Timekeeping and Payroll: The 9-to-5 Trap

Most employees today don’t punch a time clock; they generally work a set schedule, such as 9 am to 5 pm.

Because these employees work a regular schedule, many employers don’t bother to track their time (or require the employees to track their time). This means that each paycheck reflects pay for the time scheduled rather than the actual time worked. This is frequently the case with nonexempt employees who are paid on a salary basis.

Paying employees according to their scheduled work hours, as opposed to paying them for the actual hours worked, is a mistake that can easily lead to a lawsuit. Employers are required to keep track of, and pay employees for, the actual time worked. 

Paying Overtime: 10 Key Exemption Concepts

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You’re permitted to round timekeeping to the nearest five minutes, tenth of an hour, or quarter hour. The theory is that a properly implemented rounding practice will average out over time so that employees are fairly compensated.

For example, assume that employee time is rounded to the nearest quarter hour. On Monday, an employee stops working at 5:06 pm. The employee’s stop time for Monday would be recorded as 5:00 pm. On Tuesday, the employee stops working at 5:08 pm. Tuesday’s stop time would be recorded as 5:15 pm. Utilizing this rounding practice, the employee has been paid for all time worked, even though the hours recorded have been rounded to the nearest quarter hour.

But, if you pay employees only for their scheduled time, as opposed to the time they actually work (rounded to no more than the nearest quarter hour), the employee may not be paid for all hours worked, and you can be forced to pay employees for both the unpaid time and any applicable penalties.

Conversely, you may end up overpaying employees who come into work late or leave early but record their regularly scheduled hours instead of the abbreviated time that they really worked. In the long term—especially for employees who are chronically tardy or who frequently cut out early—you could end up paying out a lot in wages for time that employees aren’t working.

The High Cost of Absent Employees

According to The Total Financial Impact of Employee Absences, a recent study conducted by Mercer, more than 35 percent of an organization’s base payroll is attributable to employee absences.

These costs include direct costs such as sick pay, disability benefits, and workers’ comp benefits, as well as indirect costs, such as lost revenue and productivity. Tardiness can be an equally significant problem; your on-time workers are forced to pick up the slack of the chronic offenders, leading to decreased productivity and morale.

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