5 Minute Read | 2.5 Minute Skim

The ups and downs of timesheet rounding

Why and how employers round employee timesheets, what the Department of Labor has to say about it, and how it’s done right

Timesheet rounding is more common than you think. According to a 2018 survey by TSheets by QuickBooks, 55 percent of business owners say they always round employee timesheets up or down.*

In most cases, these business owners are rounding to make running payroll and invoicing clients a little easier. But 34 percent admit to rounding employee hours down deliberately, to reduce payroll costs or prevent employees from clocking in before their shift has started.

Knowing this, you might be wondering: Is timesheet rounding legal? And how does it work? Read on to find out.

What is timesheet rounding?

Timesheet rounding occurs when an employee’s timesheet is rounded either up or down to the nearest minute or the nearest five, 10, or 15 minutes upon clock in and clock out. Some employers may choose to round even higher (e.g., 30 to 60 minutes), but this is considered unlawful in the eyes of the federal government.

Timesheet rounding exists to account for uncertain or indefinite periods of time in the workday, ranging from a few seconds to a few minutes (e.g., the time it takes to walk to the break room and punch in or the time it takes an employee to boot up their computer). And because 55 percent of business owners say they aren’t using an electronic system like a computer, phone, or tablet to track employee time, timesheet rounding can be a necessary practice.

 

Is timesheet rounding legal?

According to the Department of Labor (DOL), timesheet rounding is legal, as long as it’s done correctly. When it comes to rounding, there are three rules employers must follow to ensure compliance.

  1. Timesheet rounding can’t favor employers. The policy must either be completely neutral or favor employees. In other words, employers can’t always round employee time down.
  2. Fifteen minutes is the maximum rounding increment.
  3. Employers must obey the seven-minute rule. If an employee clocks in at or before the seven-minute mark within a 15-minute window (e.g., 8:07), their time rounds down (to 8:00, in this case). If the employee clocks in after the seven-minute mark, their time rounds up (to 8:15, in this case).

With these rules in mind, there are three ways to round employee timesheets legally.

  1. Round up or down indiscriminately, to the nearest increment. If an employee clocks in at 8:58 and out at 4:56, their timesheet should read 9:00 in and 5:00 out.
  2. Round all clock-in times to favor the employee and all clock-out times to favor the employer. In the above example, the employee’s timesheet would have an 8:55 clock-in time and a 4:55 clock-out time.
  3. Round all clock-in and clock-out times to favor the employee. In this case, the employee’s time card would show an 8:55 clock-in and a 5:00 clock-out.

Rounded timesheets that favor employers (e.g., a 9:00 clock-in and 4:55 clock-out) would be grounds for a wage and hour grievance — and the DOL doesn’t take timesheet rounding lightly.

In June 2018, California’s Court of Appeals reviewed the class action case of AHMC Healthcare Inc. v. Superior Court. AHMC Healthcare employees claimed their employer’s timesheet rounding policy, which was set to round time up or down to the nearest quarter hour, wasn’t fair.

Ultimately, the court found the policy lawful. While 49.5 percent of employees had lost an average of two minutes per shift, the other 49.3 percent gained time. Ultimately, the court perceived the timesheet rounding to be neutral and reaffirmed California employers’ right to round.

However, that may not be the case in your state. While timesheet rounding is considered legal by the DOL, some states have specific timesheet rounding laws that override the DOL’s requirements.

 

Why do employers round timesheets?

Employees may find it easy to assume employers round timesheets for selfish reasons. But the latest TSheets survey shows employers most often round timesheets because they have to.

More than half of employers (51 percent) say rounding makes payroll easier. Another 31 percent say they round employee timesheets for billing and invoicing purposes. And 1 in 4 employers says their payroll software requires timesheet rounding.

Only 14 percent of employers admit to rounding employee timesheets in an effort to save on labor costs. And they’re outnumbered — nearly 18 percent claim they round timesheets to boost employee pay.

The remaining 1 in 5 employers rounds employee timesheets to prevent employees from clocking in before the start of their scheduled shift — a common issue among business owners.

The survey also shows 14 percent of business owners allow employees to clock in whenever they start working. The majority (51 percent) only allow employees to clock in five minutes early or fewer. One in 10 employers says employees cannot clock in early at all — even if that means working off the clock (a major wage and hour faux pas).

 

What are the consequences of improper timesheet rounding?

As with every wage and hour regulation, timesheet rounding isn’t black and white. There are a lot of grey areas and things to watch for when rounding employee time. Timesheet rounding can leave employers at a higher risk of committing one of these deadly sins of the Fair Labor Standards Act (FLSA).

  • Off-the-clock work
    According to our survey, at least 2 percent of employers say they don’t allow employees to clock in early, but they do allow them to work off the clock during that time. However, off-the-clock work is a major FLSA violation. Failing to pay employees for any time worked off the clock — even just a few minutes each day — could result in a hefty lawsuit.
  • Inaccurate employee records
    The majority of employers who say they round employee timesheets do so for record-keeping ease. But keeping inaccurate records could be grounds for a wage and hour lawsuit under FLSA regulations. To avoid this, it’s important to keep records consistent. In other words, if an employer decides to round one employee’s timesheets, they need to round every other employees’ timesheets in the same way.
  • De minimis work
    Timesheet rounding gets even more complex with the addition of the de minimis doctrine. According to the DOL, as many as 15 minutes per day can be considered de minimis, or insignificant, and therefore noncompensable. But some states — most recently, California — are reevaluating the de minimis doctrine. In July 2018, the California Supreme Court rejected the application of the de minimis rule in the case of Troester v. Starbucks Corporation. The court ruled employees must be paid for every minute worked, no matter how “insignificant” the time might appear.

As always, these rules and regulations vary by state. Employers considering timesheet rounding, or wondering if their business complies with both state and federal timesheet rounding rules, should consult with their employment counsel, state labor office, or labor law attorney.

 

How do employees feel about timesheet rounding?

It can be hard for employees to understand why employers would alter clock-in and clock-out times. As evidenced by the case of AHMC Healthcare Inc., even when the policy is neutral in practice, employees can still feel cheated.

Many see timesheet rounding as a form of wage theft — and their concerns aren’t unwarranted. According to another TSheets survey, 10 percent of U.S. employers admit to purposefully shaving time off workers’ timesheets, accounting for around $22 billion in wage theft each year.

As we learned, employers can round timesheets for several reasons, but saving money on labor costs (or committing wage theft) is last on the list. Before implementing a timesheet rounding policy that could cause employee unease, employers should discuss the policy with their employees, clarify why the policy is necessary for their business, and demonstrate the policy’s neutrality or employee benefit.

*Methodology: TSheets by QuickBooks commissioned Pollfish to survey 731 anonymous business owners (age 18+) throughout the U.S., in September 2018, to learn more about their time tracking habits and policies. TSheets designed and paid for the survey and welcomes the re-use of this data under the terms of the Creative Commons Attribution License 4.0, which permits unrestricted use, distribution, and reproduction in any medium, provided the original source is cited with attribution to “TSheets.”