On Monday, an employee comes into work for his 9 AM shift. He punches in at 8:53 AM. On Tuesday, he punches in at 9:06 AM. And on Wednesday, he punches in at 8:59 AM. What time does payroll start tracking his time? If your answer is 9 AM, you’re a timesheet rounder. Rounding to the nearest quarter hour is legal under federal law, but your timekeeping practices cannot favor the employer. Your policy must either be neutral or favor the employee to ensure that employees are fully compensated for their actual hours worked. Here are a few do’s and don’ts:
For employers who track hours in 15-minute increments, the Fair Labor Standards Act permits an employer to round to the nearest quarter hour. To keep the policy neutral, the employer can’t always round down. For employers who track to the closest quarter hour, you should apply the “7-minute rule.” If an employee works an extra 1-7 minutes, the time can be rounded down to the closest quarter hour. If an employee works an extra 8-14 minutes, the time should be rounded up to the closest quarter hour.
If your employee is consistently clocking in 8 or more minutes early or 8 or more minutes late, it’s time to have a conversation. Quarter hours add up. For an employee who works a 40-hour workweek, you will liable for overtime for each additional quarter hour.
Because your rounding policy cannot favor the employer, it must either be neutral or favor the employee. For example, if the employee clocks 8:52 AM for his 9:00 AM shift and clocks out at 5:07 PM, the employer is not permitted to round the start time to 9:00 AM and the end time to 5:00 PM. Instead, the employer must pay for an 8:45 AM-5:00 PM shift to be neutral or can round up every time and pay for an 8:45 AM-5:15 PM shift.
Some employers enforce a strict start time and end time. If you choose to implement such a policy, you must make sure employees are not working off the clock. An employee’s workday begins with the first “principal activity” and ends with the final “principal activity.” Although the term isn’t defined in federal regulations, the Supreme Court has consistently held that the term includes all work duties, including those that are “integral and indispensable part of the principal activities,” which an employee is employed to perform. For example, if a cashier comes into work and starts counting the drawer, you must pay her from the time she started counting regardless of when her shift begins.
Employers always have the option of paying exactly the time worked. If you elect to round hours, make sure your policy is either neutral or favors the employee. If you have an employee who works a 40-hour workweek, you will liable for overtime if he or she clocks in or out beyond the 7-minute rule. Clearly communicate your policy with your employees and do not let them work off the clock.
Want to know more about compensable time and wait time? Contact your HR Consultant.