By Laura Pokrzywa, Human Resources Consultant
Many employers are unknowingly violating wage and hour law with their timekeeping practices. Case in point: the U.S. Department of Labor (DOL) recently required a Florida construction company to pay more than $590,000 in back wages and damages. The DOL investigators found that the company had not paid all required overtime wages. The root cause? Improper rounding methods that did not capture all work time.
In a related press release, a DOL spokesperson acknowledged that rounding is legal and can be a useful tool for employers; however, “it is the responsibility of all employers to ensure the use of rounding in their time systems is balanced and does not always round in the employer’s favor.”
How to Round Time Correctly?
To avoid violating the Fair Labor Standards Act (FLSA) which controls minimum wage and overtime pay, employers must be careful that they do not always and only round down. The DOL’s Fact Sheet #53 clarifies proper rounding. It says employee time from 1 to 7 minutes may be rounded down, and thus not counted as hours worked, but employee time from 8 to 14 minutes must be rounded up and counted as a quarter hour of work time.
In other words, if an employee starts work more than seven minutes after the start of their scheduled shift, the company may dock pay by a full quarter hour (15 minutes) if (and only if) the company rounds up a full quarter hour when an employee starts working from 8 to 14 minutes before their shift or if the employee works from 8 to 14 minutes beyond their scheduled shift end.
Be Careful to Pay Overtime Correctly
The DOL also provides the following example to highlight the risk of overtime violations that could come from improper rounding:
An employer only records and pays for time if employees work in full 15-minute increments. An employee who is paid $10 per hour is scheduled to work 8 hours a day Monday through Friday, for a total of 40 hours a week. The employee always clocks out 12 minutes after the end of her shift. The employee is paid $400 per week. This employer has violated the FLSA’s overtime requirements because the employee worked one hour each week (12 minutes times 5) that was not compensated.
Best Practices for Compliance
- Don’t round time if you don’t have to! If your organization is still rounding time or blocking time in 15-minute increments, consider shopping around for new software or an HRIS system that allows precise timekeeping. The options are abundant.
- If you must round, be consistent and neutral. If you round time, round both at the start and the end of the work shift. Remember that rounding must average out over time. It cannot always benefit the employer.
- Train supervisors on your policies. All supervisors should be familiar with your attendance expectations, overtime requirements, and disciplinary process. Employees who frequently arrive late or work outside of their scheduled hours may create scheduling and pay issues. Your supervisors should be equipped to identify and address such potential issues before they get out of hand. If your supervisors or foremen are responsible for tracking all employees’ work time, be sure they understand what is considered compensable time and that they are accurately recording all work done inside of or outside of the assigned work hours.
- Don’t forget State law. Courts in some states have questioned the legality of rounding in light of the readily available technology that ensures more accurate pay. In addition, in states that require paid sick leave, a more precise timekeeping system will ensure proper accruals for eligible employees.
Need Help?
If you are an employer with questions about time keeping requirements, or if you have questions about any HR issue, contact our Risk Management Division by phone at 855-873-0374 or by email at . We will be happy to help!
Disclaimer: This information is for informational purposes only and not for the purpose of providing legal advice. This article does not create an attorney-client relationship between Keystone’s Risk Management Division and the reader.