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Timecard Rounding as a Payroll Practice

Recently, wage-and-hour lawsuits surpassed discrimination suits as the most commonly filed employee action in civil courts.  According to an article in Insurance and Financial Advisor, the Department of Labor (DOL) estimates that 80% of employers are not in full compliance with wage-and-hour laws.  It is more important than ever for employers to ensure that everything about their timekeeping system, break and meal policies, and overtime accounting are applied consistently to all employees and are in compliance with the Fair Labor Standards Act (FLSA).

Timecard Rounding for Employers
Many companies round up or down on employee time cards prior to processing payroll.  For example, a company might round to the nearest quarter-hour or 5-minute increments.  Some organizations have timeclocks that automatically round while others manually round employees’ paper timesheets.

The Department of Labor allows the practice of rounding, but employers can still end up in hot water.  Why? Because they apply rounding rules that are unfair to employees.  According to the DOL, the results of rounding must be neutral—in other words, rounding must favor the employee as often as or more often than it favors the employer.

Rounding Policy Must Be Consistent
The most common mistake among employers is to round up when employees clock in and round down when employees clock out.  This type of rounding would lower an employer’s overall wage expenses, so it is definitely not a neutral application of rounding.  It’s a no-no and would be a red flag to the DOL if employee complaints were made.  Mistakes can also be made when employers fail to take into account the differences in rounding rules required by the laws of individual states, which can vary from FLSA.

To ensure that rounding is equitable to both the employee and employer, it is best to choose a time interval and then round down before the halfway mark of the interval and round up after the halfway mark.  For example, if a company rounds in 15-minute intervals and an employee clocks in at 6:12 a.m., the Payroll Administrator would round up to 6:15 a.m.  But, if she clocked in at 6:07 a.m., the time would be rounded down to 6:00 a.m.

For more information or for assistance with your company’s timecard rounding policies, give us a call for your Free Consultation, 866.709.9401.