Avoiding Common Payroll Mistakes: Timecard Rounding
Keeping track of your employees’ time requires accurate tracking, coordination between crew leaders and the office, tallying up the time sheets, inputting data, uploading to payroll software, and adjusting for any mistakes. It’s easy for something small to go wrong, like a paper timecard getting lost between the field and the office, an employee clocking in late, or a crew leader forgetting to document a required break.
In scenarios like those, taking a shortcut like rounding your timecards can be appealing. But payroll rounding is riskier than it seems. In this blog post we’ll go into why payroll rounding is a problem, how employers get penalized, and how to avoid payroll rounding while still simplifying your time tracking process.
What is Timecard Rounding?
Timecard rounding is a relatively common way for employers to simplify their operation. Instead of documenting the exact time an employee started and stopped working and paying them for each minute, they would round the time to the nearest interval. Times rounded to the nearest quarter hour or ten-minute increment are easier to tally up at the end of the day and calculate pay.
The majority of employers who use rounding explain that they want to make timecard tallying easier and simplify their payroll process. Only a small number may intend to lower their payroll costs or prevent employees from clocking in before their scheduled start time. No matter their intent, employers should be familiar with the laws that affect timecard rounding.
Is Rounding Employee Time Legal?
In order to protect employees and ensure minimum wage is met, there are laws that impact rounding. Like most other labor-related laws, these will differ from state-to-state. We’ll start with the Department of Labor’s general rules, and then address California-specific regulation.
Department of Labor Rounding Rules
The Department of Labor’s Fair Labor Standards Act does permit rounding up or down to 15-minute increments, but any rounding must on the whole benefit the employee, not the employer. Employers need to follow the so-called “7-minute rule”: if an employee works 1-7 minutes past a 15-minute interval, their time can be rounded down. If they work 8-14 minutes past an interval, their time must be rounded up.
There are specific regulations that dictate how employers should round and different strategies they can use to ensure the employees benefit the majority of the time. These are easy to find, but can be complicated and still may leave an employer at risk if they put a strategy into place incorrectly or without consulting a lawyer.
California Employer Rounding Rules
Just like with other labor laws, California tends to be more strict towards rounding. In the 2018 case Troester v. Starbucks Corp, the California Supreme Court ruled that even small time increments need to be compensated, like the few minutes spent turning off lights and locking doors. The law firm Barsamian & Moody has instructed that this decision means California employees should not round timecards so they don’t risk leaving small amounts of time unpaid.
Even more recently in February 2021, the court ruled in Donohue v. AMN Services, LLC that meal breaks cannot be rounded. If a labor audit shows that your meal breaks don’t have specific start and finish times, an auditor will assume you rounded your times and it will be up to you as the employer to prove that you really did grant meal breaks in the proper amount of time.
Ultimately, California employers should eliminate the practice of timecard rounding unless they want to risk legal action.
The Two Main Problems With Timecard Rounding in Agriculture
In the agriculture industry there are some specific risks of timecard rounding.
1. You could pay your employees the wrong amount and risk penalties.
As we have covered, rounding your timecards puts you at risk of over or underpaying your employees. If employees are overpaid, you will spend more than needed on payroll increasing your expenses and lowering your profits. If employees are underpaid you risk even more:
Unsatisfied employees who are less motivated and loyal
A damaged reputation as an employer
Legal action by or on behalf of your employees (Keep in mind that even unsuccessful lawsuits can be expensive and time consuming)
Fines based on labor audits
Simply put, rounding timecards puts agriculture employers at unnecessary risk.
2. You won’t have accurate real-time data around timecards and productivity.
If you round employee time to the nearest quarter hour, your payroll process might be simplified, but you won’t have the most accurate knowledge of how long your employees were working. Rounded timecards means your data is less precise. If you want to track productivity or data like group piece rate, you’ll be working with rounded numbers that don’t reflect exact employee hours. Any management decisions you make based on your data won’t be as accurate as they could be with non-rounded numbers.
Keep Timecards Simple Without Rounding
Even though you might have started rounding your timecards to simplify your operation, it actually can complicate things further. But how can you avoid rounding while still simplifying your timekeeping process?
Digital time tracking systems can eliminate the need to round employee time and make it even easier to track exact time increments. With paper timecards the burden falls to your payroll team to run manual calculations and input data to a software program. You can skip those steps with digital time tracking software. You can use mobile devices to capture employee time to the exact minute in the field and let the software run calculations for you and create files you can easily upload to your payroll software.
With a software built specifically for agriculture, like HeavyConnect, you can combine digital timecards with productivity tracking for individual or group piece rate. Employers can even tap into their timecard data to monitor productivity trends by worker, crew, or location. With real-time data at your fingertips you lower your risk in case of a labor audit and are able to make better management decisions.
Get a personalized HeavyConnect TimeKeeper demo to learn how your company can skip timesheet rounding and benefit from digital timecards built for agriculture.
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