The Easiest Way to Calculate Employee Overtime
When it comes to running a successful business, there are a few things that remain true no matter how many employees you have or what industry you’re in.
One of these things is the importance of accurately calculating overtime pay. No matter what size your company is, having a system that can help you to accurately keep track of hourly rates and overtime rates isn’t just a good idea, it’s vital.
The U.S. Department of Labor passed the Fair Labor Standards Act (FLSA) to guarantee employee compensation at one-half times their regular rate of pay once they exceed 40 hours of work. Calculating that total pay doesn’t fall on your team members – its up to you as their employer to follow the overtime rules and make sure their weekly salary is accurate. The consequences for not doing so are severe, and labor laws in states can sometimes vary from federal law. You also need to keep track of hours in each pay period when it comes to exemptions, double time, and differential pay. Either way, if you don’t keep overtime wages accurate, you could be looking at a visit from the DOL or facing lawsuits.
Whether you have an old-fashioned pen and paper system or a robust staff clock in system, the fact remains that it’s your responsibility to accurately pay your employees for overtime work. Part of that comes from management of timekeeping overall, as losing track of straight time (non-overtime hours at an employee’s regular rate) will directly feed into losing track of the number of overtime hours an employee worked.
According to the Bureau of Labor Statistics, the average American worker works slightly more than four hours of overtime per workweek, or, 208 hours per year. Estimating an average wage of $21 per hour time-and-a-half pay, this works out to $6,552 per employee each year. For companies with multiple employees, it’s easy to see how this can quickly add up. Then there are the health risks that are associated with working overtime; with one study showing a connection between people who work 55 or more hours per week and cardiovascular disease.
With this in mind, let’s look at a few important steps that you can do to accurately calculate employee overtime, while at the same time improving your overtime management system.
Ensuring Accuracy With Time Tracking Software
Although you’ll want to ensure that you’re paying your employees for time worked, you’ll also want to ensure that you’re not overpaying them.
With the best time card apps, you’ll likely get an overtime calculator built into the software. Beyond this, you can ensure you’re not paying for more than the number of hours salaried employees actually worked by keeping track of their workday. Implementing this software for your workforce also makes work time more productive overall, as employees act more responsibly on the clock.
These time trackers work with remote teams or fluctuating workweeks, and some even have functions to juggle time off, collect GPS data, or require a QR code or webcam verification before hourly employees can clock in. Even if you’re only paying minimum wage, there’s no reason why you should have to worry about time theft and exaggerated hours.
Upgrade Your Scheduling System
When it comes to overtime, it’s important to ensure that your team is picking up extra hours because there was a need for them, not because of scheduling errors. Ineffective scheduling or scheduling errors can result in overbooking, which will impact your bottom line. That said, making sure your scheduling is running smoothly can be a full-time job in and of itself.
Improve Time Management
Poor time management can also create a perceived need for overtime. While sometimes, there is a real need for additional staff, often, what appears like a short-staffing situation could be an issue with your team being unclear on the extent of their duties, or otherwise lacking the time management skills to finish everything during the allotted hours. Ensuring that you, or your managers have a good grasp of time management is important. A good manager will be able to help your employees to manage their time better and will be able to ensure that work is done as efficiently as possible, reducing the need for unnecessary staff and eliminating employee lateness.
Tools and Training
Back before many modern labor regulations, Henry Ford found this his employees were most productive with a 40-hour workweek. Now that we’re more used to this scheduling as a society, it’s possible we’re taking for granted just how much can be accomplished in that time. If you’re going to be paying hourly wages, it would be optimal to train your employees to make the most of their straight time so overtime becomes less of a concern for your business overall.
You should also be sure to give your employees the tools and training required to complete their work in an appropriate time manner. Help them work towards being more efficient in their work.
