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An Employer’s Guide to Calculating Overtime

Posted by Christine Pahl, PHR on May 23, 2017 9:00:00 AM
Christine Pahl, PHR

iStock-179278006.jpgWhen it comes to calculating overtime, employers need to pay extra attention to overtime requirements because a mistake can cost a lot more than 1 ½ times an employee’s regular pay. Federal overtime requirements are based on each individual workweek, which can be any fixed and recurring 168-hours (seven consecutive 24-hour periods).

Employers must pay employees for all the time worked in a workday. “Workday,” in general, means all the hours between the time an employee begins work and ends work on a particular day. Sometimes, the workday extends beyond a worker’s scheduled shift or normal hours. When this happens, the employer is responsible for paying the employee for that extra time. The following are examples of worktime outside an employee’s normal shift:

  • Waiting for repairs to equipment necessary for work
  • Time spent before a shift, preparing for the job
  • Time spent after the shift, completing unfinished work
  • Waiting for materials to arrive during the workday
  • Time spent traveling between worksites during the workday

Commuting and Travel Time

Depending on the nature of the travel, the nature of the employee’s work and the connection between the two, an employee’s drive and travel time may need to be included in the total hours worked for the week for the purposes of calculating overtime. According to federal guidelines, employees are “working” in the following travel scenarios:

  • Travel from office to first worksite of the day if a stop at the main office or jobsite is required before starting work for the day
  • Travel time minus the normal commute (example: if an employee’s normal commute is 20 minutes and the worksite is an hour away, 40 minutes of the travel time is compensable work time)
  • Any travel during a non-exempt employee's normal working hours (regardless of the day of the week)
  • Any time spent driving (other than the normal commute), the driver is always working (regardless of the time of day or day of week)

To help with the expense of overtime, some employers choose to pay drive/travel time at a lower rate than the employee’s regular pay rate. When using two different pay rates in a week in which an employee worked overtime, the regular rate is a “blended rate” or “weighted average” of the two rates.

Other Types of Compensable Worktime

Training. When it comes to mandatory training or meetings, employers have to pay non-exempt employees all hours they spend attending any type of required programs.

Wait-time. Depending on the industry, some employees have to wait to receive their jobs for the day, wait in a security line, or wait at their place of employment to punch a time clock. Employers should pay employees for their wait time if the employer requires the activity; the activity is necessary for the employee to perform his or her duties; and the activity primarily benefits the employer.

Outside or After-Hours Work. Many employers who expect or require their employees to check email or take calls outside of the office may not realize that they have to pay their employees for that time. Make sure your employees track this type of time with a log so you can pay them appropriately. If you choose to forbid outside or after-hours work, make sure to have a clear policy stating that. Either way, you must pay the employee, but you may also then be able to discipline him or her for violating the policy.

Employers must use caution when evaluating whether they comply with overtime requirements. Many states have laws that don’t always mirror the Fair Labor Standards Act (FLSA) overtime rules. Employers must be certain they comply with the FLSA and state-law requirements in every state where they have employees and calculate overtime appropriately based on those laws.

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Topics: Payroll, Human Resources, Legal News & Compliance

Christine Pahl, PHR

Written by Christine Pahl, PHR

Christine has over 20 years of HR related experience with a background in labor and employment law. She manages FrankAdvice, the premium HR service provided to business clients of FrankCrum. FrankAdvice offers senior-level HR advice on all aspects of the employer/employee relationship and includes a vast library of employment-related documents including various forms, policies and handbooks. Christine also manages the Employment Practices Liability Insurance (EPLI) claims process for both the FrankCrum corporate office and the client companies.

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