Human resources professionals can use payroll processing software to better manage overtime compensation and tracking. As overtime regulations may be shifting in the near future, a reliable platform that can be tailored to best fit the needs of an organization is essential to strategic business management.
Legal regulations for employers to follow
The United States Department of Labor has specific guidelines for employers when it comes to managing employee overtime hours. The Fair Labor Standards Act states all employees, with a few exceptions, must be compensated with overtime wages for any hours worked beyond the traditional 40-hour work week. The standard compensation for overtime pay must be at least 1.5 times the amount of the employee's regular pay rate.
There are, however, some types of employees who are exempt from overtime requirements. HR professionals need to pay close attention to the types of employees that fall into the non-exempt and exempt categories, as sometimes a business employs both types of workers. It's also possible a single worker will fall into both categories during one work week. If this is the case, the worker in question typically is classified as non-exempt. Employees who are paid based on commission from sales, administrative salaried employees and farmworkers are examples of those exempt from overtime regulations.
Currently, employees making $24,000 per year or more qualify for overtime exemptions. In March 2014, President Barack Obama signed a memorandum calling for updated overtime pay regulations, which could increase the exemption threshold to as much as $52,000 per year, according to Politico. Another one of the memorandum's goals is to simplify the overtime compensation and tracking process.
Writing overtime policy
Every HR department must have an overtime policy to distribute to employees. An official policy not only increases transparency in an organization, it establishes expectations for employees and protects the employer from ramifications should a disagreement arise between team members and supervisors on how much extra time must be spent and how much people should be paid on a particular project.
The Society for Human Resources Management offered a template for any business looking to revamp their current overtime policy or draft the very first version of one for their company. A strong policy communicates the following:
- Purpose – Explain why an overtime policy is in place and what it hopes to accomplish for the employer and its employees.
- Overtime eligibility – Describe who is eligible for overtime pay based on guidelines set up by the FLSA and DOL. This also may include a maximum number of overtime hours an employee can work each week or approved reasons for putting in extra hours.
- How to schedule overtime – Offer employees step-by-step instructions for how to schedule their overtime hours, including whether a request to work more than 40 hours requires a manager's approval.
- How to track overtime hours – Every business needs a standardized process for recording overtime hours worked each pay period. It's best to track in real time, at the end of each day, for accuracy.
- What constitutes overtime work – Purdue University recommended employers define what constitutes overtime work. Depending on the business, this could mean anything from answering a few phone calls while waiting to locking up to rebuilding a product model.
- Compensation offered for overtime – All employees need to be aware of how much additional funding they'll accrue working overtime. Again, the standard is 1.5 times their hourly wage, though some businesses may opt to increase this.
- Consequences – Purdue University also stated each employee should know what to expect should they violate overtime terms. In addition, businesses should be up front about the penalties the organization receives if it does not comply with overtime policies.
Managing employees when it comes to overtime
It's imperative HR departments have a reliable system for tracking employee overtime and managing additional payments. Business Management Daily recommended conducting an overtime audit. This will help HR visualize how many people are paid overtime and if this extra incentive boosts productivity.Taking a look at how many overtime hours are used each month and whether certain departments abuse the system can give HR professionals great insight into how well their overtime policies work, not to mention whether the business is compliant with the DOL and FLSA.
Payroll processing software helps HR professionals better manage employees, wages and overtime information.