August 5, 2022
The U.S. Department of Labor requires that, “Unless exempt, employees covered by the Fair Labor Standards Act (FLSA) must receive overtime pay for hours worked over 40 in a workweek at a rate not less than time and one-half their regular rates of pay.”
There is no limit on the number of hours employees aged 16 and older may work in any workweek. This means that overtime work is an option across many industries.
Benefits of Offering Overtime
In a perfect world, every employee would be able to work the standard 40 hours a week. However, that’s not always a realistic expectation.
Offering overtime can be beneficial for many reasons:
Use internal talent. When work piles up, you may think it’s time to consider hiring a new employee. Or, you can offer your existing team overtime work! Leaning on overtime for short term fluctuations in business can, sometimes, be more cost effective than hiring a new employee. Not only are you saving on a separate salary, but you can also bypass hiring and training costs.
Navigate busy seasons. Offering extra time worked for employees can also help with business stability. With this option, you can navigate busy seasons, bottlenecks, staff shortages and more with ease.
Incentivize employees. Employee time is valuable, and so is your business. Overtime work is mutually beneficial because it offers increased earning potential for employees and more stability for your company.
Overtime pay is a great incentive for employees to go above and beyond the required 40 hour work week. Additionally, it can be used to entice employees to work undesirable or more untraditional hours or jobs.
Essentially, overtime can help you operate a more productive, stable organization. You can have more flexibility when it comes to work schedules and ensure your business can run without major interruptions.
Industries Where Overtime Work is Common
In many industries, offering overtime work is the norm. This includes industries such as:
● Healthcare commonly offers overtime to account for an influx of patients or being understaffed.
● Production and manufacturing typically offer packers, mechanics, and technicians overtime work to meet demand.
● Transportation, including truck drivers and even USPS workers, may be offered overtime due to circumstances beyond their control - like traffic.
● Construction typically offers overtime pay to ensure deadlines are met.
Of course, these aren’t the only industries where overtime pay is the norm. Here are some other jobs that are likely to offer overtime according to Indeed. As you’ll see, many times it’s positions where the work is often unpredictable and can vary day by day.
Not all employees are eligible for overtime pay. It’s important to know the ins and outs of the FLA to ensure your employees are being fairly compensated and you’re not paying extra wages that could negatively impact your business’s bottom line.
Here are some of the commonly used exemptions the U.S. Department of Labor recognizes:
Of course, employers and employees should always check the exact terms and conditions of an exemption before assuming it might apply to the employee.
Challenges of Controlling Overtime
As you can see, offering extra hours is beneficial for many businesses. But managing overtime in the workplace doesn’t come without its challenges. Here are some of the drawbacks of overtime work:
Overtime dependency is a real issue outlined by the Society for Human Resource Management. The publication explains that when overtime levels are constantly high, employees may become dependent on the additional income. This isn’t financially sound and can also attract employees who are only looking for short-term monetary benefits from overtime work.
At the same time offering overtime consistently can also be costly for your business. It’s never sustainable to rely on overtime too much.
Time tracking to account for overtime is another common challenge. While it’s always important to track employee hours, it’s perhaps even more important to ensure the extra hours worked are being accounted for - especially when it comes to payroll purposes.
Making sure overtime hours are tracked helps with employee satisfaction and helps you stay compliant with the FLA.
Speaking of staying compliant with laws, it’s also important to brush up on the Department of Labor’s rules and regulations when it comes to overtime work. It can be difficult to navigate the laws that span from exempt employees to proper recordkeeping.
While the U.S. Department of Labor offers great guidance online, so staying compliant can still be a time consuming process.
Payroll is already a complicated process, but can be made more difficult when you need to correctly factor in overtime pay. Business News Daily explained that overtime compensation is paid at a rate of at least 1.5 times the employee’s regular pay rate. While this is a simple calculation, it can be cumbersome completing it for multiple employees every week.
This is especially true if you need to pull up employee time charts and have to differentiate between the standard 40 hours worked and extra time.
Strategies to Reduce Overtime Costs
Luckily, there are many ways to control overtime at work to find a happy medium of keeping your business running without shelling out too much money in extra pay.
Here are some effective ways to reduce overtime hours at your business:
Make Overtime the Exception
For most industries, overtime shouldn’t be the norm but should be the exception. When employees and managers rely on overtime, no one benefits because it’s simply not sustainable. It’s important to implement strict rules when it comes to extra compensation and look for patterns in the extra hours worked.
This way, you can make other changes like hiring new employees or offering different shifts to ensure employees remain productive without creating an overtime culture.
Cross-Train Your Team
According to Forbes, cross-training creates a more agile workforce. This mutually beneficial set up allows you to duplicate your employees’ skill sets, and your employees get a chance to learn different things.
In the long-run, organizations that cross-train are better equipped to recover quickly from disruptions and handle transitions gracefully. There will be less times when you need overtime to meet deadlines because employees can work where they’re needed during the day.
Offer Flexible Work Hours
While a 9-5 schedule is what’s common for most jobs, it may not be practical for your business. Take notice of when employees are the most productive and any patterns of when overtime becomes a necessity.
You may want to offer nontraditional work schedules, like night shifts or hours that are more appealing to parents etc. You can also consider letting your employees, if possible, work from home. Bloomberg reported that people are about 10% more productive when they work from home
Utilize a Time Clock
Perhaps the best way to immediately begin controlling overtime at work and reducing costs is by investing in a modern employee time clock system. The right time clock can help you better manage your employees’ hours, including overtime.
And not only does a time clock help with efficient employee time tracking, but it can also automatically ensure all employee timecard information is easily integrated with payroll. This streamlines two processes at once and ensures you’re not overpaying or underpaying your employees.
Lathem Time Clocks to Control Overtime
How to control overtime at work with a time clock is easy with Lathem. With a PayClock time clock software , employees can record their time and view their time card data on demand via the web, with mobile smartphones, a physical employee time clock, - or all three!
A PayClock employee time clock system lets you eliminate employee time theft, ensure compliance with Affordable Care Act and wage/hour laws, and, most importantly, reduce unauthorized overtime. Managing overtime in the workplace is all about finding balance between incentivizing employees and protecting your business’s bottom line.
PayClock is a solution that you can quickly implement to help find this balance and reduce overtime hours at your business. And the best part is it seamlessly integrates with popular payroll software systems including: QuickBooks, ADP, Intuit, Paychex, Fortune 1000(Acomba), Progressive Payroll and more to streamline this essential process.
The Benefits of Combining Time Clocks & Online Software
Learn how employee time clocks and PayClock software can help you manage overtime and more! (Free Download)
Grab the Free Guide Here