Rounding Standards - Financial Calculations

Question

I am curious about the existence of any \"rounding\" standards\" when it comes to the calculation of financial data. My initial thoughts are to perform rounding only when the da

Answer 1

It's frustrating that there aren't clear standards on this, both to guide the programmer, and as a defense in court. Just doing "regular" rounding toward nearest for payroll can lead to underpayment by a few pennies on a paycheck here and there, which is something labor lawyers eat up like crack.

Though a base pay rate may well only be specified in two decimal places ("You're hired at $22.71/hour"), things like blended overtime (determined by averaging multiple pay rates in a period) end up with an effective hourly rate of $23.37183475/hr.

How do you pay overtime on that?

15 hours x 23.37183475 x 1.5 = $525.87 rounded from $525.86628187
15 hours x 23.37       x 1.5 = $525.82

WHY DID YOU STEAL FIVE CENTS FROM MY CLIENT? Sadly, I'm not joking about this.

This gets even more uncomfortable when you calculate at the full precision value but display a truncated version: you do the first calculation above, but only display $23.37 for the rate on the pay stub.

Now the pay stub calculations don't tie out to the penny, and now you have to explain it, but even if it's in the employee's favor, it can be enough for a labor lawyer to smell blood in the water and start looking for other stuff.

One approach is to always round in favor of the employee, not in the natural direction, so there cannot ever be an accusation of systematic wage theft.