When you employ hourly workers, overtime can be both a dream and a nightmare. A dream because it’s a powerful tool to motivate employees to pitch in extra time when you need it most. And a nightmare because even minor scheduling mishaps can throw your month’s payroll budget into total disarray.
Here are some tips for managing overtime in your business, so that you can focus on using overtime deliberately and mindfully, rather than by accident.
1. Ensure your scheduling system is effective.
One of the most common sources of excessive overtime isn’t employees, it’s managers. Here are some signs that your scheduling system needs to be rehauled:
- Do you frequently need to call in employees at the last minute, or ask them to arrive early or work late?
- Are your estimates for the amount of time needed to complete a given task or project regularly too low?
- Do employees often find themselves working slivers of extra time in order to fill in gaps during shift changes, lunch breaks, or other key periods during the day?
- Are there employees who find themselves underutilized during the workday?
These are signs you may be paying unnecessary overtime due to poor scheduling. It’s worth working with your team to tackle these issues, which affect not only overtime pay but also employee effectiveness, stress levels, and morale.
2. Be clear about the rules for timekeeping.
If you pay based on 15 minute increments and round up at 7.5 minutes, an employee who clocks in four minutes early and then out for lunch four minutes late will end up earning an extra 15 minutes of paid time that day.
At an overtime rate of 1.5x their regular pay, that means you’re paying them for an extra 22.5 minutes of work, when they only worked 8 minutes of that. (Or less, if they spent that time ambling towards their workspace with a stop in the restroom along the way. We’ve all met that employee.)
Your employee handbook should cover the rules for clocking in and out. There are of course reasonable exceptions (working with an unhappy customer at the end of a shift, time clock malfunctioning, an injury or other emergency), but in general, employees should know that straying too far from the schedule too frequently is a discipline-worthy issue.
If people are clocking in early or late due to a scheduling bottleneck where you have a line of people standing around waiting for their turn at the terminal, you may have grown to a size where more equipment or a quicker timekeeping system is needed.
Of course, you also need to support stated rules with legitimate enforcement. Employees at all levels are quick to discern which rules are truly followed, and which are empty words with no follow-through whatsoever.
3. Keep an eye on repeat offenders.
Do you find that the same people end up racking up overtime again and again? It’s worth finding out why. This, of course, doesn’t apply to serial volunteers, the people who always have their hand up when you mention there’s an overtime opportunity.
Rather, this is about the people who always “lost track of time,” “just need to finish this one last task,” or “started talking with a client and couldn’t get off the phone.” In the best-case scenario, this person needs coaching in time management. In the worst-case scenario, they’re doing this deliberately to try to earn overtime they know you wouldn’t normally permit.
4. Know what’s inappropriate when managing overtime.
There are a number of worker protections in place when it comes to overtime:
- You cannot refuse to pay employees for hours worked, even if you told them not to work overtime and they disobeyed. (You can, however, discipline or fire them.)
- You cannot change employee time records without their knowledge in order to eliminate overtime.
- You cannot ask employees to work off the clock.
- If you are a for-profit organization, you cannot ask employees to do volunteer work for the company. (And if you are a nonprofit, there are limits on the types of tasks you can ask employee-volunteers to do.)
- You cannot give employees two different job titles at the same workplace in order to argue that each job’s overtime should be counted separately.
Want to take your timekeeping strategies to the next level, but aren’t sure where to start?
The Timekeeping Compliance Checklist is the perfect place to begin. It’ll make sure your timekeeping strategies meet all the basic requirements and highlight the most critical places where you need to improve.
If you're a small business owner or HR Manager trying to wrap your head around the complex world of time and attendance, check out our comprehensive resource page, Time and Attendance - A Complete Guide. This page spells out literally everything you'd need to know about time and attendance, including timekeeping procedures, time clocks, employee scheduling, compliance considerations, emerging trends and a whole bunch more.