How to Manage Overtime

As you prepare your payroll each period, do you wince when you see all the time-and-a-half money you are paying out because of overtime? It could be that it’s a temporary busy time, but maybe you need to be more proactive in overtime management.

Avoiding unauthorized overtime

Are you taking steps to keep employees from putting in extra hours that you haven’t approved? If you did not give an employee permission to work overtime but he or she does so anyway, under the Fair Labor Standards Act, you still must pay the employee overtime wages. Make sure you do the following:

• Create an overtime authorization policy, put it in the company handbook and enforce it.
• Remind employees about the policy in periodic emails.
• Post notices about the policy in the company breakroom and by time clocks, for example.
• Discipline employees who violate your clearly stated rules. Although you have to pay unauthorized overtime, the FLSA does allow employers to discipline those who ignore company policy.

Other overtime pitfalls

Even if you have a policy and everyone is adhering to it, there are other potential problems — but they have solutions.

• Are you tracking time? You need to have a system, typically a software program, that will let you keep on top of who is working when. For example, you’ll be able to see that Employee A is already slated for 40 hours and so shouldn’t be given an additional shift. You will also be able to see that Employee B is otherwise working only 35 hours and thus is available for five more non-overtime hours.
• Are you paying overtime unnecessarily? For example, sometimes you, or managers under you, give unnecessary priority to certain tasks. Consider whether a certain task can be done within normal time in the following workweek instead of being done in the current week when the required nonexempt staff is already approaching 40 hours.
• Do you cross-train? Maybe workers in Department A are working into the night in a certain week while those in Department B can go home at 5:00. You may be able to cross-train your Department B employees to do Department A tasks (and vice versa), so no one goes over the 40-hour limit.

These are just a few thoughts about a complex situation — and there may be even more stringent state rules in your area. Contact us to learn more about our overtime management tools.