17 Sep Time rounding for attendance and overtime calculations.
What is time rounding?
Time rounding, sometimes referred to as clock rounding, is a policy used in some workplaces when tracking time and payroll. This approach rounds an employee’s start and end times to the nearest specified increment, such as five, ten, or fifteen minutes.
Here is an example: suppose an organization has a policy of rounding time to the nearest fifteen minutes. If an employee clocks in at 8:07 a.m., this would be rounded down to 8:00 a.m. If the same employee clocks out at 5:04 p.m., this would be rounded down to 5:00 p.m.
This process simplifies the calculation of hours worked, especially for those using analog or digital time cards. However, the Fair Labor Standards Act (FLSA) in the United States stipulates that rounding policies must be fair and cannot systematically underpay employees. For example, employers should not always round down, because this would lead to employees not being paid for all the time they actually worked.
It’s worth noting that while time rounding can simplify payroll calculations, some consider it an outdated practice, given that digital time tracking systems can accurately record exact hours worked. The ethics and fairness of time rounding are often discussed, and laws regarding time rounding may vary by jurisdiction.
Is time rounding legal?
In the United States, time rounding is generally considered legal under the Fair Labor Standards Act (FLSA), provided it’s done correctly and fairly. The FLSA allows employers to round employee hours to the nearest quarter hour. For example, an employer might round an employee’s time up or down to the nearest 15-minute increment.
However, the rounding must not consistently favor the employer. For instance, an employer cannot always round down. The Department of Labor’s (DOL) regulation states that the rounding practices should average out so that the employees are properly compensated for all the time they have actually worked.
While time rounding is allowed, its use can sometimes result in wage and hour disputes, especially if the employer is perceived as unfairly rounding in their own favor. This is why, despite the law, some employers prefer to record exact start and stop times.
In other countries, the legality of time rounding may depend on local labor laws, so it’s always best to check with a local authority or legal professional.
It’s also worth noting that there has been a move towards more precise timekeeping due to advancements in technology, which can also reduce the potential for disputes over time rounding.
How does time rounding affect overtime pay?
Time rounding can affect overtime depending on how it’s applied. The key point to remember is that an employee should receive overtime pay if they work more than 40 hours in a workweek, as specified by the Fair Labor Standards Act (FLSA) in the United States.
For instance, if an employer rounds down an employee’s time such that it reduces their total hours to under 40 for the week, when they actually worked over 40 hours, this could infringe on the employee’s rights to receive overtime pay.
On the other hand, if the rounding policy is applied fairly, over time it should not consistently favor either the employer or the employee, and it should balance out. This means an employee may occasionally gain or lose some minutes in a workweek, but it shouldn’t result in a consistent loss of overtime pay.
To ensure fairness, many companies adopt a “7-minute rule” or a similar policy where they round down if the employee clocked in up to 7 minutes late, and round up if the employee clocked in 8 or more minutes late. This method of rounding to the nearest quarter hour can help to balance things out over time.
However, it’s important to note that labor laws can vary greatly depending on the jurisdiction, and some states in the U.S. have specific rules and regulations regarding overtime and time rounding. Therefore, it’s always advisable to check with a local authority or legal professional to ensure compliance with all relevant laws and regulations.
What is the 7-minute rule in time rounding?
The 7-minute rule is a common guideline used in time rounding in payroll systems. When an employer uses the 7-minute rule, the minutes an employee clocks in before or after the quarter hour are rounded to the nearest quarter hour of work.
Here’s how it works:
- If an employee clocks in up to 7 minutes late, their time is rounded down to the nearest quarter hour. For example, if an employee clocks in at 8:07, their time would be rounded to 8:00.
- If an employee clocks in 8 or more minutes past the quarter hour, their time is rounded up to the next quarter hour. So if an employee clocks in at 8:08, their time would be rounded to 8:15.
The same approach is applied when clocking out.
The purpose of this rule is to make time calculation easier while still being generally fair to both employees and employers. This is allowed under the Fair Labor Standards Act (FLSA) in the United States, provided that the rounding does not consistently disadvantage the employee over time.
What kind of time clock rounding does ClockIt support?
ClockIt it allows time rounding for both PUNCH IN and PUNCH OUT. With our rounding functions, you can calculate overtime calculations with ease. What’s more is that you can specify both positive rounding and negative rounding. Depending on your company policies you may only apply either one of the two.
To understand this further let me explain with two examples.
Positive Time Rounding
Positive time rounding is used mainly to avoid over time build up for very small amounts of time. Let’s say a few minutes every day can add up to a few hours by the end of the month. To avoid this you can apply a positive rounding of time.
Say, you have a 15-minute positive rounding and let’s say that your IN time is 9:00 AM and OUT time is 6:00 PM. If an employee arrives at 8:50 AM his IN time will automatically be rounded off to 9:00 AM. This will ensure that 10 minutes is not accounted towards overtime. Similarly, if the employee leaves at 6:05 PM the positive rounding will his/her out time will be rounded to 6:00 PM.
But if the employee arrives at 8:30 AM then his/her IN time will be considered at 8:30 AM and he/she will receive a 30 minute overtime for the IN punch. Again if the employee leaves at 7:00 PM then he/she will get a 1 hour overtime for the out punch totaling to 1 hour and 30 mins total overtime for the day.
Negative Time Rounding
The negative time rounding of time is used mainly to give the employee a little flexibility to come a little late or leave a little early from work. For example, say, this is set to -15 mins and your IN time is set to 9:00 AM and out time is set to 6:00 PM. If the employee arrives at 9:10 AM the IN time will automatically be taken as 9:00 AM. If the employee leaves at 5:45 then the OUT time will automatically be adjusted to 6:00 PM.
But if the employee arrives at 9:30 AM then 9:30 will be considered as the IN time and he will be marked late by 30 mins. He/she will need to make up for this lost time.
Doing these time rounding calculations manually can take up a lot of time, fortunately, in ClockIt this is automated on a daily basis so that you can run our 1 click reports for your payroll period. If you would like to know more about our reports click here.