timesheet rounding

Timesheet Rounding: Do it Right to Stay Compliant

Timesheet rounding is a widespread practice in companies everywhere that use timeclocks or apps for clocking in and clocking out. For the most part it’s considered an acceptable practice when it comes to the Fair Labor Standards Act (FLSA) and the Department of Labor (DOL) if – and this is a big IF – employees average out in a way that they get paid for all the time they have actually worked. In this article I’ll walk you through the issues, challenges and best practices to make sure your company’s timesheet rounding doesn’t put you on the wrong side of the law.

Timesheet Rounding in Perspective

Automatic timesheet rounding is something that happens pretty routinely in a lot of companies where hourly workers have to punch in and punch out for accurate recording of their working time. Yes, it’s the 21st century, so a lot of companies have eliminated the traditional “punch-clock” of yesteryear and accomplishing clocking in and clocking out a variety of different ways, including smartphone apps, ID card swiping, attendance beacons, and even biometric scanning.

However hourly employees clock in and clock out, their exact starting and ending times are often rounded to the nearest time increment. For example, an employee who clocks in at 8:56 am or 9:03 am is likely going have a clock-in time automatically rounded to 9:00 am. Of course, this does depend on what the official time increment is at any given company. If it’s based on a five-minute interval, then the 8:56 would round down to 8:55 and 9:03 would round up to 9:05.

The big question you have to ask yourself from a company perspective that uses timesheet rounding is WHY? The practice comes from a day and age when rounding made it easier to calculate a person’s time and wages – but this was back when all that was being done manually. The practice has stuck around at many companies for no other reason than that’s the way it has always been done. But here’s the thing – with all the new modern ways to do time tracking automatically down to the second with virtually no work on anyone’s part, there is no reason to do timesheet rounding!

Yes, you will have to invest in a new system if you haven’t already done so. But many of the time tracking and time clock solutions available today are surprisingly affordable and very easy to implement. Two simple action takeaways from this article right now:

  • If you do timesheet rounding for no good reason, then stop doing it.
  • If needed, update your time tracking capability to stop timesheet rounding.

Stopping the practice of timesheet rounding is the best course of action, especially from the employee perspective. There have been cases where timesheet rounding has resulted in workers not getting paid for all their work. In fact, among companies that do timesheet rounding, 34% have admitted to deliberately rounding down to reduce payroll costs or minimize early clock-ins (source). You can bet that whenever that happens, word spreads quickly and makes hourly workers paranoid. There is a general mistrust of timesheet rounding among many hourly workers. Your company can avoid these problems and the resentment and mistrust they breed by simply choosing to not round timesheets at all. Ever.

If you stop timesheet rounding, then you also don’t have to worry about making sure your system does it fairly. What you can’t do is have any kind of system that always rounds down, because then you’re definitely guilty of cheating your workers out of compensation they owed for time they actually worked. That’s no good, obviously, and is also illegal. And if your system went they opposite way and always rounded up, you’d end up paying people for time when they weren’t working and that is just, well, stupid from a business perspective.

Timesheet Rounding Best Practices

If your company is going to insist on continuing with timesheet rounding, then at least consider the following best practices to make sure you remain fair and compliant with applicable laws:

  • Use the shortest increment possible: FLSA regulations clearly state that timesheets can be rounded to “the nearest 5 minutes, or to the nearest one-tenth or quarter of an hour.” With time increment options of 5, 10, and 15 minutes, you should choose 5 minutes. Why? Because the effects of rounding have the least amount of impact at the smallest increment. If you round to the nearest 15-minute interval, those rounded amounts add up quickly. If there’s ever a dispute or allegation that it wasn’t done correctly, there’s going to be a lot of rounded time on the table. It could end up being a huge financial liability for your company.
  • Never round unpaid breaks: Most hourly workers are given a timed lunch break of 20-30 minutes (or more at generous companies). You definitely don’t want to be rounding time for any of those sorts of breaks. If you do, state and federal investigators are going to question whether workers are getting or taking their full break, which can land you in hot water with regulators.
  • Accurate time tracking: Your timeclocks have to put in places that facilitate hourly workers punching in before doing any kind of work, including preparatory work such as turning on equipment and so forth. Same thing with punching out. Once workers have punched out, there shouldn’t be any work-related tasks that remain to be done. It’s on you as the employer to arrange your work areas and timeclocks in such a way that people aren’t inadvertently performing work that isn’t somehow captured by the time tracking system.
  • Audit your timesheet rounding: At least once each year you should perform a full and detailed audit of your timesheet rounding scheme to make sure it is both fair and compliant.
  • Choose your method wisely: You might decide to indiscriminately round to the nearest increment and let the chips fall where they may. But over time if it turns out this approach favors the employer and not the employee, you could get into trouble. You might decide to round all clock-ins to favor employees and all clock-outs to favor the employer. That’s fine, but track the data over time and see how it turns out. If the employer is getting more of the benefit of rounding, it’s problematic. Choosing to do all rounding to favor the employee will keep you safe legally, but might not be the smartest business decision to make.
  • Check state laws: At the federal level, the DOL approach to timesheet rounding has been explained. But your state might have a different take on timesheet rounding that overrides the DOL regulations. Make sure you find out about timesheet rounding in your state!

As you can see, timesheet rounding is a surprisingly tricky business, which is why I strongly recommend you stay away from it. In part this is because if you get it wrong, you are likely to get in trouble for it. The DOL loves to come down hard on unfair timesheet rounding. The last thing you need is to become the object of a wage and hour grievance because it probably won’t go in your favor.

Yes, timesheet rounding is perfectly legal, but just because it’s legal doesn’t mean you have to be doing it. In fact, I would go so far as to say that although it’s legal, it’s just not smart given the more technologically up-to-date ways time tracking can be handled in the 21st century. Give up on timesheet rounding and don’t look back!

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