How to Simplify Your Payroll With Time Clock Rounding

Time clock rounding is a common practice that helps businesses streamline their time tracking. It’s the strategy and process that an employer uses to round an employee’s logged hours, usually to simplify payroll and invoicing.

When is this practice needed, and what are the most popular — and legal — payroll rounding rules? Find out below.

Time rounding is a common practice used in various industries to simplify and standardize timekeeping procedures. It involves rounding off the time an employee works to a specific increment, typically in minutes.

For example, if an employee clocks in at 8:53 AM and time rounding is set at 15-minute intervals, their recorded start time would be rounded to 9:00 AM.

Time rounding simplifies the calculation of work hours, making it easier for employees and employers to track and manage time. Time rounding helps reduce the complexity of payroll and attendance tracking, ensuring that employees are paid accurately.

Timesheet rounding is crucial for businesses to streamline operations and increase efficiency. It helps managers keep better tabs on clock-in and clock-out times and simplifies payroll processing by accurately rounding billable hours. This rounding method helps businesses save money, reduce payroll disputes, and improve workflow consistency.

1. Weekly or monthly payroll

It can be challenging to handle tiny segments of logged employee hours, like seconds or just a few minutes. These micro periods of work time can be a burden when you're trying to finalize your weekly or monthly payroll. This is one of the top reasons for rounding.

2. Calculate billable hours

Another typical case when employers may have to round the logged hours is calculating billable hours for a client. It's not practical to send an invoice for, say, 10 hours and 3 minutes of work, so the business owner will typically use a rounded standard for billing their clients.

3. Clock in/out early

Some businesses may also use timesheet rounding to prevent employees from clocking in before the start of their scheduled working hours. This is common in companies where a physical punching machine is located in one spot while the staff's workspaces are in various places. It can be tempting for employees to clock in earlier and then spend time drinking coffee with their colleagues before actually heading over to their working station.

In addition, many businesses still use analog methods for time tracking, like punching physical time cards. This makes accurate logging complicated since an employee typically has to punch in at a specific location and then move to their actual workplace.

Digital timesheets make it much easier to get the correct tracking in terms of hours and minutes worked. You can also customize your own rules and time increments for rounding — and make sure you’re limiting them to the maximum that’s legally allowed.

Despite digital innovations, timecard rounding is here to stay. That’s why it’s good to know when you can use it and how to do it right to ensure your complete legal compliance.

In the U.S., timesheet rounding is legal, but there are specific rules regarding how it can be applied. The Department of Labor has guidelines about rounding hours worked, as well as about travel time pay, holiday pay, time clock laws for hourly employees, and employee break policy, all based on the Fair Labor Standards Act.

Maximum time roundup — the 7-minute rule

The highest roundup that employees can do legally is 15 minutes. You are not allowed to round up or down to, say 30, or 60-minute increments.

To comply with the 15-minute limit, you must also follow the 7-minute rule, which means using the 7-minute mark as a guide in the rounding process. If an employee has clocked in at 10:07, the rounding should be down to 10:00, while if the time was 10:08 or later, the rounding should be up to 10:15.

Maintain fairness to employees 

Another important rule is that your time clock rounding must be neutral or favorable towards employees. The Fair Labor Standards Act (FLSA) explicitly notes that the rounding has to be impartial or never in the complete favor of the employer. It is illegal always to round down the timesheets in your interest, as this means the employee loses payment for worked time. An excellent way to ensure fairness is to round the clock-in hour in the employee’s interest, while the clock-out hour can be in your interest. Another option is to round both in and out times in favor of your staff.

Follow these three rules to avoid ending up with a wage and hour grievance submitted by your employees to the Department of Labor. The guiding principle for the legality of your timesheet rounding should be fairness towards the workers, as the federal framework protects their payment rights rigorously.

Avoid wage theft 

You should ensure you don’t underpay employees due to your rounding practices, which is considered wage theft. It’s also a good idea to clarify to your staff what your payroll rounding rules are so that people are not left with the wrong impression that you are handling it unfairly. Read about time theft here.

In some states, the 15-minute roundup rule may have further restrictions. Make sure to check if there are different requirements for timesheet rounding in your state, as they may be given priority over the federal rules.

Instead of inventing the best time clock rounding rules for your business from scratch, you can build your policy from legally verified existing methods. Once you decide to use a specific process, it’s essential to stick with it throughout all logged hours. This will ensure the consistency and legality of your rounding rules.

15-minute rounding

The maximum rounding you can do under federal law is 15 minutes. This means that all rounding practices have to follow this basic rule. On top of that, many payroll management systems use 15-minute intervals.

In applying the 15-minute limit for rounding, you should also follow the time clock 7-minute rule. It guides whether to round the time down or up. If the clocked time is below the 7-minute mark, choose the previous quarter-hour. If it is above 7 minutes, you have to round up to the next quarter-hour.

Here is a simple 7-minute rule chart:

1. Determine if you’re eligible

Start by using rounding for payroll and invoicing needs. It might have been necessary back then, especially when employees had to wait at the entrance and use a machine to punch in their time cards. For most modern businesses, the system is different today. That’s why it’s good to keep checking how applicable rounding is for you.

2. Consider the pros and cons

In some situations, it can lead to losses instead of being a benefit for your company. For example, after rounding, an employee’s logged hours may cross into overtime, which means additional labor costs for your business. Take the time to do internal research to figure out what purpose the rounding practice serves for your business so that you can weigh it against the risks. While some companies use it to cut down their payroll costs, this often entails illegal rounding that harms employees’ lawfully earned payments. The best advice in this respect is to avoid using rounding for budget-cutting purposes, as it can quickly end in administrative penalties, costly labor lawsuits, and class action suits. 

3. Create a time rounding policy for your business

If you establish that rounding is necessary, it’s wise to assess your time clock rounding practices yearly. By conducting an annual audit, you can examine how practical your system is and if it needs adjustments. Make sure that you analyze its impact on employees’ timesheets regularly. It’s also essential to stay up-to-date with the legal framework changes and apply them in your business immediately to ensure your compliance. While rounding is legal in the U.S., it poses many risks if not done correctly, as it may go against the established working hours laws. You should carefully determine your time clock rounding rules, ensuring they do not violate the FLSA.

4. Be transparent and fair

The most important principle to remember is that rounding should not result in paying your employees less than they legally have earned for the hours worked. Even if this occurs by mistake, it can still result in a lawsuit against your company. Refraining from rounding up unpaid meal breaks is essential, as such cases have led to legal grievances. If the rules are transparent and fair, your staff will be less likely to go down the lawsuit path in disputable cases. However, if your rounding practices are unclear or haven’t been communicated well, people will have more reasons to doubt them and possibly seek further legal action in problematic cases.

5. Communicate, communicate, communicate

While it’s tricky, getting your employees on board with your timesheet rounding practices can be an excellent opportunity to foster a better atmosphere and build trust with your team. This means proactively communicating with them and providing a simple, transparent explanation of how you round up their hours. Make it clear that it doesn’t take paid time away from them (a common misconception) and show how you’ve got their best interests at heart and work to ensure they get accurately paid for every minute they spend at work.

If you’re worried about manually keeping track of time, rounding timesheets, and paying the right amounts, there’s a more straightforward way to do all of it.

Time tracking with Hubstaff’s desktop, web, or mobile apps captures accurate work hours so you know what you owe each person.

To make things even easier, you can set pay rates so that the amounts are calculated at the end of each pay period — no more manual tallying or risk of over or underpaying. Your team can see what they’re owed based on their timesheets.

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