Bob, a small business owner, has two non-exempt employees. Sue regularly begins work five to 10 minutes early most days and works late anywhere from 15 to 20 minutes every day. On the other the hand, Mike usually starts his workday within five minutes before or after his shift begins and “clocks out” about five minutes after his shift ends. From a payroll perspective, how should Bob handle calculating the time each of these employees worked?
According to the Fair Labor Standards Act (FLSA), which is overseen by the U.S. Department of Labor Wage and Hour Division, employers are required to accurately calculate and record their employees’ time worked and to compensate them for each of those hours. While compliance to this mandate may seem simple enough, employers can face several pitfalls when it comes to accurately recording the time that employees actually work. These pitfalls can include adjustments to an employee’s working time, rounding the minutes employees worked and “long punching” issues.
Therefore, the Wage and Hour Division has established specific rules on how to calculate employees’ time worked when it comes to these pitfalls.
- Employers may not disregard any portion, however small, of employees’ regularly scheduled working time or any time that can be ascertained as time spent working.
- In computing employees’ hours of work, employers may disregard insignificant amounts of working time beyond an employee’s normal work schedule. However, this rule applies only when the work time is uncertain and indefinite, and consists of an adjustment of a few seconds or minutes (less than seven minutes). A general decision not to pay for the first five to 10 minutes at the beginning or past the end of an employee’s shift, on the assumption that the time is not significant, is an unacceptable payroll practice.
- Rounding is allowed as long as there is a stated company policy in the workplace. FLSA allows an employer to round down employee’s time of seven minutes or less to zero, and to round up time of eight minutes or more to a quarter hour. However, this policy must be administered fairly and consistently.
- Excessive long punching should be discouraged by establishing a clear time and attendance policy that outlines disciplinary measures if employees fail to follow the policy. Long punching refers to employee time records that show more time than the hours the employee actually worked. Long punching may be due to an employee voluntarily entering the workplace before his/her actual starting time or remaining after his/her actual quitting time.
Another pitfall, employers may face when calculating an employee’s time, is when an employee “forgets” to clock in and out. The employer should:
- Have the employee verbally tell them when they worked
- Pay them for the time agreed upon
- Tell the employee, if it happens again, they will be suspended
- Terminate the employee, if it does happen again.
According to the Internal Revenue Service, one out of three employers gets charged for a payroll mistake. Therefore, it makes sense to outsource your company’s payroll services. The Payroll Department in Brownsburg, Indiana, is experienced in facilitating all of the processing, regulation changes and IRS filings associated with the processing of your payroll. Whether you are a medium or small business, the Payroll Department can be your payroll provider! Contact us today.
– Ariane of The Payroll Department Blog Team