Organizations depend on human beings for labor and running operations. They, therefore, understand the imperfect human nature of starting work at 8:16 am instead of 8:00 am or extending the normal working hours. That said, time clock rounding is a set of rules that guide organizations on managing labor hours concerning payroll. These regulations guide the accounting or payroll manager on how to apply the time variations. The understanding of rounding rules can shield an organization from lawsuits related to disputed labor hours.
Here are the key aspects you need to know.
Regulations of Time Clock Rounding
It’s legal to do time clock rounding in Indiana; however, no organization is allowed to exceed 15 minutes rounding. No organization should therefore round-off, 25 minutes, 30 minutes, or an hour of an employee’s time.
It’s also within the law to make an internal time-clock rounding policy. Nonetheless, it’s advisable to utilize the existing guidelines to minimize errors and potential disparities. The common time clock rounding options include:
15-minute rounding is the maximum allowance under federal law. For that reason, many organizations have adopted this system in their payroll.
An organization must apply the 7-minute rule to make the 15-minute rule legally valid. For each quarter(15-minute mark), the 7-minute mark is the boundary. For example, if an employee clocks at 0807 hours, then round off to 0800 hours.
On the other hand, if your employee clocks in between 0808 hours to 0823 hours, round off to 0815 hours. Times that range between 38-52 minutes should be rounded off to 45 minutes.
Another alternative is a 1/10th of an hour or 6-minute rounding off. If an employee clocks in at 9:04, then the appropriate round-off time is 9:06. For clarity, the hour clock starts between the 58th minute of the previous hour and the third minute of the current hour.
You can also opt for 5-minute rounding that utilizes 2 ½ minutes breaks. At 9:02 am, the system rounds off to 9:00 am. From 9:03 am, it rounds off to 9:05 am.
Best Practices for Time Clock Rounding
1. Audit Your Policy Regularly
It’s prudent to check the policy regularly to ensure it’s serving the interest of the organization. Check whether the employees are happy with the policy. If you receive constant complaints from the workforce, it’s time to audit it.
If 5-minute rounding is not working for your workforce, you can shift to 15,6 or any other rounding that is suitable and acceptable.
A point to note: It’s advisable to refer to the Fair Labor Standard Act in terms of working hours, overtime rates, and working days.
2. Nurture Transparency and Communication
Implementing time clock rounding can face resistance depending on the approach that organizations use. Regular communication with your workforce has the potential to diffuse a toxic work atmosphere.
You should therefore take time to explain the policy. Employees may interpret the policy as unfair or a method of taking away their hours. That said, constant and open communication can improve the acceptability of the policy.
3. Analyze the Opportunity Cost
An organization can suffer a loss using time clock rounding during calculations resulting from overtime rates. As such, it’s prudent to assess whether the current clock rounding has created a surge in total overtime expense.
One method of solving this impasse is by discounting employees’ favor during check-in and favor of an employer during check-out. Whereas the benefit of time rounding is payroll optimization, it could also increase legal liability, which is an additional threat to an organization. That said, a regular audit is critical.
Use ASAP Payroll for Your HR Needs
Any organization requires sound and quality systems to get the best out of employees and promote transparency. Time clock rounding is one of the contentious issues that require an accurate and agreeable approach.
To that end, it pays to work with a resourceful payroll firm like ASAP Payroll. By working with us, you’ll get access to timekeeping solutions, performance tracking, applicant tracking systems, among others.
Contact us today to transform your HR function.