Rounding comes from the days of punch cards, when working out 8 hours and 47 minutes by hand was a real chore. Payroll clerks rounded to the nearest quarter of an hour, and everybody assumed it evened out. Many businesses still do it, sometimes without knowing, because it's a setting someone turned on years ago.
What federal law says
The rule is in 29 CFR 785.48(b). It says some employers have long recorded time to the nearest 5 minutes, or to the nearest tenth or quarter of an hour. It then says:
So rounding is accepted, on one condition. It can't result, over a period of time, in failing to pay employees properly for all the time they actually worked.
That's the entire test. Rounding is allowed only if it's neutral.
The 7-minute rule
If you round to the nearest quarter hour, the middle point is 7.5 minutes:
| Punch | Rounds to | Effect |
|---|---|---|
| 8:53 | 9:00 | Employee loses 7 minutes |
| 8:57 | 9:00 | Employee loses 3 minutes |
| 9:07 | 9:00 | Employee gains 7 minutes |
| 9:08 | 9:15 | Employee loses 7 minutes |
So someone who punches in at 8:53 and out at 5:07 works 14 minutes more than they'd be paid for, if you're rounding to 9:00 and 5:00. Do it every day, and that's over an hour a week.
And that's the problem. Time clocks and good employees both lean the same way. People arrive a few minutes early and stay a few minutes late. So rounding that looks neutral on paper may run against your staff in practice, month after month.
Where it goes wrong
Early arrivals who start working. Someone who clocks in at 8:53, and immediately starts setting up, is working. If you round to 9:00, you've taken 7 minutes of work.
Only rounding one way. Rounding every punch up to the next 15 minutes for start times, and down for end times, isn't rounding. It's cutting hours. That's the clearest way to lose a claim.
Rounding and also disciplining. You round 9:07 back to 9:00 in the employee's favor, and then you write them up for being late, while early arrivals never earn anything. That looks one-sided, and it's the kind of pattern a lawyer will point to.
Combining it with other deductions. Rounding plus an automatic lunch deduction can add up quickly.
State courts. Some state courts have been tougher than federal law. California has seen a lot of litigation on rounding. If you're in a state that's active on wage claims, get advice before relying on it.
How to tell if your rounding is neutral
Run a test. Take three to six months of raw punches and compare them with rounded hours, per person:
- For each employee, add up hours from the actual punches.
- Add up hours after rounding.
- Compare.
If employees come out ahead about as often as behind, and the totals are close, your rounding looks neutral. If most people lose time every month, you've got a problem. Fix it going forward, and ask a lawyer about back pay.
You can usually just stop
Here's the argument for dropping it altogether. The original reason for rounding was to save someone from doing arithmetic. Software does the arithmetic now. A time clock app records 8:53 and 5:07 and pays you for exactly that.
"But people will clock in early and run up my hours." That's a real concern, and it has a better answer: a rule about clocking in. For example:
- People shouldn't clock in more than 5 minutes before their shift
- People shouldn't start working until their shift starts
- If you need them early, say so, and pay for it
You must pay for time they actually worked, even if they broke the rule. But you can enforce the rule through ordinary discipline, and you'll have clear records of what happened.
If you do keep rounding, choose a short increment like 5 minutes or a tenth of an hour, apply it the same way to everyone, and test it now and then.
Records matter either way
Keep the original punches, not only the rounded figures. If someone questions their pay, you'll want to show what really happened. Federal rules require you to keep time cards and similar records for at least two years, and payroll records for at least three.
How PinkLinq handles it
Punches are recorded to the actual time. Rounding is a setting under Time Clock if you need it for your timesheets, and it's off until you choose to use it. You can compare what happened with what was paid, because original punches are kept. Every edit needs a reason and goes on the record. Try our time card calculator if you just want to add up a week of real hours.
Sources
- 29 CFR 785.48, Use of time clocks
- Fact Sheet #21: Recordkeeping Requirements, US Department of Labor
This is general information, not legal advice. Ask an employment lawyer about rounding in your state.