There are numerous ways for employers to calculate hourly wages. Digital technology has made it easier than ever to track worked hours with absolute precision and to quickly calculate wages based on the actual time worked.
Employers can use apps on workers’ phones or a centralized computer as a station for clocking in and clocking out digitally. Modern timekeeping systems can establish time worked down to a fraction of a second. Some employers have systems in place intended to simplify payroll matters. For example, they may round the time worked by an individual employee.
Businesses might pay their workers by the hour but calculate wages in five or 10-minute increments. Are such practices legal, or do they violate the Fair Labor Standards Act (FLSA)?
Rounding can be a lawful practice
The FLSA exists in no small part to prevent practices that deny workers the wages they have earned and to provide a form of recourse when businesses fail to comply with the law. The FLSA allows time clock rounding so long as the company is neutral in applying the process and uses time increments no larger than 15 minutes.
When applied appropriately, time clock rounding should not negatively impact a worker’s wages. If employers consistently round up or down as appropriate instead of applying a bias, the minutes lost to rounding down should balance out more or less with the minutes gained by rounding up. Time clock rounding is theoretically a lawful practice so long as employers remain neutral when applying the practice instead of using it as a means to covertly reduce the hourly wages paid.
Reviewing employment practices can help businesses proactively avoid FLSA violations and the possibility of litigation. Time clock rounding is a common practice that is lawful when used appropriately.
