Many business owners misunderstand overtime requirements, which can be quite costly as the price of being out of compliance is high. HR must take the reins when it comes to training management, particularly those who are overseeing workers who are newly classified as non-exempt. By doing so, they will be less likely to repeat overtime errors that other businesses have made.
In this article, we will be going over the common overtime errors that occur in businesses and ways that they can be prevented, such as investing in a time clock app or by doing a quarterly audit.
Common Overtime Errors
Employees who don’t earn a minimum salary of $684 per week or $35,568 annually, or those who don’t meet the duties test of an overtime exemption, are eligible for overtime pay. Under federal law, non-exempt employees are required to be paid time-and-a-half if they work more than 40 hours in a workweek.
There are some states, such as New York or California, that may have a higher salary level threshold. The general rule in employment law is that a business must comply with the law that provides the most protection to an employee.
If you have employees who have been recently reclassified as non-exempt due to the new federal overtime law change which took effect at the beginning of the year, overtime violations may occur in a variety of different circumstances. Here are just a few common overtime errors:
Problem: A non-exempt worker might work off the clock, which is a violation of the Fair Labor Standards Act. Off-the-clock work typically occurs when an employee performs work before punching in, works through unpaid meal breaks, or continues to work after they have punched out.
Solution: By using online time and attendance software, you can restrict precisely where and when your employees can punch time. This will also require management to check in with employees and remind them that if they are doing any form of work, they must be on the clock. Not only is this helpful to ensure the employee gets paid accurately for their work, but it also ensures that your business remains in compliance.
Problem: Another frequent overtime violation occurs when an employer manipulates, and employees work hours after they’ve been recorded.
Solution: Employees punch time clock can track any changes that have been made to an employee’s timesheet. Proper timesheet management is vital because if an employee’s timesheet information is changed, and if you get audited, you need to be able to explain why. Managers should be informed on proper practices and when it is okay to change employee time card information.
Problem: Improperly calculating overtime hours can lead to inaccurate employee pay and potential fines.
Solution: With modern time clock solutions, the system can do all the heavy lifting for you and accurately calculate overtime for each employee. Most solutions come equipped with multiple different overtime types to accommodate for the different overtime rules in each state. By having a time clock app automatically calculate overtime for you, you can guarantee that your employees are being paid correctly for their time and that you remain compliant with all labor laws.
Problem: Employers frequently fail to include shift premiums, weekend premiums, commissions, and non-discretionary bonuses into the regular rate of pay resulting in miscalculated overtime.
Solution: Ensure that management understands all of the different types of pay and how they need to be recorded. An audit should be done every quarter to ensure management is adhering to these rules. If you find they’re not, then conduct another training session to remind them how to track time properly.
When you take all of these problems into consideration, it is easy to see how employers can make mistakes. The most common overtime errors occur due to simply not understanding how to accurately calculate overtime, especially in states with more strict rules such as California.
California has a daily overtime requirement in addition to a weekly overtime requirement. In some situations, an employee may be owed a double-time as opposed to time-and-a-half in California.
Damages and Penalties
If employees are misclassified or if their employer does not pay for all their hours worked, the damages under the FLSA can include back pay for the time worked, liquidated damages equal to the amount of back pay, and having to cover the employee’s attorney fees. Employers are liable for any penalties that occur as a result of a non-compliant pay stub. They are also responsible for penalties as it relates to meal and rest breaks for non-exempt employees who are denied breaks.
Manage Overtime with a Time Clock App
As mentioned previously, one of the best ways to manage overtime is through the use of time clock app. Such software allows an employer to set their overtime types, such as an 8-hour workday or 40 Hour Work Week, and the system automatically calculates overtime based on that information.
If an employee is reaching overtime for the day or week, management can be alerted so they can take proper action, whether that be replacing the employee with another worker or getting their overtime approved.
By using an online timecard system, you can guarantee that overtime is adequately tracked, employees are paid for their time worked, and you remain compliant with all labor laws.