Employee time tracking is important, but it can often get frustratingly complicated. Nobody wants to be in the situation where poor time rounding practices have led to employees not being correctly paid or clients being incorrectly charged. We all want to foster positive relationships by making sure everybody gets their due, but there are also legal concerns, as well as the desire to make our administrative work as quick and easy as it can be. Doing it wrong could lead to the unenviable position of having to pay a large settlement amount for poor time rounding practices, and worse can harm the strength of your team and your reputation by creating payment disputes.
What is Time Clock or Time Sheet Rounding?
So, what are we actually talking about here? In a broad sense, time clock rounding is the practice of rounding timesheet entries to certain intervals to make billing and payroll processing a ‘cleaner’ process. For example, it would be incredibly rare for a person to always be clocking in exactly eight hours for their workday.
More likely is the case in which a few minutes are over/under that regular expected time each day. Rather than complicating things by working out exact payments for the extra two minutes over or under here and there, you might implement a time rounding policy whereby you round time entries to the nearest five or ten minute interval, letting you smooth out the numbers to make everything more easily digestible. Many employee time sheet apps will include settings options to allow for automatic rounding of time entries.
Understanding the advantages and disadvantages of employing time clock rounding is vital in knowing you are making well informed decisions about your team’s processes.
Pros and Cons of Time Clock Rounding
We’ve mentioned how using time clock rounding can help to smooth out annoying minute differences in times that are to small to be relevant. It’s much easier to deal with clean numbers in regular intervals rather than messing around with minuscule differences of a few minutes here and there.
But while time rounding can make life easier at the front end, there is always a danger of things working out wrong. When we use time clock rounding, we need to be aware of the potential case in which we wind up not correctly charging a client or paying an employee.
Imagine for example that one of our workers regularly works an extra ten minutes over the expected eight-hour day. Our time rounding practices might cut off these ten minutes to simplify our payroll processing, but the result ends up that, over the course of a week that regular ten minutes adds up to over an hour, and over the course of a few months we’ll end up having underpaid our worker for potentially days of work time that they’ve recorded on their time sheets. What seems like a minor adjustment for the sake of efficiency can quickly add up to a significant amount.
The same situation can come up with charging clients – if we employ rounding practices and round up five minutes here and there to get neat numbers for client billing, we could easily find ourselves in a situation where we’ve either drastically overcharge or undercharged a client. The second scenario hurts our bottom line, the first could potentially have legal ramifications.
What is Time Sheet Compliance and How Can You Comply with the Rules?
It no doubt doesn’t come as much of a shock to know that there are industry standards and legal compliance to meet for time rounding when you realise the potential for mismanagement. Time sheet compliance, put simply, is meeting these industry and legal regulations. Making sure your time recording processes are accurate and within the expectations for what kind of time rounding is acceptable will help to make sure you don’t find yourself in the unfortunate situation of making settlements for poor time clock rounding issues.
Do your research: what is the standard practice within your industry, and will it suit your business? How much impact will changing your current processes have on your team? The right fit for you will take into account the unique situation of your business.
Three Time Rounding Rules Every Business Should Follow
1. Make sure you are rounding in small, reasonable increments
Know and abide by the time rounding regulations for your particular industry/country/business. The best way to avoid overstepping the line is to have clear knowledge of where that line is.
Rounding to the Nearest Interval:
6-minute rounding: This method simplifies timekeeping by rounding clock-in and clock-out times to the nearest 6-minute increment. For example:
- Clock-in at 8:04 rounds to 8:06.
- Clock-out at 5:26 rounds to 5:30.
Generally, rounding is always to the next interval (always rounding up, not down). Commonly used by the likes of accountants/lawyers for billing by time 6-minute units. 6 minutes is used in order to more easily break down an hourly rate, making one 6-minute unit match 1/10 of an hour. Using 5-minute units instead can result in odd charge amounts when operating on per hour charge rates, so for both reporting and for clear invoicing/customer communication, 6-minute intervals work more efficiently.
10-minute rounding: Similar to 5-minute rounding but with larger intervals:
- Clock-in at 8:06 rounds to 8:10.
- Clock-out at 5:22 rounds to 5:30.
The simplicity or 10-minute intervals for assessing productivity/ reporting on tasks can be good for time management but may not be ideal for dealing with a time-based billing structure - it's important to remember that the larger your rounding intervals are, the greater the discrepancy will end up being between your time records and actual work performed. Be careful not to end up overcharging your clients!
15-minute rounding: Widely used due to its simplicity:
- Clock-in at 8:07 rounds to 8:00.
- Clock-in at 8:08 rounds to 8:15.
This method can impact total time more significantly, so care must be taken to ensure fairness. Not generally recommended for a time-based billing structure. If you bill by 15-minute increments, you likely shouldn't be automatically rounding your time tracking in that increment. Likely a 5-minute rounding increment will be fairer to your clients when charging in 15-minute units.
2. Communicate rounding processes clearly with your team
Your team need to understand your rounding process clearly in order to implement it correctly. Make sure your team are fully up to date on all the expectations around their time recording.
Employee Trust and Morale: Employees need to trust that their time is recorded accurately and fairly. Any perception of unfairness can lead to decreased morale and productivity. Transparent and consistent application of rounding rules helps maintain this trust. Communicate clearly with employees about how their time is being tracked and rounded.
Accurate Payroll Calculation: Accurate rounding ensures that employees are paid correctly, preventing overpayments or underpayments. Errors in payroll can lead to financial discrepancies, affecting both the company's finances and employee satisfaction. Implement automated systems to reduce human error in payroll calculations.
Consistency and Transparency: Clearly document your time rounding policies and ensure they are consistently applied across all employees. Consistent application prevents disputes and confusion, promoting a fair workplace. Transparency in how and why rounding rules are applied can help mitigate concerns and build trust.
Best Practices for Implementing Time Rounding Rules
Document and Communicate Policies: Create detailed documentation of your time rounding policies, including examples and explanations. Communicate these policies to all employees through training sessions, handbooks, and accessible online resources. Ensure employees understand the rationale behind the policies and how they are applied.
Regular Audits: Conduct regular audits of time entries and payroll calculations to ensure compliance with rounding rules. Use these audits to identify and correct any discrepancies or issues. Involve both HR and finance departments in the audit process for comprehensive oversight.
Use Reliable Time Tracking Systems:
Invest in reliable time tracking software that automates the rounding process, ensuring consistency and accuracy. Choose systems that are compliant with labor laws and regulations. Regularly update and maintain the software to address any bugs or changes in legislation.
Stay Updated on Laws:
Regularly review and stay informed about changes in labor laws and regulations that affect time tracking and payroll. Adjust your policies and practices as needed to ensure ongoing compliance. Consider consulting with legal experts or labor law professionals to stay ahead of any potential issues.
If your records are accurate and detailed, you will be able to keep an effective eye on how things are progressing over time and be able to rest assured that your processes are being followed correctly.