Time Clock Rounding Best Practices

What is time clock rounding?

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.

Why is time clock rounding important?

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.

Is time clock rounding legal?

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:

1. They must round only to certain fractions of an hour.
2. They cannot use rounding to withhold wages that an employee has fully legally earned.

Rounding rules for compliance

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.

15-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:

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.

Five-minute rounding

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:

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.

Six-minute rounding

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:

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.

What are the challenges of time clock rounding?

Consider the following challenges that can emerge if you round your time clocks:

• Short-term wage theft: Although the FLSA allows for the aforementioned rounding methods, employees may view rounding as wage theft. Think about it like this: If an employee works from 8:53 a.m. to 5:07 p.m., they’ve worked 8 hours, 14 minutes. However, under 15-minute rounding, they’d get paid for only eight hours. That’s approximately a quarter hour of unnecessarily (though legally) held wages.
• Long-term wage theft: If your employee starts their day at 9:02 a.m. and ends at 5:04 p.m., you might round their start and end times to 9:00 a.m. and 5:00 p.m. That’s two minutes of wages not paid, which means little for one work shift. However, if you’re not paying these two minutes every work shift, you could eventually wind up not paying employees for what amounts to hours of work in the long term. Employees could sue you over this.
• Inaccurate work records: Some employers may use employees’ exact hours worked to determine which employees are performing the best. However, when you round your time clocks, you chop off up to a quarter hour of extra work that can set one employee apart from others. As a result, you may find strategic shift planning more difficult.

What are some best practices for time clock rounding?

To keep your time clock practices legally compliant while paying your employees fairly, follow these best practices:

Regularly assess and tweak your time clock rounding.

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.

Round to benefit your employees, not yourself.

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.

Check whether employees are abusing your rounding system.

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.

Think about your budget.

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.

Set a clear time-rounding policy.

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.]

Decide whether you truly need to round.

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.

The best payroll and time and attendance software for time tracking

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:

• Gusto: Within this payroll software’s user interface, you’ll find a tab dedicated to time tracking. Read our in-depth Gusto payroll review to learn how this platform excels at streamlining employee time-off requests and tabulating each employee’s used and remaining paid time off.
• QuickBooks Payroll: The payroll service from accounting software’s leading brand comes with built-in time-tracking features. Use this payroll platform to approve employee time sheets and generate client invoices based on team members’ hours worked per project. Discover more about this platform’s time-tracking features in our comprehensive QuickBooks Payroll review.
• TriNet: This payroll provider includes time-tracking features in all of its plans. Alongside this technology for fully tracking and paying employees’ hours worked, TriNet includes tools for ensuring adequate salaries for key personnel. Explore this platform’s additional offerings via our detailed TriNet review.
• TimeClock Plus: Your options for tracking employee time within this platform include time sheets and geofencing features. Read our TimeClock Plus review to learn how you can set exceptions for individual employees’ meal and rest breaks and overtime hours.
• When I Work: This platform excels at tracking employees’ hours worked against their scheduled hours. You can also use When I Work to monitor all team members’ paid and unpaid breaks. Read our When I Work review to discover the other ways this time and attendance system streamlines your employee time tracking.
• Time Doctor: If your employees lose their internet connections, Time Doctor continues tracking their time. You can add keyboard- and mouse-tracking services to your plan to further assess how much of your team’s clocked time is actually spent working. Dive deep into this platform’s offerings via our full Time Doctor review.

Paying your employees the right way

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.