FAQ: Is It Legal for My HR to Round My Hours Down?
IMO: It’s a dinosaur party - jump to “opinion” below to read what I mean.
Let’s just get right to it: Yes, but there are specific regulations that employers must follow. The Fair Labor Standards Act (FLSA Hours Worked Advisor Here) allows for rounding practices as long as the rounding practices are fair and neutral. This means rounding should not consistently favor the employer at the employee's expense. Employers can round to the nearest preset increment, such as five, ten, or fifteen minutes, but this must balance out over time.
Key Points to Remember:
Neutral Application: The rounding must not consistently result in employees being paid less. For example, if the practice rounds down at 8:02 AM to 8:00 AM, it should also round up if an employee clocks out at 5:01 PM to 5:00 PM.
Compliance with State Laws: Some states have specific rules about rounding practices. For example, California law requires that rounding practices not result in a systematic underpayment of wages. Read about See’s Candy v Superior Court or the real formal legal jargon here.
Fair Balance: The practice should neither advantage nor disadvantage employees consistently. If rounding practices are challenged, employers must demonstrate that the method used is neutral and fair over time.
Opinion: In my view, as we look at people strategy for 2024 and beyond, the practice of rounding payroll is another HR dinosaur. Rounding made sense in the past when technology wasn't as advanced or reliable. However, with today's payroll systems, technology should be precise enough to pay employees accurately based on their clock-in and clock-out times.
Continuing to use rounding practices puts employers at risk. If there is an issue with the system that leads to incorrect payments, it's the employer who will be held accountable, not the system. You can't simply say, "Oops, it was a system issue for years." This situation could lead to costly legal consequences, as employees are entitled to be paid accurately for their work.
So, let's just not. Let’s set up payroll systems to pay employees and manage to attendance/other performance concerns instead. It's not only fair but also protects the company from potential liabilities.
How Should Employers Check if Their System is Paying Correctly?
To ensure accurate and fair payment for employees, employers should regularly review and audit their payroll systems. Here are some key steps to follow:
Regular Audits:
Conduct regular audits of payroll data to verify that hours worked match the hours paid. This includes checking clock-in and clock-out times against payroll records.
Ensure that any rounding practices in place are applied fairly and do not consistently benefit the employer over the employee.
System Accuracy:
Test the payroll system's functionality to ensure it is accurately capturing and processing time data. This may involve running test scenarios to see how the system handles various clock-in/out times.
Review any updates or changes to the payroll software to ensure they have been implemented correctly and have not introduced new errors.
Employee Feedback:
Encourage employees to report any discrepancies they notice in their pay. Open communication can help identify potential issues early.
Periodically survey employees about their satisfaction with the payroll process and whether they feel they are being paid accurately.
Review Policies and Procedures:
Revisit company policies regarding time tracking and rounding to ensure they comply with legal standards and are clearly communicated to employees.
Update the employee handbook and training materials to reflect any changes in payroll practices or technology.
Consult with Experts:
Work with payroll professionals, accountants, or legal advisors to review your payroll practices and ensure compliance with federal and state laws.
Consider using third-party payroll audits to provide an unbiased assessment of your payroll accuracy.
Documentation and Reporting:
Maintain thorough documentation of payroll processes, audits, and any discrepancies or issues identified. This can provide a valuable record in the event of disputes or legal inquiries.
Report any significant discrepancies or recurring issues to senior management and take corrective action as needed.
Conclusion: Employers must proactively ensure their payroll systems are accurate and fair. Regular audits, system checks, employee feedback, and expert consultations can help mitigate risks and ensure compliance. By paying employees accurately to the minute, employers not only avoid potential legal issues but also build trust and transparency within their workforce.
For more information or assistance with payroll systems and practices, feel free to reach out. We're here to help ensure your business operates smoothly and fairly!
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And remember, I am not an attorney, and this is not legal advice. Please use the referenced links in this blog and remain curious.
Cheers!