Are the Rounding Rules in your Timekeeping system making you a Digital Wage Thief?
Understand how you're round your employees time before the Auditors and Lawyers come knocking!
Too Long, Didn’t Read.
What is Digital Wage Theft?
When & Why it began.
How Rounding Works.
So, What’s the Fuss?!
Conclusion.
In The News.
For my first topic, let’s get into the common practice of rounding employee time and how you could be engaging in digital wage theft (and perhaps not even know it!).
🥱 The TL;DR
The short of it and ultimate takeaway is really simple. If your business is currently rounding employee time, in 2022 resolve to save yourself the looming legal headache and stop this antiquated and out-of-touch practice. Instead capture worked time to the minute, and work with your frontline managers on ensuring that the time being recorded (and ultimately paid) is truly productive worked time! And while you’re under the hood, it may not hurt to review your payroll governance processes as well.
😇 What is Digital Wage Theft?
If we define Wage Theft as “the denial of wages or employee benefits rightfully owed to an employee” then Digital Wage Theft is the extent to which the theft is facilitated by your timekeeping systems. Further more, even though employment lawyers and labor economists have long raised issues regarding wage theft, the recent ubiquity of Workforce Management Systems (and the weak governance over them) in modern business has quietly exacerbated the issue.
Among the several troubling timekeeping practices I’ve seen over the years, the following three seem to make up the majority of recent digital wage theft legal cases:
automated break deductions,
time shaving and,
time rounding.
I may get into the first two in a future post, for now, it is the rounding issue we will get into.
🤔 When & Why it Began!
It isn’t clear from the available literature when the practice of rounding employee time was first implemented, but it is very reasonable to assume it was sometime in the early 1900s towards the end of the second industrial revolution facilitated by a few key events:
Slavery had been outlawed throughout British North America in 1834 and by the 1860s more slave owners were forced to move to a wage-labour model requiring them to track the time of all their “workers” instead of the few white foremen and administrative staff.
The emergence of the mechanized, large-scale factory in the US in 1813. Factories were becoming larger with more complex operations, they required a larger workforce for whom operators needed to track time accurately.
Perhaps, most notably, the timeclock that punched employees in and out times on punch cards had been invented and in mass-circulation by 1891.
Fun-fact: Considered the manufacturer of the the 1st time clock (the Bundy Clock) the Bundy Manufacturing Company would in just 10yrs grow rapidly and then through a few acquisitions and consolidations go on to become IBM in 1911.
So as businesses grew along with the size of their workforces so too the need to accurately capture and calculate worked time for compensation at scale. Enter Time Rounding!
🤓 How Time Rounding Works
There are 12 ways an hour can be divided into equal segments as illustrated below and each of these segments is representative of a rounding method.
In addition, it has been common practice to use a “Grace” period of approximately half the round segment as the threshold to either round time back or forwards. For example, an organization using Quarter rounding is also said to be on 15/7 rounding, meaning they round time to the nearest 15 minutes using a 7-minute grace. So at the 7 minute mark time is rounded to either the next or the previous quarter. The same occurring at the 22nd, 37th, and 52nd-minute mark.
Consider an employee who is scheduled to start work at 7:00 am and comes in at either 7:01, 7:02, 7:03, 7:04, 7:05, 7:06, or 7:07 am, their punch time will be rounded back to 7:00 am, however, if they punched in anytime between 7:08 and 7:14 inclusively then their punch is rounded forward to 7:15 am.
If we take this example a step further and suppose the employee is also scheduled to work Monday to Friday from 7:00 am to 3:00 pm with a 30-minute unpaid break, then using Quarter (or 15/7) rounding their timesheet might look like the table below:
😬 So, What’s the Fuss!?
The main concern I have is that although the practice of rounding has been around for a long time, the speed at which the technology has offered advanced rounding features to businesses has far outpaced the development of labour standards and legal guidance on how to properly and legally implement these in a manner that ensures compliance and frankly fairness to workers.
Most front-line managers when faced with a timesheet such as the one above are not going to want to spend their scarce payroll dollars on the 1.5 hours in Overtime resulting from an employee who came in a little early or left a little late of their own accord and it is what they do to remedy this that gets organizations in trouble. Nowadays timekeeping systems are nuanced enough to apply a different rounding behaviour to the “outside” of a punch compared to the “inside” of the punch. This means you can apply different grace thresholds depending on if the punch time was before or after the scheduled shift start or shift end time. Businesses will enable this type of functionality unaware of the legal consequences of deviating from using a Grace other than half the round.
Other Managers (if they have access) will just edit the punch times and manually round up the time so that timesheet calculates the desired 8 hours worked time, this is called Time Shaving and is just as bad rigging the rounding and will raise legal concerns if discovered.
🤯 Conclusion
Rounding employee time will almost certainly force your managers into making decisions that under most jurisdictions be regarded as wage theft. In addition, labour lawyers catching onto this are pursuing these types of cases more as litigation cases related to digital wage theft rise.
Furthermore, of the 12 rounding methods available most labour standards (at least in North America) seem to only discuss 3: Quarter, Tenth and Twelfth rounding. There is a lack of legal literature on interpretations and guidance on the application of anything other than these 3 leaving businesses, unions, and employees to speculate on how to decipher the legalize.
Ideally, I’d advise the following:
Get rid of rounding altogether and capture employee time on a minute-to-minute basis.
If your employees are going into a physical place of work, then place your time capture devices at the place where the work is actually performed. Remove the clocks at the staff entrances or exits of your factory, hospital, airport, etc, and rather, place them at the entrance/exit of the shop floor, ward, or terminal such that punching in or out it is the last action performed before they start work or end work. i.e. enter facility→change room→shop-floor→clock-in→start work.
Put in place a governance apparatus that will connect business objectives to the realities on the ground and surface any conflicts to leadership. Take advantage of all the data being collected by your Workforce Management Systems, labour being the largest operating expense line item for almost every business there is almost always room for improvement that does not have to come at the cost of unnecessary risk and litigation exposure!
📺 In the News:
California Supreme Court Rejects Rounding of Timekeeping for Tracking Meal Periods, - Holland & Knight LLP, March 21, 2021
Wisconsin Wage and Hour Law: Rounding Employee Time, - The National Law Review, March 18, 2021
New rules require office workers to clock in and out of work amid wage theft concerns, - ABC News Australia, February 28, 2020
New Legislation Signed Regarding Wage Theft, The National Law Review, September 20, 2021
👋 The Awkward End Bit
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