Everyone who oversees budgets and staff knows that labor expenses are among the most significant expenses on any balance sheet. As important a role as staff play in every business, controlling expenses is a constant issue for management. For many mangers doing this correctly it has been the difference between a paycheck and filing for unemployment. Considering the implications overtime expenses must take center stage.
Here in Arizona the Industrial Commission has first say in employer compliance. Overtime compensation is one of the few areas where a set of legislation has not been written by the Industrial Commission of Arizona. Instead our state based governing body defers to the federally based Fair Labor and Standards Act. This piece of policy speaks directly to overtime pay and what an employer must do to stay on the right side of the law.
As we all know, compensation equivalent to time and a half of exact or average hourly pay is due to an employee that works more than forty hours in a given week. The weekly schedule is determined by the employer and simply must follow a seven day schedule. Work on weekends and holidays does not count as overtime unless work on those days constitutes an excess of forty hours worked. Avoiding this cost increase is a vital skill for every manager.
A well written schedule is a manager’s best friend. A well written schedule helps to not only avoid overtime but to keep your labor costs in line in general. Overstaffing is just as bad if not worse than paying overtime. Overtime is an identifiable and adjustable issue while overstaffing sometimes becomes commonplace. Once you have identified an overtime issue it is time to look at the scope of your staff’s workload. Take some advice:
- The truth is there might be more work to be done than you originally thought. If getting the job done consistently requires overtime then you will need to add staff, especially during busy shifts or seasons.
- Also try watching and taking mental—or written—notes. Is your staff working as quickly as they should be? Are some employees taking unnecessary breaks towards the end of a day or shift which leads to the increase in how long it takes to get the job done?
- Be clear—yet not overbearing—with your staff about expectations pertinent to the amount of time it takes to get the job done. Provide them with a schedule and order in which job duties are best performed to stay on top of time management if necessary.
- It might be tempting to massage the numbers. DO NOT do this. Not only is it illegal, it is a sure fire way to kill morale and pit staff against management. The Supreme Court is currently considering hearing a case out of California where hospital workers agreed to have their wages altered to avoid being paid overtime for working in excess of eight hours per day. The tradeoff for the employees was that they worked longer days in exchange for more full days off. The agreement was legally upheld in California but there is no certainty that the Federal decision will be the same. If you are not sure about whether your tactics are legal, read up on employment law or consult an attorney. “I didn’t know” will not get you out of fines and other forms of legal recourse.
- Bring in temporary employees to fill overtime gaps. It is a great way to ensure that your staff is not overworked and that your expenses stay in line. We would love to discuss the other advantages with you and help you to put together a plan that fits your business needs. Just call (877-522-7797) and we will find a way to make things better.
The Legality of Reducing Wage Rate to ‘Avoid” Overtime; The Supreme Court May Decide (Wage and Hour Developments and Insight)
Overtime Pay Requirements of the FLSA (U.S. Department of Labor)