Employers can make a lot of mistakes with overtime calculations if they’re not careful. Sometimes they avoid paying overtime altogether by classifying employees incorrectly as contractors, paying employees a salary when they should be working by the hour, “paying” private employees comp-time in lieu of overtime, etc.
Even if you classify your employees correctly and don’t deliberately withhold overtime payments, you can still make a lot of mistakes if you’re not careful.
1. Calculate Overtime Biweekly Instead of Weekly
“Unless exempt, employees covered by the Act 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. ” -from DOL
The Department of Labor defined the workweek to be 40 hours and not 80 hours and overtime is calculated based on that workweek.
2. Change an Employee’s Timezone During a Pay Period
Changing the timezone in the middle of a pay period while using an online time tracking system would change the employee’s workweek. That can affect overtime calculations and that’s why we don’t allow it (other, less experienced systems might!). The Department of Labor requires that employers stick to the same workweek from week to week (so they don’t get out of paying overtime) and definitely doesn’t allow that a workweek is changed in the middle of the week.
I’ll describe how this could affect overtime with an example.
Let’s say the employee is in the Eastern timezone. Their workweek is defined from Sunday at midnight through Saturday at 11:59pm. The employee worked 42 hours by Saturday at 11pm. He should be getting 2 hours of overtime for this workweek. Now, let’s say the employee moves to Oregon and the employer changes his timezone to Pacific but, without thinking, he does it before closing out payroll. Here’s what happens: The workweek gets reset so that the workweek is over at 8:59 Eastern time, instead of 11:59 Eastern time. So those two hours of what should have been overtime, are now pushed into the next week and will be paid as 2 regular hours, instead of overtime hours.
3. Don’t Count Travel Time Towards Overtime Calculations
Employees who travel from job site to job site during a normal day’s work, need to be paid for that time. However, they do not need to be paid when they leave the last job site, under most circumstances. They also don’t need to be paid the same as their regular wage, although they do need to be paid at least minimum wage. For full details, read our article on travel time.
4. Pay Employees From the Payroll of Two Different Companies
Much of the time when a single employer pays an employee from two different payrolls, it is done intentionally to avoid overtime payments but, occasionally, employers just don’t realize what they’re doing. Lots of business owners own more than one company. Some employees may work for both. Understandably, these employees would be on the payroll of each company, in order to keep the books separate. But unless employers are paying attention they may not give an employee who works 30 hours for one company and 20 for the other, the 10 hours of overtime he deserves. Chances are, the employee won’t even know he’s entitled and neither will the employer. But if the employee figures it out and takes the employer to court, the employer may be found guilty for overtime violations.
5. Try to Calculate Overtime By Hand
I suppose I might try this at home since I’ve been writing articles on overtime for years but I wouldn’t recommend it to anyone less experienced. There are so many things employers don’t realize about overtime, it’s really easy to make mistakes. For example, you have to know the workweek and it has to remain constant from week to week. If your normal workweek runs through Saturday but you decide to pay a day early for the holidays, then that last day that got cut out of the normal workweek needs to count towards that week’s overtime calculations. Some employers try to count it towards the next week and some just leave it hanging and not count it towards any overtime calculations. Calculating double time is just as difficult for California employers. Employees are entitled to double time after 12 hours in one day and any time over 8 hours on the seventh day.
How to Avoid All These Mistakes
Use our online time tracking system! It may sound like a shameless plug, but it’s the truth. Our system eliminates these problems because it is designed to calculate overtime correctly. In our system, you can set up a lower rate of pay for travel time, which will be automatically counted towards overtime. We don’t let you change the timezone when you’re in the middle of a pay period so that workweeks don’t get thrown off. Basically, we’ve spent the last 10 years thinking about this stuff so that you don’t have to.