Timesheet Rounding: What’s Legal, and Is It a Best Business Practice?

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With 4.2 million employees slated to become eligible for overtime on December 1, controlling costs and avoiding potential FLSA lawsuits are hot concerns in business.

Timesheet rounding, the practice in which an employer rounds employee time to the nearest minute, five minutes, etc. is a one way that some business owners attempt to cut costs.

But is it legal? What does the DOL say? And does timesheet rounding really save you money?

Read on!

Is Timesheet Rounding Legal?

The short answer is–yes.

But take that “yes” with a major word of caution. The DOL specifies that while timesheet rounding is legal–it’s only kosher under certain circumstances. And keep in mind that state laws may override the DOL’s requirements, so be sure to consult state and local laws before making any decision on rounding

Here’s what you need to know about the DOL’s rules on timesheet rounding:

1. Timesheet rounding can’t favor the employer. The policy must either be neutral, or favor the employee. In other words, you can’t always round time down.

2. 15 minutes is the maximum increment you can round to. You are also allowed to round to the nearest 1/10 of an hour or the nearest 5 minutes.

3. If you round at the maximum (15 minutes) you must obey the 7 minute rule. In other words, if your employee clocks in at or before the 7 minute mark within a given 15-minute window (e.g., 8:07) you round down (to 8:00 in this case). If the employee clocks in after the 7 minute mark in a given 15-minute window, you round up (to 8:15  in this case).

4. You have three options for rounding timesheets legally:

  1. Round up/down indiscriminately to the nearest increment you’ve chosen (5 minutes, 1/10 of an hour, or 5 minutes)
  2. Round all clock-in times to favor the employee, and all clock-out times to favor the employer.
  3. Round all clock in/clock out times to favor the employees

Here’s something else you should know–the DOL allows timesheet rounding primarily because most business owners still use manual processes to track their employees’ time (aka, spreadsheets and good old paper). Is it efficient? No. Is it reality? Yes. So, because most business owners still use inefficient processes, the DOL allows for some controlled inefficiency (as long as it doesn’t always favor the employer).

Which brings us to our next point …

Does Timesheet Rounding Really Save You Money?

It might sound harsh, but if timesheet rounding is saving you money, you’re probably setting yourself up for a major lawsuit.

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The Code of Federal Regulations states that timesheet rounding is permitted “only where there are uncertain and indefinite periods of time involved of a few seconds or minutes.” Which, there definitely is when using paper processes!

To put it simply, timesheet rounding is based on uncertainty and inefficiency. And when there’s uncertainty involved, the DOL’s rulings favor the employee.

Not to mention, the rounding system is easy to game. For example, if you round to favor the employee on all clock-ins and to favor the employer on all clock-outs, it’s not unheard of to start seeing a lot of clock-ins at 8:07 and a lot of clock-outs at 5:00 on the dot.

What can you do about it?

You can take the uncertainty out of tracking your employees’ time.

By using cloud-based time tracking, you’ll gain an entirely new level of accuracy–and accountability–in your business.

Employees can clock in from their iPhone or Android, the web, even by call-in or Twitter. You decide what makes sense for your employees and your business. The result is an accurate picture of hours (down to the second), as well as an incredibly informative audit trail of all clock ins/clock outs, edits made to timesheets, and approvals. You’ll also have access to free GPS tracking while employees are on the clock, in-app scheduling that dovetails with employee timecards (your employees can clock in right from the schedule), handy features like overtime alerts (which, speaking of saving money, will actually help you cut costs!) and a “Who’s Working” view to show you who’s working and where at any given moment.

And the best part? TSheets favors both employee and employer. Employees get paid for every second of the hard work they do. And employers can rest assured knowing that payroll isn’t padded or inaccurate.

Keep it legal when it comes to rounding employee timesheets–but just as importantly, keep it efficient! Try TSheets FREE for 14 days now, and find out what thousands of other happy business owners already have.

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