Is Rounding Employee Time Costing More Than You Realize?

FLSA-rounding-employee-time

“Rounding” employee in/out punch times has been a widely used practice since the Department of Labor introduced employee overtime wage and hour protections many years ago. Perhaps the most common practice is rounding an employee’s in or out time to the nearest 15-minute mark (e.g., 8:06 am = 8:00 am) to simplify the recording and calculating of time worked.

But these days, this practice raises questions of compliance and increased labor costs. Staying compliant with labor laws as an employer can seem at times like a moving target. Is this practice considered in compliance with the Department of Labor’s Fair Labor Standards Act (FLSA)? And perhaps more importantly, is this practice costing employers dearly in increased labor expenses? (Most likely, yes.)

Why Round Employee Times?

Historically, tracking and then calculating employee time has been a tedious and time-consuming process. The timesheet and scheduling software we enjoy today that makes it convenient and inexpensive to automatically track time was not readily available or was cost-prohibitive. Rounding time made it convenient for employees managing their own timesheet, and for clerks who were calculating those hours.

Today, however, tracking employee time can be simple and automatic through an automated time clock and scheduling solution. Using such a tool results in saving employers thousands each month in overtime costs, overpaid wages, time theft, administration time and productivity.

So why do some employers still use this rounding method to calculate time, and what is the general guideline for applying rounding in an FLSA-compliant way?

Use a Neutral Rounding Rule

Although numerous states have established additional wage and hour requirements that you should research before finalizing any use of rounding with your staff, the Department of Labor has provided some examples and guidelines on the matter. (Visit DOL website for examples.)

At a federal level, for example, rounding to the nearest 15-minute mark has been considered historically acceptable as long as it is applied neutrally. In other words, the rule should not always benefit the employer. If properly applied the rounding will benefit either side, depending on whether rounding up or down is occurring.

From 5:00 – 5:07 pm, we round down to 5:00 pm. From 5:08 – 5:15 pm, we must round up to 5:15 pm.

Is Rounding Costing You More than You Realize?

While rounding may be a common practice and acceptable in many circumstances, it can also be very costly for employers in terms of productivity and overpaid wages. Consider this example.

An employee arrives at 8:06 am, 6 minutes late for work. The in time is rounded to 8:00 am, adding 6 minutes of hours worked. The employee also leaves for the day at 4:55, 5 minutes early. That time is rounded to 5:00 pm, adding 5 minutes of pay. Consider also the employee’s punches for lunch. If the employee leaves at 11:55 am, that time is rounded to 12:00 pm. Perhaps they return at 12:35, 5 minutes late, with the return time rounded to 12:30 pm.

This is a very common example, resulting in the employee receiving 21 minutes of extra pay in a single day. If this pattern were to occur with many employees every single day, overpaid wages (or lost productivity) can quickly reach thousands in regular and overtime each month.

A Costly, Yet Common Problem

One of the most common problems that occurs when employers apply a rounding rule is that employees begin to use the rule in their favor. This quickly becomes very costly. As employees review and approve their time cards, they become acutely aware of the rule. In many cases, employees are not seeking to maximize their pay, but rather, are aware of what time they must come and go to be considered “on time.” The rule tends to promote arriving late and leaving early. Not only is this a loss in productivity, but again, leads to increased regular and overtime pay.

So why do employers pay the cost? The primary intent has been for convenience. But in the end, with today’s timesheet calculator and scheduling software that can automatically capture and calculate hours, this costly practice in most cases is simply unnecessary.

Eliminate Punch Rounding

Because today’s time and labor software has made tracking employee time simple, convenient and cost-effective, consider eliminating punch rounding to enjoy the labor savings and increased productivity that will follow. Contact us at 941 Timekeeping to learn more about simplifying compliance and time tracking with an automated time and attendance solution.

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