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Hourly Employee

Anonymous LA's Profile

Hi! How is overtime work on an hourly employee? How to prevent misuse of overtime? Thank you in advance.

Answers

Topic Expert
Wayne Spivak
Title: President & CFO
Company: SBAConsulting.com
LinkedIn Profile
(President & CFO, SBAConsulting.com) |

According to the US DOL, you can't prevent misuse of overtime UNLESS you a) lock-out, b) fire or c) suspend the Employee.

If an Employee works overtime, with or without permission, you as the employer MUST pay.

Topic Expert
Malak Kazan
Title: VP, Special Projects
Company: ERI Economic Research Institute
(VP, Special Projects, ERI Economic Research Institute) |

Also you may want to "require" overtime be "approved". I've worked in organizations where we had a general policy "No Overtime" expected or required unless pre- approved by dept Manager / Supervisor. Hope this helps.

John Herndon
Title: Senior Consultant
Company: NOWCFO
(Senior Consultant, NOWCFO) |

I believe the question may relate to calculation of overtime ("OT"), as with all hourly employees the location and direction of their work is based on the employers definition.

I am not sure how other states define OT, however in California the calculation covers more than 8 hours in a day and 40 hours in a week.

Monitoring / controlling overtime is a separate issue; without specifics it is difficult to address the question. For example, is the employee in the field? Are there multiple 'jobs' or locations the employee is required to travel to?

Answers to these questions can help formulate the final answer.

Topic Expert
Wayne Spivak
Title: President & CFO
Company: SBAConsulting.com
LinkedIn Profile
(President & CFO, SBAConsulting.com) |

I would suggest everyone read this:

US DOL Factsheet #23: Overtime Payments under the FLSA

http://www.dol.gov/whd/regs/compliance/whdfs23.pdf

Topic Expert
Patrick Dunne
Title: Chief Financial Officer
Company: Milk Source
(Chief Financial Officer, Milk Source) |

Without a lot of details, the best advice we can give you is pre-approval of overtime and a lot of manager oversight. The other piece of advice is being able to monitor output. For office employees that process transactions: how many invoices do they process is an example. For factory employees, how many units are they producing?

Mark Matheny
Title: VP - FInancial Planning and Analysis
Company: Novolex (formerly Hilex Poly)
(VP - FInancial Planning and Analysis, Novolex (formerly Hilex Poly)) |

Require supervisor approval of any overtime BEFORE it is incurred.

Edward Thill
Title: VP - Finance & Operations
Company: Performance Trust
(VP - Finance & Operations, Performance Trust) |

You have two separate discussions going on here that should not be confused:
1) Compensation is a legal question. Wayne has provided good guidance above on that and you will want to also investigate your particular state's rules. John mentions above that an 8 hr day is the breakpoint for OT premium in CA but here in IL, they follow the federal rules so an employee could work (2) 20-hr days and still not require OT.
2) Misuse of OT is a management issue. Policies requiring that OT must be approved do not eliminate your legal requirement for compensation, it only forces managers to address the policy violation after-the-fact much the same as a dress-code violation or any other similar undesirable employee action. The larger issue is why the employee needs to work OT. If it is driven by work load, consider redistribution to other employees. If it is driven by inefficiency or ineffectiveness, that's up to management to address. Consider an efficiency review, further training or, if warranted, termination. This does pre-suppose that OT is an undesirable event. In our company, OT is expected in several positions as the workload is sufficient to warrant the additional cost but the premium is not enough yet to warrant the addition of another employee.

Simon Westbrook
Title: CFO
Company: Aargo Inc.
( CFO, Aargo Inc.) |

From a different perspective I would like to raise the question of overtime rate. I am used to a 50% premium for overtime, but we have a contract with a major customer who specifies that approved overtime will be paid at 43%. This leaves us absorbing a 7% gap on all OT worked by our employees. While it wont be popular with our employees I am wondering whether we can adjust their OT rate to match the customer rate?

Topic Expert
Wayne Spivak
Title: President & CFO
Company: SBAConsulting.com
LinkedIn Profile
(President & CFO, SBAConsulting.com) |

Read the Fed rules and check your state. May gut is no you can't.

Topic Expert
Karoline Mello
Title: Director, FP&A
Company: Apollo Group
(Director, FP&A, Apollo Group) |

The law in my state dictates that employees in my state receive one and a half time wages for overtime. It also dictates that overtime is based on a 40 hour work week – not an 8 hour work day like a few other states.

Your employees and your pay to them is set at a minimum by your state law, although you can offer a higher rate you would be violating state labor laws to pay a lower rate (1.43%).

I would request payroll reports by manager of the over time paid weekly or monthly. This would identify if there is a group abusing the overtime because a particular manager is not monitoring the over time. Then you have a conversation with the manager about the expectations of preserving the company bottom line and respecting use of time. I would also look at the lowest over time, because you want to be sure that a manager is not requiring work off the clock to make their numbers.

We have a group that we offer overtime to during a particular busy season and the group is a revenue generating group also paid a commission. During these rare, and planned events our group is paid overtime on the bonus and hourly wages, which is paid as a true up on the next payroll cycle because we aren’t sure what the OT on the bonus will be.

Topic Expert
Mike Caruana
Title: Director of Financial Services
Company: Diamond Resorts International
(Director of Financial Services, Diamond Resorts International) |

Karoline raises some excellent points regarding the management of OT within your functional area(s) by recommending reports be reviewed to ensure adherence to your established guidelines/goals, and that you have to make sure you true up the impact of commissions/performance based incentives onto the OT amounts paid. You should make sure that both are documented and clearly understood by all managers involved.

Anonymous LA
Title: Anonymous
Company: Anonymous
(Anonymous, Anonymous) |

Hi Everyone, thank you for the replies. I'm brand new at using this forum so I didn't even know about your replies until today. Sorry about that.

To be specific, the employees who are getting over-time works in the corporate office, not in the field. These 8 individuals consist of bookkeeper, payroll coordinator, ap clerks, ar clerks, receptionists and other administrative staff.

I need to do a reasonable tests on the overtime used. Also, the ratio between the overtime and regular hours for some admin ppl can reach 30%, is this normal for our type of industry? We are property management company, managing 1.2 million rsf. We have 65 employees total. There is no changing in anyone's workload and the overtime only used by the admin people in the office from the receptionist to the bookkeeper.

Yes, the overtime hours has been approved but I still have to find out whether it is approved before or after it occurred. My question is, once approved, someone also need to approve the data entry before the money is released.

I was just hired in this company as their Corporate Controller. At first, I wasn't given access to the payroll by the payroll coordinator and when I asked for it, I have to get permission from the CFO who is also new and he felt strange that I have to ask for his permission. Also, I overheard the bookkeeper said that she is worry if I have access to payroll. Is it just me, or is this strange?

Anonymous User
Title: CFO
Company: Local Government Agency
(CFO, Local Government Agency) |

The bookkeeper is being overzealous. That is not an uncommon occurrence. Who does she report to? It sounds like a structural issue. As she is one of the recipients of the OTs largess, there is a definite conflict of interest in her denying access to the payroll records like that.

As someone who has been an hourly, time clock punching employee as well as an anti-OT CFO, I have seen OT abuse in many forms. Also, too many mangers don't understand the metrics or laws regarding OT. Thus, it is ripe for aggressive types to milk for "extra pay" while also being seen as "punishment" by others who would rather be off work. It's a fine line to walk. Understanding of the respective laws, terms of contracts and strong polices of the agency is the only way to keep OT where it should be.

Anonymous LA
Title: Anonymous
Company: Anonymous
(Anonymous, Anonymous) |

There is a definitely structure issue. The issue that becomes apparent from my point of view is that there is no policy on OT. At this point, I need to do reasonable test on payroll exp and present whatever it is to the CFO. What is more interesting is that the CFO even said that no need for me to dig deeper in OT.

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