Common Mistakes Employers Make Calculating Overtime
In This Article
- Negligence by Design
- Salaried Isn't Exempt from Overtime
- Negligence by Rationalization
- Grant Comp Time Instead of Overtime
- Missed Hours for Off-the-Clock Work
- Tipped Employee Overtime
- Including Vacation, Sick, Holiday, Personal Time Off in Overtime Calculations
Negligence by Design
It is common for employers to instruct their employees to self-report hours worked to a manager or directly to ASAP. Often, these self-created time sheets do not provide the assurances of having proper overtime calculations. Even the most detailed daily tracking spreadsheet will have mistakes, fail to check against all overtime situations, and may not account for the workweek calculations vs. the pay period totals (a workweek can cross into two separate pay periods). If you have only a few employees, we suggest setting them up on ASAP's HUB to help avoid overtime mistakes. If you still prefer employees enter their hours worked vs. clock in/out, HUB can accommodate free entry of hours by employees, which may help streamline your reporting as employees can associate hours worked with a department, cost center or grant.
Salaried Isn't Exempt from Overtime
Salaried employees aren't always exempt from overtime rules. As employment attorney G. Roger Beck points out, "To be exempt from overtime pay, an employee's situation may need to meet both a 'salary' test and a 'duties' test under applicable law." Make sure your employee qualifies as exempt under FLSA and your state's labor law. (Visit the CDLE website for Colorado's overtime exemption rules.) Keep in mind that the most stringent test will apply to the employer.
Negligence by Rationalization
"But they want the hours." Even if an employee offers to work extra hours, you are still required to provide overtime pay if they are not exempt. Even if an employee agrees to work the extra hours at their standard rate, they are still protected by Colorado and FLSA laws. This rationalization would not hold water under a labor audit or a claim filed by a current or former employee. The damages can be costly.
Grant Comp Time Instead of Paying Overtime
If you are a private non-governmental employer, trading comp time for overtime pay in almost all cases is in violation of Colorado labor laws and/or FLSA. Because governmental exclusions apply, many employers may feel justified in setting up a comp time plan. If you have a comp time policy or wish to create one, we suggest you work with an employment lawyer.
Missed Hours for Off-the-Clock Work
In today's 24/7 technology-at-your-fingertips world, off-the-clock work is becoming more of a problem as work seeps into every device and our daily consciousness. Checking emails and voicemails and engaging in other work-related activities after hours leads to a slippery slope for those engaged non-exempt employees. For further information on how to prevent off-the-clock work, check out this SHRM article.
Tipped Employee Overtime
The rate of overtime pay is based on the full minimum wage rate, not the lesser tipped minimum wage rate. ASAP's restaurant customers may by now have noticed this as our systems provide two sets of pay types for hourly employees that help auto-calculate this deviation from standard rate x 1.5 calculations. If you have any questions about how to use/enter those hours, please let us know. To see the Colorado calculation examples on this matter, visit the CDLE website . If you are not a payroll client of ASAP yet, please be careful with this item as we have seen many larger payroll providers fail to set up the safeguards and reporting codes for restaurants unless requested.
Including Vacation, Sick, Holiday, Personal Time Off in Overtime Calculations
Ending on a positive note for employers, you only need to calculate overtime based on worked hours. Again this often slips into manual calculations and even system calculations if time-off hours are not properly categorized.
In summary, if you are concerned about your compliance with overtime rules, please reach out so that we can either get you set up on HUB Time Tracking for your employees, a more advanced workforce management solution or direct you to a labor lawyer that can review your policies and provide more specific analysis.