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Rounding Rules For Hourly Employees

Learn how to simplify payroll and stay compliant with FLSA time rounding rules. Discover best practices, legal considerations, and effective timekeeping solutions.

Under the Fair Labor Standards Act (FLSA), employers can round employee time entries to simplify payroll processing. Here's a detailed look at how rounding works and what you need to know to stay compliant.

Rounding Increments

Employers can round work time to the nearest increment, up to a quarter of an hour. Specifically, you can round time entries up or down to the nearest:

  • Five minutes
  • Six minutes
  • Fifteen minutes

Seven-Minute Rule

A commonly used practice is the “seven-minute rule,” which allows employers to round employee time to the nearest quarter-hour. For example, if an employee clocks in or out within seven minutes of a quarter-hour mark (such as 7:07 AM or 7:22 AM), their time is rounded to the nearest quarter-hour (7:00 AM or 7:15 AM).

Neutral Rounding

To ensure fairness, time rounding should be neutral or favor the employee. Over time, this approach ensures that employees are properly compensated for the actual time worked. An example of neutral rounding would be adding seven minutes to the clock-in time and subtracting seven minutes from the clock-out time.

Best Practices for Employers

While rounding is allowed, it's crucial to apply it consistently and fairly. Using the right technology can help maintain compliance. Here are some best practices:

  • Implement a reliable timekeeping system that integrates with payroll.
  • Ensure the rounding policy is neutral and does not disadvantage employees.
  • Regularly audit time records to verify compliance.

Legal Considerations

In California, a recent Supreme Court case highlights the risks of improper rounding practices, including potential liabilities for back wages, liquidated damages, and state penalties. Employers must be vigilant to avoid costly legal disputes.

How to Stay Compliant

To avoid issues, consider investing in a timekeeping system that records exact work times, eliminating the need for rounding. HR Wise software offers a timekeeping solution that integrates seamlessly with payroll systems, ensuring accurate time tracking and compliance.

By understanding and correctly implementing rounding rules, employers can simplify payroll processes while ensuring fair and accurate compensation for their hourly employees. If you need any help ensuring your company’s compliance, please click below for a free consultation with HR Wise.

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