Understanding Timesheet Rounding: Legalities and Best Practices

Timesheets are essential tools for tracking work hours and simplifying billing and invoicing. However, the practice of timesheet rounding has sparked debates over its legality and fairness. It’s more common than you might think; 55% of business owners and employers acknowledge rounding employee timesheets for various reasons, such as simplifying payroll and invoicing.

The Controversy of Timesheet Rounding

Despite its convenience, some employers round time deliberately to reduce labor costs or discourage early clock-ins, raising questions about the fairness and legality of this practice. Is rounding down hours considered wage theft? Is it legal?

Defining Timesheet Rounding

Timesheet rounding involves adjusting an employee’s recorded work time to the nearest minute, 5, 10, or 15 minutes. While some employers even round to the nearest 30 to 60 minutes, such extreme rounding may be deemed illegal by federal law.

The rationale behind rounding is to account for minor, indefinite time periods during the workday, which might otherwise go unrecorded. With 55% of business owners not using time tracking software, rounding serves as a practical solution for some.

Legal Guidelines for Timesheet Rounding

The Department of Labor (DOL) allows time rounding if done correctly. To comply with the law, employers should:

• Ensure rounding is neutral or favors the employee.
• Avoid rounding by more than 15 minutes.
• Apply the seven-minute rule: round down if clock-in is within 7 minutes of the quarter-hour, round up if after.

For instance, if an employee clocks in at 7:58 and out at 3:56, their timesheet should read 8:00 in and 4:00 out, reflecting 8 hours of work.

Case Study: AHMC Healthcare Inc. v. Superior Court

In 2018, California’s Court of Appeal upheld AHMC Healthcare’s neutral rounding policy. Despite some employees losing time, the court found the policy lawful as it was not manipulated to favor the employer.

State-Specific Regulations

While the DOL supports legal time rounding, state laws may vary. Employers should consult labor law experts to ensure compliance with both federal and state regulations.

The Role of Time Tracking Software

Automated time tracking software can eliminate the need for rounding by providing accurate records. These tools track time as work occurs, allowing pauses for non-working periods, ensuring precision in payroll and invoicing.

Conclusion

While some employers round timesheets to ease payroll processing, doing so inaccurately can lead to legal issues under the Fair Labor Standards Act (FLSA). To avoid this, maintain consistent and accurate time records, and if rounding is necessary, ensure it is done fairly and in compliance with the law.

Employers should communicate openly with employees about rounding policies, highlighting their neutrality and necessity. By adhering to legal guidelines and leveraging technology, businesses can manage work hours effectively and ethically.