Blog Post

Why Employee Punch Rounding is Too Costly for Employers

Guest Author: Noam Yalon
Owner, 941 Payroll and Timekeeping

Why Employee Punch Rounding is Too Costly for Employers

As an employer with hourly employees, is your organization still rounding employee punches to the nearest 15-minute mark on timesheets? Do you allow employees to manually enter their time on a time card or spreadsheet, resulting in estimations and approximations? If so, you’re likely paying much more for employee wages, overtime and lost productivity than your competitors – each and every pay period.

Although it historically was common practice to record employee in/out times to the nearest 15-minute mark due to a lack of technology and affordable tools, today most employers are taking advantage of automated time and attendance technology systems to conveniently track employee time to the exact minute, eliminating countless hours of overpaid minutes and lost productivity.

 

The Fair Labor Standards Act and Rounding Time

Punch rounding is very expensive for employers. But beyond this principle, another important question for employers to as is whether it’s legal. While many states have additional guidelines beyond those at the federal level, the Fair Labor Standards Act (FLSA) does allow for punch rounding when it’s applied correctly (i.e., neutrally, not in favor of the employer). However, there are some practices still in use today that are not FLSA-compliant and could result in costly wage and hour violations.

Here’s the guideline taken from the Department of Labor’s website:

“Some employers track employee hours worked in 15-minute increments, and the FLSA allows an employer to round employee time to the nearest quarter hour. However, an employer may violate the FLSA minimum wage and overtime pay requirements if the employer always rounds down. Employee time from 1 to 7 minutes may be rounded down, and thus not counted as hours worked, but employee time from 8 to 14 minutes must be rounded up and counted as a quarter hour of work time.”

In other words, the rounding must be applied neutrally, to the nearest 15-minute mark, and regardless of whether it’s in the employee’s or employer’s favor.

 

A Costly Example in Punch Rounding

To demonstrate the steep cost of allowing for employee punch rounding, consider the following example. Employee X arrives as usual at 8:05 a.m. in the morning (recorded as 8:00 a.m.). Having been an employee for some time, he knows he has up to 7 minutes to arrive late before he’ll actually be marked as late. For the lunch hour, the employee leaves at 11:55 a.m. to get an early start on the lunch rush (recorded as 12:00 p.m.). He returns after lunch a few minutes late, getting caught up in traffic to arrive at 12:34 p.m. (recorded as 12:30 p.m.). Seemingly, this is “not a big deal.” And finally, after a long day of work, he leaves at 4:56 p.m. (recorded as 5:00 p.m.) to get ahead of evening traffic. In this very typical example, Employee X has been paid for 18 minutes of additional work in single day. Feasibly the employee could have been paid as many as 28 minutes extra if he had “taken full advantage” of the 7-minute grace period.

Now let’s say we have 20 employees following the same practice. Eighteen minutes multiplied by 20 is 360 minutes or six hours of overpay and/or lost productivity per day. Now let’s multiply this by a typical 21-day work month. That’s 7,560 minutes or 126 hours of overpay and/or lost productivity each month. At $15 per hour, that’s $1890 in lost wages per month. Fortunately, fixing this problem with an automated time and labor solution would cost only a fraction of that amount each month!

 

End the Costly Practice of Punch Rounding

If you’re still rounding employee times or permitting employees to enter their times manually on a timesheet, it’s time to take control of that cost. There are numerous simple, affordable tools to immediately and conveniently fix this problem. With an affordable plug-and-play time clock, your organization could eliminate these added costs of wages, overtime and lost productivity.

 

This Apex Blog guest authored by Noam Yalon, Owner, 941 Payroll and 941 Timekeeping. Noam is a member of the Apex Industry Leaders Council and a contributor to the Apex Blog.