The Axcet Blog

6 Dos and Don'ts of Paying Overtime

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With the U.S. unemployment rate at record lows, there is downward pressure on the labor market and overtime hours are increasing. According to the Bureau of Labor Statistics, the average U.S. worker logged 3.5 hours per week in overtime in late 2018. It is all the more important to know what you can and can’t do with regard to paying employee overtime.

Here are a few do's and don’ts to keep the smart employer out of hot water and to avoid potential fines.

  1. “Comp time.” Comp time or compensatory time is often offered in place of overtime. It is assumed that instead of the employer paying for the extra hours the employee worked, the employee may be able to take an equal amount of time off during normal working hours. Private sectors, however, would be wrong in this assumption. “Comp time” is not allowed in the private sector unless it is taken in the same work week. It’s only allowed in the public sector and under specific conditions
  2. Rest breaks. Do rest breaks count toward hours worked when calculating overtime?  Simply put, yes. The Department of Labor (DOL) says rest breaks are considered 20 minutes or less away from work, and must be included in compensated hours when calculating overtime. Meal time (30 minutes or more) is not included in calculating overtime hours.
  3. Exempt Employees. It would seem logical that a salaried employee wouldn’t, by definition, be eligible for overtime. The criteria for “exempt” status is very specific (learn more here). If the employee is salaried, but does not meet the specific criteria of exemption, he or she may indeed be eligible for overtime and should be required to track all hours worked.
  4. Unauthorized Overtime. If a non-exempt employee has worked overtime, he or she must be paid overtime, regardless of whether the overtime was pre-authorized. Even if an employer has a policy that overtime must be pre-authorized, any overtime worked must be paid an overtime premium. The employer may take disciplinary action for the unauthorized overtime, but again, the time must be paid accordingly.
  5. Time spent traveling. Travel that keeps an employee away from home overnight, when it takes place during the employee’s regular work hours, can be considered hours worked in the calculation of overtime. For example, if an employee normally works 8:00 a.m. to 5:00 p.m., Monday through Friday, and is traveling from 1:00 to 3:00 p.m. on a Sunday – even though it’s not a normal work day – should be factored into overtime pay.
  6. Averaging hours worked over two weeks. Under the Fair Standards and Labor Act (FLSA), a single workweek must be considered when calculating overtime. If an employee normally works 40 hours per week, and works 30 hours then 50 hours in consecutive weeks, he must be paid overtime for the second week. The two weeks cannot be combined to avoid paying overtime.

Do you want to ensure your business is avoiding payroll mistakes? Check out this blog which covers the top eight payroll mistakes small businesses make. Many small businesses leave payroll processing to the professionals. Here are five reasons small businesses outsource their payroll.

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Written by Herman McDaniel