Time clock rounding: rules, best practices & compliance for 2025

Time clock rounding originally became popular as a method for keeping employee records simple and easy to process, especially for payroll calculations. Despite advances in time-tracking software that make it easier to log hours efficiently and compliantly, rounding remains common, especially among small businesses.

If your organization continues to round, it must do so fairly, transparently, and in accordance with federal and state labor laws. In this guide, we’ll explain everything HR and operations leaders need to know about time clock rounding in 2025.‍

‍Please note that this article will focus on time clock rounding in the United States.

‍Even when following labor laws, statistical patterns or employee work habits can unintentionally disadvantage employees, which may still expose companies to lawsuits. For this reason, many experts recommend tracking the exact time whenever possible.
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What is time clock rounding?

Time clock rounding is the practice of adjusting an employee’s reported time worked to the nearest increment — typically five, six, or 15 minutes. For example, if someone clocks in at 8:03 a.m., the recorded time might be rounded to 8:00 a.m. or 8:05 a.m., depending on the organization’s policy.

Many companies adopt rounding to simplify payroll processing, especially when employees record work in short intervals. Rounding can help standardize entries and reduce payroll inconsistencies, making calculations easier for finance and HR teams.

However, rounding alters actual hours, so it must be applied consistently and neutrally. Repeatedly rounding in the employer’s favor can expose the business to wage‑and‑hour claims, penalties, and reputational damage.
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Is time clock rounding legal in the United States?

When applied fairly and consistently, time clock rounding is permitted under US federal law — specifically the Fair Labor Standards Act (FLSA). The Department of Labor (DOL) allows rounding to the nearest five, six, or 15-minute increment. However, rounding policies must not systematically disadvantage employees. For example, it’s not compliant to always round down or in the employer’s favor.

Organizations must also pay close attention to state-level requirements. California, for instance, has signalled through multiple court decisions that if employers can capture the exact time worked, they should use that data and avoid rounding practices that risk underpayment. Washington state courts have also issued seven‑figure judgments against companies whose rounding practices shaved minutes from workers’ shifts.

For distributed or remote teams, you may need to comply with the labor laws of multiple states — meaning not just where your company is headquartered, but also where your employees live and work.

In short, rounding can be lawful when used fairly and by federal and state laws. However, due to ongoing legal scrutiny and an increase in wage and hour lawsuits, many employers are moving toward precise time-tracking methods instead, like digital timesheets or automated tools.
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In practice, even if rounding is technically legal, it may not protect your company if data shows employees are consistently disadvantaged. For example, if most staff arrive at 8:16 a.m. because of a bus schedule, a six-minute rounding policy could disproportionately cut paid time. Courts have found that these patterns can undermine compliance, even when the policy seems neutral on paper.

Common time clock rounding rules (with examples)

Based on the FLSA’s guidelines surrounding time clock rounding, there are three most common intervals: five, six, and 15 minutes. Let’s review the reasons behind each interval and explore their pros and cons.

5-minute rounding

Rounding in five-minute increments is common in industries with frequent time punches, like retail and hospitality. For example, a clock-in at 9:05 a.m. may be rounded to 9:00 a.m., depending on the rounding policy.

When applied fairly and consistently, this approach can balance administrative efficiency with reasonable accuracy in payroll preparation. A five-minute adjustment is often seen as minimal in the context of total compensation, but the key is ensuring rounding doesn’t systematically reduce hours worked.
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6-minute rounding

Six-minute rounding — or one-tenth-of-an-hour rounding — is another commonly used method, particularly in professional services such as legal, financial, or consulting work. For instance, if an employee clocks out at 10:54 a.m., their time might be rounded to 11:00 a.m.

This method aligns with common billing structures in these industries, where work is tracked and invoiced in tenths of an hour. It offers a practical level of granularity for roles involving frequent task-switching or client-specific time tracking.

However, this approach isn’t without risks. Not all timekeeping or payroll systems accommodate one-tenth-hour rounding. Inconsistent use or a lack of transparency around how rounding is applied may lead to confusion or perceived unfairness among employees or clients.
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15-minute rounding

Fifteen-minute rounding is one of the most traditional timekeeping intervals, often found in legacy payroll systems. For example, if an employee clocks in at 7:53 a.m., a 15-minute rounding policy might record the start time as 8:00 a.m.

While this approach may simplify calculations in some systems, it introduces the greatest compliance risk of the common rounding intervals, especially for hourly or part-time employees. A 15-minute adjustment can result in a meaningful loss of recorded work time, particularly if the rounding consistently favors the employer.

This method has faced increasing legal scrutiny, especially in jurisdictions like California. Courts there have made it clear that if an employer can track time to the minute, they should use that data rather than rely on time clock rounding.
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Common challenges & compliance risks associated with time clock rounding

While some organizations continue to rely on time rounding, the practice still carries certain risks and challenges. Ultimately, these intervals may simplify payroll, but no rounding system is fully risk-free. 

Employees can also “game” the rules by clocking in strategically — for instance, arriving at 8:14 a.m. every day to be rounded forward. These realities highlight why precise tracking is increasingly the standard for modern teams.

Be sure to review these potential complications before implementing any rounding rule and consult a legal professional for tailored advice and guidance. 
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System limitations

Outdated time-tracking systems can make it challenging to maintain compliant rounding practices. Many legacy platforms lack the flexibility to configure rounding rules accurately or apply them consistently across organizations. Sometimes, these systems may default to rounding behaviors no longer aligned with evolving legal standards, increasing the risk of payroll inaccuracies and administrative complexity.

These gaps can become especially problematic during a labor audit or in response to an employee complaint, when systems lacking clear audit trails or transparent time records may disadvantage employers.

If your current platform doesn’t support configurable rounding logic, precise time capture, or audit-ready reporting, it may be worth exploring more modern solutions like Leapsome Time Tracking. Platforms that support customizable timekeeping policies, compliance checks, and transparent employee access can help reduce risk and improve operational clarity.
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Favoring the employer in rounding patterns 

Rounding practices that consistently reduce recorded work time or disproportionately favor the employer can create legal exposure. For example, always rounding down when employees clock in early or rounding up when they clock out late may be seen as non-neutral — which can violate federal and state labor laws.

Even minor, recurring adjustments can impact employee compensation over time. To mitigate this risk, organizations should regularly audit their rounding data to confirm that the policy is applied consistently and doesn’t result in a pattern of underpayment.

Some companies choose to round in the employee’s favor when ambiguity arises — but the safest approach remains moving away from rounding altogether and recording actual time worked.
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Inconsistent application between employees

Time clock rounding must be applied consistently across all employees and departments to avoid compliance risks. Even unintentional inconsistencies can create the appearance of unequal treatment, which can lead to wage disputes or potential violations of labor law.

For example, applying five-minute rounding in one department and 15-minute rounding in another, or treating salaried and hourly employees differently when tracking time, may raise concerns about fairness and compliance.

The Fair Labor Standards Act (FLSA) requires that rounding practices be neutral over time. In practice, organizations should define clear, documented rounding standards — including the interval used and how rounding up or down is determined — and apply them uniformly.

Avoid making exceptions on a case-by-case basis, as even well-meaning deviations can undermine compliance efforts and employee trust.
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Misclassifying exempt vs. non-exempt workers

Misclassifying a non-exempt employee as exempt can result in noncompliance with the Fair Labor Standards Act (FLSA). If a non-exempt employee is excluded from accurate time tracking due to an incorrect classification, your organization may be liable for back wages, penalties, and other legal consequences.

To reduce this risk, regularly audit employee classifications and ensure that time clock rounding policies are only applied to individuals who are appropriately categorized as non-exempt. Misapplication of policies across exempt and non-exempt roles can introduce inconsistencies and compliance issues.

Training HR, payroll, and team leads on the distinction between exempt and non-exempt status is also critical, particularly when onboarding new roles or reclassifying employees.
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Failure to update policies with new regulations

Employment laws change, and your timekeeping policies must evolve with them. Rounding practices once considered compliant may no longer meet updated federal or state standards, especially as regulations and legal interpretations shift over time.

To reduce the risk of falling out of compliance, conduct regular reviews of your rounding policies in collaboration with legal counsel or qualified HR professionals. This helps ensure your practices stay aligned with current labor laws and withstand regulatory scrutiny if challenged.

Beyond compliance, proactive policy reviews demonstrate your organization’s commitment to wage accuracy and fairness. That transparency strengthens employee trust and contributes to a healthier, more psychologically safe work environment.
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Time clock rounding vs. exact tracking: what’s better in 2025?

Time clock rounding was initially adopted to simplify payroll and reduce administrative overhead. But with today’s advances in time tracking and HR tech, many historical justifications for rounding no longer hold up, especially as concerns around fairness and compliance continue to grow.

Moving to exact time tracking provides a clearer long-term advantage for many organizations. It helps reduce manual adjustments, lowers the risk of wage disputes, and gives teams a more accurate view of work patterns and payroll data.

Modern tools like Leapsome Time Tracking and Payroll enable teams to automate time capture, apply rule-based logic, and streamline payroll processing. With support for real-time tracking and robust audit trails, these systems help reduce administrative burden and align with evolving compliance expectations.

Whether you’re scaling your team or operating across multiple jurisdictions, precise time tracking gives HR and payroll teams the clarity and control needed to stay focused on strategic work — not enforcing legacy processes.
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Modern teams love tracking time with Leapsome

Time clock rounding is a time-honored approach to logging employee hours (excuse the pun), especially if your team finds it easy to remain up-to-date with federal and local labor laws.

‍However, for most teams, a user-friendly, integrated time-tracking software like Leapsome is the way to go. Because the Leapsome HRIS consolidates payroll preparation, time tracking, and people analytics into one system, you won’t struggle to gather and make sense of employee data. Instead, you’ll easily take care of all your core HR processes in one centralized platform.
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‍Disclaimer: This article is for informational purposes only and doesn’t offer legal advice. While we’ve done our best to ensure accuracy and completeness, we can’t guarantee everything is up-to-date or error-free. For tailored advice, we recommend consulting a qualified lawyer or compliance professional.