Overtime ranks as one of the most significant ongoing expenses for companies, both large and small. Correctly, or incorrectly, managing overtime can mean the difference between low morale, lawsuits, and changes to overtime regulations. Thankfully a timekeeper app can help.
Figuring out work schedules while accounting for overtime is often a significant pitfall, but it doesn’t have to be this way. Beyond being an improvement for your team’s work-life balance, proactively managing your employee’s overtime can enable you to reduce absenteeism, improve employee morale, and protect your company from potential legal action.
The following tips can help you more efficiently manage overtime and avoid pitfalls and surprises.
Use Time Tracking and Scheduling Software
Tracking employee time and using scheduling software can help you better manage overtime.
According to the Bureau of Labor Statistics, the average American worker puts in just a little over four hours of overtime per workweek. That’s approximately 208 hours per year. To put it into perspective, if an employee is earning $21 per hour of overtime, that comes to $6,552 per employee – per year! With a staff of 10 employees, that’s $65,520 in overtime expenses. Bottom line, not having your overtime policy and procedures up-to-date will cost you severely when you’re paying several employees one and a half times their hourly rate.
So what can you do to avoid overtime surprises? One of the best ways is to invest in scheduling software and a mobile employee time tracking solution. Specifically, you’ll want to invest in time tracking software that includes alerts or reminders to let you and your employees know when they’re about to work extra hours / reach overtime.
Tracking employee’s work hours also allows leadership to find and address and company-wide patterns as well as at the individual level when it comes to overtime.
Improve Efficiency with Scheduling Software
Do you have one employee who is continually racking up on overtime hours every week? Does overtime occur due to staffing shortages or your busy season? With a big-picture view, you can see how time is spent and how your resources are allocated to different projects. And with this information, management can make more informed decisions when it comes to resources and overtime.
Scheduling and timekeeping software can also help you to avoid time theft, such as timecard rounding. This typically happens innocently but falls in favor of the employee. Per the American Payroll Association, each employee rounds 10 minutes per shift – this can quickly add up.
Ensure the time tracking or shift scheduling software you choose helps you remain FLSA compliant. This protects not only employees but you the employer in the event of an audit or labor dispute.
Employee classification can significantly impact your overtime and labor expenses. Frequently reviewing employee job duties can help to ensure that each employee is classified correctly.
Take Into Account Employee Classification
Classification is another important factor to take into consideration when it comes to overtime.
If a salaried employee makes less than $47,476 per year, you are still required to pay them overtime. Classifying an employee as exempt who earns a salary below $47,476 simply to avoid overtime isn’t a good strategy. A large portion of labor lawsuits stem from misclassification, and eventually, employers have to backpay the overtime anyways. Not so cost-effective at the end of the day, is it? Accurate time tracking for exempt employees is crucial.
It doesn’t matter to the courts if you’re purposefully or unintentionally misclassifying employees. It is your job as the employer to ensure that your employees are classified correctly and not in an attempt to cut labor costs. The penalties for misclassifying an employee can include two years of back pay. If the court finds you purposely misclassified the employee, you’ll end up owing three years’ worth of back pay.
To ensure that your classifications are correct and that your exempt employee time tracking process is up-to-date, regularly review your employees’ job duties and relationship to your business, and consult a lawyer in any grey areas. While the legal fees may impact you in the short term, in the long run, you will save thousands of dollars.
You should clearly lay out your overtime expectations for both your employees and management.
Perhaps one of the best ways to better manage overtime is to improve employee-employer communication. Set your expectations and make them known to your employees. You can send out alerts through employee scheduling software or explicitly train employees and managers on your expectations and reduce any employee habits of not recording overtime out of the goodness of their hearts.
There are unspoken rules about when to record time for shift workers than most business owners or managers realize. However, work without pay can lead to legal action even if the approval is still implied. No matter how much your employees think it helps, any work without pay will eventually reduce transparency and morale within your business.
It is also essential to set and clarify your expectations when it comes to technology. While sending an email and expecting employees to respond when not working seems innocent, the minutes can quickly add up. Many businesses want employees to be available for email-communication. However, when this availability is after hours, that can be grounds for labor disputes.
By clarifying your expectations upfront, you can hold employees and management to the standards you set forth.
Cross-training employees allows you to fill schedule shifts with more competent workers and reduce your overtime costs by spreading out the workload.
Emphasize Cross-Training to Improve Scheduling
Cross-training allows you to spread out workloads and more efficiently create shifts using scheduling software.
Overtime expenses can add up quickly for specific employees if no one else can do their job. Not only does over time add up, but problems can arise. Some employees end up maxed out while others get underutilized.
By emphasizing cross-training as much as possible, you can spread out the workload and allow different employees to help as workloads increase or emergencies come up. Effective cross-training can lead to improved morale, empowered staff, and can help to relieve the burned placed on other employees.
Cross-training also allows you to be more flexible when it comes to scheduling software. Companies are frequently forced to schedule based on an individual’s specialized knowledge. This results in overtime.
While it’s not possible to cross-train all job functions or skill sets, you can identify duties that are quickly learned and train several employees. By doing so, you can drastically reduce overtime and increase efficiency and productivity.
If an employee is worried about their job or performance, they may want to put in more hours without charging that time. However, as a business, you shouldn’t view this as a good thing. If you turn a blind eye to this type of behavior, you are encouraging it. This can lead to disastrous financial repercussions down the road.
Labor and wage disputes have risen significantly over the past decade. In 2014 alone, the Department of Labor ordered businesses to pay nearly $241 million in back pay. This is due to employee misclassification – most of which is done as a result of trying to avoid overtime pay.
While it is vital to ensure that your business remains profitable and continues to grow, it is just as essential to pay your employees for their work. Not paying them for any time worked can lead to big problems down the road and can result in your business being shut down.