Daylight saving time (DST) was conceived by Benjamin Franklin in 1784 and established throughout the U.S. in 1966. Its purpose is to save electricity by extending daylight hours for eight months of the year. While daylight saving time may help save on electricity use and cost, it may cause a payroll headache for companies with shift workers.
In 2021, daylight saving time starts March 14 and ends November 7. Daylight saving time is not observed in Arizona, Hawaii, Puerto Rico, the U.S. Virgin Islands, and American Samoa.
Workers and Businesses Affected by Daylight Saving Time
Many employees work schedules other than a Monday through Friday 9 a.m. to 5 p.m. work week, and many different industries need employees to work night shifts. Emergency services, security, retail, food service, travel, hospitality, and manufacturing are just some types of positions that require night and weekend schedules. The Bureau of Labor Statistics (BLS) reports that 16% of workers worked a non-daytime schedule in the most recent timeframe for which statistics are available from 2017 to 2018.
Daylight Saving Time and Payroll
The Society for Human Resource Management (SHRM) describes a few payroll problems employers deal with when it comes to daylight saving time if they have hourly employees working graveyard or overnight shifts. It may result in an extra hour of work if employees are at work at 2 a.m. when the autumn time change occurs and an hour is gained, and this may push the total week’s work hours to over 40 resulting in an overtime pay obligation. It may result in employees losing a payroll hour for actual time worked when the springtime change occurs and an hour is lost.
These hours gained and lost create a payroll processing problem for employers because the Fair Labor Standards Act (FLSA) requires employers to credit employees for hours actually worked.
What to Do
- Because the FLSA requires employers to pay non-exempt employees for all hours actually worked, employers must pay employees who work the graveyard shift during the daylight-saving time change accordingly.
- Employers who have employees on the clock when DST ends in the fall should pay an additional hour and review total hours to see if the DST hour puts them over 40 hours. If so, that hour must be paid as overtime.
- Per the FLSA, employers who have employees on the clock when DST starts in the spring could pay an hour less or pay the regular number of hours, but not include the DST hour in the regular rate of pay to calculate overtime. Employers could also allow the employee to use an hour of paid time off.
- Another option is to modify employee schedules to reflect the time change. For example, an employee regularly scheduled to work 11 p.m. to 7 a.m. could start after the DST time change, or leave before the time change.
- SHRM reminds employers that state law and employment contracts should also be reviewed in advance of DST to schedule employees, edit time, and process payroll compliantly.