- slide 1 of 3
Create a Policy
When it comes to paying wages, the most important factors are the hourly rates, hours worked and other conditions related to employment. Having clear policies regarding overtime since inception avoids many misunderstandings. By creating a strict overtime policy you can keep a check on overtime abuse.
Laws - Learn all you can about all the federal, state and local laws regarding overtime. Consult lawyers and the Department of Labor should you find something confusing. Understand these regulations and obey them by learning what they require you to do as an employer. There are some states that have overtime laws. When an employee is subject to state as well as federal overtime laws, he should be entitled to overtime that provides him higher pay. Many states have their own overtime laws so make sure your organization complies with each one, especially when your businesses are located in different states.
Exempt/Non-Exempt - Draw a clear line between exempt and non-exempt employees. Overtime wages should be paid only to non-exempt employees. Examples of exempt employees who are not eligible for overtime payments includes executives, lawyers and administrative staff.
Permission - Mention how, when and in what situations overtime is to be accepted. In case an employee wants to work overtime, he should seek the manager’s permission before doing so.
FLSA - Learn more about the Fair Labor Standards Act (FLSA). It gives a clear idea of which employees are considered eligible for overtime and which type of employees are not. Specifications such as what should be the pay scale for overtime, what if the employees work overtime on weekends or holidays, who is entitled to approve overtime, etc.
Policy - Based on the collected information and its analysis, create an overtime policy that covers all the aspects of overtime. Distribute it among all the employees and make sure they read it.
Training - Devise a training plan for managers and supervisors. Encourage them to follow overtime policies. After the training they will know when overtime is essential, procedures to seek and approve overtime, what they are expected to do if they notice an employee violating the overtime policy and how disciplinary meetings should be held regarding such violations. Schedule feedback or follow-up meetings with supervisors to ensure they understand the policies and hurdles they may encounter while implementing the policies. Keep the training protocol updated whenever the policies are modified.
- slide 2 of 3
Stop Employees from Taking Unnecessary Overtime
Curbing unnecessary overtime requires a diligent effort. You may have to keep revising current policies and keep an eye on the average overtime compensation standards (which is now one and a half times the usual hourly pay). You can take following steps to stop employees from abusing overtime:
Handbooks - Check to ensure all employees have received the employee handbook. Prepare a list of those who haven’t. Provide them with a copy of the handbook and get a duly signed acknowledgment page. If the number of such employees is very small, schedule a meeting with all of them to have a discussion about the handbook and the company’s workplace policies.
Update Policies - Make it a habit to update policies regularly so the current version contains all the required aspects about compensation for overtime worked. The policy must clarify any doubts regarding authorized and unauthorized overtime, along with how the permission for overtime can be obtained. There should be a mention of steps the company will take in cases of policy violations. These steps can range from a simple warning to a strict disciplinary action.
Obtain Advice - Discussing the policy with the company’s legal advisors will ensure the policy you have devised is consistent with the Fair Labor Standards Act and government regulations regarding overtime pay scale. If you have factories located in different states, make sure that your policies are in line with each state’s overtime labor law.
Industry Standards - Learn the wages and compensation being offered by other companies in the industry. If you observe widespread and persistent claims for unauthorized overtime, consider the possibility the wage rate you offer is not competitive enough. You can simply compare the wages of your company with that of others in the industry to find out whether your employees receive a fair compensation or not. Restructuring the compensation plan is the only way out if you find your organization is paying below industry standards.
Keep in mind that overtime costs the company not only in wages but taxes and insurance as well. Overtime should be allowed only if there is an extreme necessity. Those employees who do abuse overtime should be warned on the first instance, but you should also think of terminating them from the job if they do so frequently.