DOL chimes in on rounding off minutes of work
Posted July 2, 2019
Many payroll software programs and payroll administrators round off an employee’s hours worked in some situations. The Fair Labor Standards Act (FLSA) does allow an employer to round employee time to but with some consideration. An employer may, for example, violate the FLSA minimum wage and overtime pay requirements if it 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.
On July 1, 2019, the U.S. Department of Labor provided an opinion letter regarding a situation where employees generally clock in and out for each work period using a time clock or computer and the payroll software converts the amount of time an employee records working in each work period into a numerical figure in decimal form extended out to six decimal points (e.g., 7 hours and 30 minutes converts to 7.500000 hours).
The payroll software then totals the converted hours (extended to six decimal points) for each work period on each working day to calculate a numerical figure for daily hours, which is also extended out to six decimal points. Next, the software rounds that number to two decimal points — if the third decimal is less than .005, the second decimal stays the same (e.g., 6.784999 hours worked rounds down to 6.78 hours); but if the third decimal is .005 or greater, the second decimal rounds up by 0.01 (e.g., 6.865000 hours worked in a work day rounds up to 6.87 hours). the software rounds an employee’s daily hours downward by no more than 0.29994 minutes per day and rounds an employee’s daily hours upward by as much as 0.3 minutes per day. Finally, the software calculates daily pay by multiplying the rounded daily hours number by the wage.
The DOL indicated that such a rounding practice complies with the FLSA because it is neutral on its face. The practice also appears to average out so that it fully pays its employees for all the time that they actually work. Accordingly, this rounding practice will not result, over a period of time, in failure to compensate the employees properly for all the time they have actually worked.
Further, the DOL indicated that it has been its policy to accept rounding to the nearest five minutes, one-tenth of an hour, one-quarter of an hour, or one-half hour as long as the rounding averages out.
Compare this, however, to another scenario: You record and pay for time only if employees work in full 15-minute increments, and an employee paid $10 per hour is scheduled to work 8 hours a day Monday through Friday, for a total of 40 hours a week. The employee always clocks out 12 minutes after the end of her shift. The employee is paid $400 per week. In this situation, you have violated the overtime requirements. The employee worked an hour each week (12 minutes times 5) that was not compensated. While you have not violated the minimum wage requirement because the employee was paid $9.75 per hour ($400 divided by 41 hours), you do owe the employee for one hour of overtime each week.
J. J. Keller's Wage and Hour Compliance with FLSA Manual provides critical info to help you comply with the Fair Labor Standards Act (FLSA) and state wage and hour laws.
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