For many businesses it’s common practice to round employee hours to the nearest whole number—often the nearest five minutes, 10 minutes, or quarter hour. The reasoning seems sound, since it greatly simplifies payroll calculations for hourly employees or hourly client billing. But rounding an employee’s hours can have severe consequences, both with team members and clients.
Impact on Payroll
An hourly employee comes in a couple minutes late every day. Another one regularly comes in a few minutes early. Come payday, their paychecks are the same, but does it really reflect the work they did?
A survey from QuickBooks Time in 2018 showed that 55% of business owners regularly rounded their employee timesheets up or down. While the intention may be to simplify payroll, it’s possible for rounding to have a more nefarious intention. That same survey revealed that 34% of employers admit to rounding their employee timesheets down to reduce their labor costs.
Rounding isn’t always permitted depending on the circumstances. Companies that round down too much could find themselves accused of wage theft. Some companies err on the side of caution and choose to round up or down in favor of the employee or client, respectively.
Erosion of Trust
In both employment and business partnerships, trust forms the foundation of productive relationships. Both parties need to trust that the other side is being fair. If employees are worried they aren’t being paid for their time, or clients aren’t sure they’re getting enough value for what they’re paying, this lack of clarity could lead to a lack of trust. In severe cases where it becomes an ongoing issue, it could lead to employees deciding to leave or clients moving on to other business partnerships.
The Alternative to Rounding
The best alternative to rounding employee time—and what we highly recommend—is minute-to-minute time tracking. Using a digital time-tracking software, like Attendance on Demand™, allows employers to easily pay their teams for the exact amount of time they worked without rounding. Minute-to-minute time tracking reduces an employer’s compliance risk while creating better transparency with employees and clients. It also helps companies understand their true labor costs without the fuss of rounding employee time.
If you’d like to learn more about how a time tracking software like Attendance on Demand can benefit your business, we’d be happy to chat with you. Reach out to our team and we’ll help answer any questions you may have.