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Timesheet Rounding: Best Rules and Practices

Timesheets are tools that help employers and employees keep track of time spent on work. It also simplifies billing and invoicing clients. However, with practices such as timesheet rounding, debates are on the rise as different bodies argue whether this practice is legal or acceptable. Time clock rounding is more common than you think. 55% of business owners and employers admit that they carry out time rounding with employee timesheets. They either round employee timesheet up or down for various reasons. For example, most business owners rounding time clock do so to make it easier to run payroll and invoice clients.

However, 34% of employers rounding time clock punches do it deliberately to reduce labor costs and also discourage employees from punching in or clocking in too early before their shifts has begun. As an employee, this might leave you wondering: is rounding down hours wage theft? Is it legal?

As a business owner, you might have questions such as the following:

  • What are time clock rounding rules?
  • What are the best practices and rules to follow?

After all, you can easily fall into legal trouble if you don’t follow the rules either intentionally or unintentionally. Read on to have your questions answered.

What Is Timesheet Rounding?

clocks that set to a different time

Timesheet or time clock rounding is a practice where an employer rounds an employee’s timesheet to the nearest minute, 5, 10, or 15 minutes. This rounding can be in either direction – up or down. Employers round employee timesheet either up or down for a variety of reasons. Some business owners even go as far as rounding to the nearest 30 to 60 minutes. However, the law frowns upon such high rounding because the federal government considers it unlawful and illegal.

Timesheet rounding came into practice as a way to account for uncertain or indefinite time periods in an employee’s workday. This indefinite time can range anywhere from seconds to minutes, such as the time it takes to walk to the restroom or the time an employee takes to boot up their computer. These few seconds and minutes will eventually add up to unaccountable time chunks. When you consider that about 55% of business owners do not use time tracking software to monitor employees, it becomes obvious that timesheet rounding can be a necessary practice for some employers.

Is timesheet rounding legal?

The next question is about the legality of the practice. How much time rounding can be considered excessive?

The Department of Labor (DOL) did release a guideline on this. The Department of Labor states that time clock rounding is legal as long as it’s done correctly and within the limits allowed by the law.

To comply with the law and ensure you don’t make yourself liable to lawsuits as an employer or business owner, there are three rules you should follow:

1.      Timesheet rounding cannot favor employers.

If a company is to have a time rounding policy, then it should either be neutral or favor the employees. This means that employers can’t always round down employee time.

2.      Fifteen minutes is the maximum rounding increment.

If an employer is to round up time, it should not be by more than 15 minutes.

3.      Employers must obey the seven-minute rule.

The seven-minute rule uses a 15-minute window. For example, should an employee clock in at or before the 7-minute mark within a 15-minute time frame, the time should be rounded down. Let’s say an employee clocks in at 9:07 or before then, their timesheet rounds down to 9:00. However, should an employee clock in after the 7-minute mark, then their time should be rounded up. Now, if an employee clocks in at 9:08, their timesheet rounds up to the 9:15. This is the time clock 15 minute rounding.

We now have a good understanding of the rules. Let’s look at how to round employee timesheets legally within the limits allowed by the law.

Round Up or Down neutrally, to the Nearest Increment

man at work is looking at his watch

An employer should round time neutrally to the nearest incremental value. For example, if an employee clocks in at 7:58 and clocks out at 3:56, then their timesheet should round as 8:00 in and 4:00 out respectively. This gives a total work-time of 8 hours.

Clock-In Rounding: For Employee; Clock-Out Rounding: For Employer

In the example above, the employee timesheet should read as 7:55 in and 3:55 out. This gives a total work-time of 8 hours. This method serves to protect the occasional late employee who meets traffic on their way to work. It also protects the employer from employees who might want to clock out later than their shift time.

Round all Clock-In and Clock-Out Times to Favor of the Employee

This is for the employee-focused business owners. Using the first example, the timesheet should read as 7:55 in and 4:00 out. This gives a total work-time of 8 hours and 5minutes.

A timesheet rounding that favors an employer is illegal and the Department of Labor takes such cases seriously. For example, if an employee clocks in at 7:58 and clocks out at 3:56, it is illegal for an employer to record the time as 8:00 in (round up) and 3:55 out (round down). This gives a reduced total work-time of 7 hours and 55 minutes. Such illegal time rounding would be grounds for an employee to file a wage and hour lawsuit. This will bring up the settlement clock rounding calculator where the settlement amount for time clock rounding will vary depending on employee claims.

It is best to follow the rules and be in good standing with the law. For instance, let’s consider the AHMC Healthcare Inc. v. Superior Court class action case. This was reviewed by California’s Court of Appeal in the June of 2018. Two AHMC Health care employees filed a wage and hour complaint, stating that their employer’s timesheet rounding policy was unfair. The hospital used the neutral rule, which rounds time up or down to the nearest quarter-hour for all employees.

man holding a sign 'follow the rules'

After the review, the court ruled the case in favor of the employer.The AHMC time rounding policy was considered lawful. Cross examination reveled that even though 49.5% of their employees had lost time at an average of 2 minutes per shift, another 49.3%gained time. This was proof that the timesheet rounding was neutral and wasn’t manipulated to favor the employer. This in turn showed that employers in California could round time as long as they followed the laid down rule of law.

However, keep in mind that time rounding policies might differ in your state. While the Department Of Labor considers time rounding as legal, some states have their time rounding laws that supersede the requirements of the DOL. This is why employers should use automated time tracking software. Time tracking apps log time automatically as the employee works. They can also be paused when the employee is not working, thereby, giving an accurate up-to-the-minute record of time input. Time management apps will save you the stress of rounding timesheets by automating the invoicing process.

Why Do Employers Round Timesheets?

As an employee, it is easy to assume that employers round timesheets to avoid paying workers their full wages. However, this is notexactly true. Most employers round employee timesheets out of necessity. More than half of business owners saying they round time to make the payroll process easier. One in four employers use payroll software that requires timesheet rounding. Meanwhile, another 34% say they round time because it makes the billing and invoicing process easier.

You’re not entirely wrong to believe that business owners round time out of selfishness. However, they are fewer than you might think. For example, 14% of business owners say they round employee timesheet to save money on labor costs. This 14% are outnumbered by another 18% that say they round time to increase employee pay.

One in five employers round employee timesheets to discourage employees from clocking in too early or before their shift start (a behavior that employers encounter a lot).

However, more than half of employers allow their employees to clock in before their shift begins as long as it is not more than 5 minutes to their scheduled shift. Another 14% allow employees to clock in at whatever time they start working. Then, there areone in ten business owners that won’t allow their employees clock in early at all (it doesn’t matter if they have to work off the clock). As an employer in the last category, you can get into a time clock rounding down calculator settlement dispute. An aggrieved employee can file a Fair Labor Standard lawsuit against you.

What Are the Consequences of Improper Timesheet Rounding?

There are a lot of gray areas when it comes to wage and hour regulation. This is why you need to be careful not to fall victim to breaking the Fair Labor Standard Act (FLSA). Employee timesheet rounding can put employers at higher risks of going against the Fair Labor Standard Act either intentionally or unintentionally. This can lead to a lot of avoidable legal trouble.

1.      Off-the-Clock Work

Some business owners admit that while they do not allow employees to clock in early, they do letthem to work offtheclock until their scheduled shift begins. Keep in mind that off-the-clock work is a major violationof the FLSA. Employers are required to pay employees for hours worked offtheclock even if it’s just a few minutes per day. After all, a few minutes per day will eventually sum up to hours of unpaid labor. This can lead to a huge lawsuit on wage theft.

2.      Inaccurate Employee Records

More than half of business owners admit to rounding employee timesheets to make the payroll process easier. However, this counts as inaccurate record keeping and is a violation of the FLSA. In such a case, an employee can file a wage and labor lawsuit under the FLSA regulations. You can simply avoid these legal battles by keeping consistent and accurate records. So, if a business owner is to round an employee’s timesheet, then they should round everyone’s timesheet the same way. You should follow the rules for legal time rounding as discussed earlier in this article.

3.      De Minimis Work

The de minimis doctrine excuses employers from paying for small amounts of otherwise compensable work-time if the time in question is administratively difficult to track. However, employers have to be careful about what they classify as de minimis work as the California Supreme Court ruling of July 2018 clearly shows. In the case of Troester v. Starbucks Corporation, the California Supreme Court rejected the de minimis doctrine case. It stated that where an employer “requires its employees to work off minutes on a regular basis or as a regular feature of the job,” the de minimis doctrine does not apply. This is because employers can devise ways to track small amounts of reoccurring time worked by employees in such cases.

Employers should contact the labor law attorney, employment counsel, or state labor office if they are unsure whether their business complies with both federal and state time rounding policies.

Conclusion

As we have seen, timesheet rounding can be beneficial to the employee. While some employers round employee timesheets to cut down on labor costs, this is wage theft and can result in huge lawsuits. It’s best to use time tracking software to automate time tracking and make it easier for yourself and your employees. This way, you can pay your employees for the exact hours worked and avoid timesheet rounding altogether. However, if you must implement a time rounding policy, be sure to talk to your employees about it, explain the policy’s neutrality, andwhy it’s a necessity.

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