Payroll: How to Best Track your Hours

Payroll: How to Best Track your Hours

We have another payroll issue that has been discussed by other bloggers, and the Department of Labor has issued an opinion on this. Believe me, if you want a cure for insomnia reading the Department of Labor opinion letters is a great option. In order to avoid you falling asleep at your computer, let me give you the breakdown.

An opinion letter was requested by a company to the Department of Labor Wage and Hour Division. In this request, the company wanted guidance on how to manage the rounding of hours worked.

This company used a digital timeclock that calculated time to six decimal places. I have no idea why someone would need to calculate time six decimal places, even Olympic Bobsledding only calculates to three decimal places, the most accurate timing in sports. The system would round at the third decimal place: if it was four or less they would round down, and if it was 5 or above they would round up. Pretty standard rounding rules we learned in third grade math.

The issue was whether this was an appropriate rounding method. Why the company felt obligated to contact the DoL on this matter, I’ll never know.

The Department of Labor gave their stamp of approval on the rounding method, but it leads to a different question. There are employers out there who do not round in a mathematical sense. It is perfect sense to use rounding as long as the method results in an averaging out of pay.

The most common place that we see this is in the companies that round to the nearest quarter hour. If you’re rounding to the nearest tenth of an hour, we usually don’t run into issues (the window would be three minutes). If we are rounding to the nearest quarter hour, however, we could run into a fifteen minute period, which is a significant amount of time. Even if you’re making $15/hour, that is $3.75. It is not a small number.

If you round to the quarter hour, it is okay for the first seven minutes to be rounded down, so long as the second seven minutes are rounded up. That way, on average you get the right pay. But, if you consistently round down, you’re probably going to run into some problems if you were audited by the DoL or State Labor Boards because you are potentially cheating employees out of a significant amount of pay. If you’re going to round, remember what your third grade teacher told you. If it is four or below, round down and if it is five or above, round up.

Like I said, if you really want to read the Department of Labor opinion FLSA2009-9 you can read it here. If that doesn’t cure your insomnia, go see a doctor.