The 7/8 Rounding Rule: Why 2 Minutes on a Time Card Could Cost You 5 Hours!!

Ask any business what their biggest cost, apart from raw materials, consists of, and you will probably get the same response. In most cases, rental, mortgage, computers, electricity, and phones are all minor issues on the expense report. It is employees -- the cost of labor to complete required work -- that puts the biggest dent in the company budget. And strangely enough, the law actually allows people to be paid for time they haven’t worked, day after day and week after week! This is allowed under many state laws, and is hinted at under federal legislation regarding rounding. If you keep standard time records, you could be paying for up to 15 minutes a day of work not completed, for every employee. We look at why the 7/8 rounding rule allows this, and how to combat the situation with telephone time clocking.

The 7/8 rounding rule

This is so familiar to most of us that we probably didn’t even realize there was a name for it! This rule basically states that if your employees are paid in 15-minute increments, then for every start and finish time they can round up or down to the nearest fifteen minutes. If the actual time is seven minutes over one fifteen minute period, they must round down. If it is eight minutes over the start of a period, they must round up. For example:

• Your employee's official start time is 8:30. If they arrive one morning at 8:37, they can still fill out their time sheet to indicate starting at 8:30, with no applicable penalty. If they arrive at 8:38, they must state that they arrived at 8:45.
• The same is applicable at finishing time.

You can see that simply by intentionally staying for as little as one extra minute at finishing time, or by arranging it so they get to work 7 minutes late instead of 8 minutes, your employees can legally be paid for 15 minutes a day of work they don't perform! Over a week this adds up to an hour and fifteen minutes, per employee, and over a month's salary, your employees could have been paid for five hours of work they didn’t perform.

Assumptions of the rounding rule

In order to ensure fairness, the rounding rule assumes that employees will not deliberately try to manipulate their starting and finishing times to take advantage of this. Even with no deliberate malice, it assumes that the roundings-up and roundings-down will even out over time. Neithe of these assumptions is necessarily true; it is better to simply keep accurate, indisputable records of time started and finished, tally it up for the pay period, and THEN do your rounding! Telephone time clocking makes this easy, and can be implemented for both on-site and off-site employees.