being rounded up and all Clock outs being rounded down. So with a 15 minute increment a 7:46AM clock in would be rounded up to 8:00AM and a 5:14PM clock out would be rounded down to 5:00PM.
- Maximum Quantity – This rounding scheme favors time worked by employees. All clock ins are rounded down and all clock outs are rounded up. So with a 15 minute increment a 7:59AM clock in would be rounded down to 7:45AM and a 5:01PM clock out would be rounded up to 5:15PM. It’s likely when used that this rounding scheme would result in more hours paid to employees.
Time Clock MTS Stores Actual Punch Times
Time Clock MTS applies any rounding rules at report time only and raw punch times are stored internally. Because of this it’s simple to change your time rounding rules and evaluate the effect they will have on your payroll. There are also a number of reports that allow comparison of actual time punches and the rounded values such as the Actual vs Rounded Report.
Obviously none of this article constitutes actual legal advice and laws can vary widely from state to state and country to country. You should consult with your own counsel when considering applying a time clock rounding system to your business.