A rise in lawsuits against employers over punch rounding and automatic break deductions is forcing organizations to carefully weigh the impacts to the business and their employees. Knowing the right time to automatically round an employee’s punches can help determine if it’s right for your organization or if you should pay your employees “minute-to-minute.”
Axsium has significant experience implementing both types of policies. In addition, modern WFM systems with punch recording can handle either type of policy. The question is solely around policy, not technology.
The Terms
Before we walk through a decision tree to guide the process, let’s first define some terminology.
- “Punch rounding” – This is a policy for automatically moving the employee’s recorded punch time to a new time that is used for pay purposes only. A common rounding rule is a “seven-minute rule” where punches are moved to the nearest quarter hour. For example, if an employee punches in at 7:53 a.m., the punch is rounded forward seven minutes to 8:00 a.m. But if the employee had punched in at 7:52 a.m., the punch would be rounded back seven minutes to 7:45 a.m.
- “Minute-to-minute” – This is a policy that pays the employee from exactly the minute they record an in punch to the minute they record an out punch. There is no rounding involved. If an employee punches in at 7:59 a.m. and out at 12:02 p.m., then the employee is paid for four hours and three minutes.
“Safe” Recommendation
If there’s no business reason to implement punch rounding, then applying the minute-to-minute policy is the safest route to take from a litigation perspective. When the employee punches in, they are working and getting paid so there is no ambiguity with this policy.
In some instances, however there may be good reasons why a minute-to-minute policy is not possible or appropriate for an employer. The following decision tree captures the decision points and provides high level guidance. Employers should weigh the factors and consult with their legal counsel to make the best decision for their business.
Decision Tree
Let’s walk through the tree together.
- If the payroll system cannot handle paying decimal hours in increments of one hundredth of an hour, then paying employees for durations such as 8:01 is not possible. That means that a minute-to-minute policy is not an option due to a payroll technology limitation. Punch rounding must then be implemented.
- If there are union or other legal restrictions to punch rounding (e.g. collective bargaining agreements which specifically restrict rounding) then use the minute-to-minute policy.
The first two decision points in the tree are for situations when the decision is straightforward. The next six decision points are factors that provide weight for implementing a rounding policy.
- In high traffic scenarios, a queue may form at a time clock while employees go through the process of punching one at a time. A rounding policy creates a grace window, so employees are not held up from pay while waiting or can punch in early (to be on time) without costing the employer extra pay.
- When the time clock locations are distant from the employee’s work station, a rounding policy lets the employee clock in early before being ready to work, without costing the employer extra pay.
- If the cultural expectations in the business are that the tardy rules match the punch policy and there is a grace period for being late, then a rounding policy is needed to match the attendance policy.
- If the organization pays from schedule, regardless of actual punch time (e.g. 40 hours scheduled equals 40 hours paid), then a rounding policy is likely the best approach.
- Certain positions may require some initial setup tasks before starting the primary job (e.g. workstation cleaning and setup for stylists). Rounding allows for early punch in to accomplish these tasks before the location is officially open to customers.
- Likewise, certain jobs require tasks to be performed after final punch out (e.g. turning off lights, enabling security system, etc.). Rounding would allow early punch out, so that the employee does not work past scheduled time to accomplish those tasks.
If none of these scenarios apply, a minute-to-minute policy is likely the best option for the business. To the contrary, the more times a business says “Yes, that is our situation,” then the more likely it is that a rounding policy should be considered and implemented.
Weighing the risks of rounding
Making the right call on a rounding policy can be a weighty decision for businesses. Regardless of which policy is implemented, Axsium recommends organizations consider the following three principles:
- Make the policy fair and uniform for all non-exempt employees across the organization.
- Get consensus from executive leadership, HR, Payroll, and Legal.
- Leverage the workforce management system to apply the policy accurately and consistently.