Overtime laws were initially instituted to help protect workers from abusive schedules and to help spur employment. By forcing employers to pay time and a half to hourly workers for time worked over 40 hours in a work-week, there was a significant financial penalty to overtime wages, encouraging the employer to add staff instead of additional hours.
Many myths have surfaced involving overtime, perpetuated by both employees and employers. One myth is that if a “non-exempt” employee is being paid hourly in a biweekly fashion, overtime is only accrued if the employee goes over 80 hours in the pay period. This idea is maintained because staff would often like to work hard one week and then have a lighter week to offset the hours. This is incorrect. The employee should be paid overtime for any hours accrued over 40 in a weekly time period and cannot be averaged over a two-week period.
There is also a common misunderstanding about after-hours training meetings. Most hourly staffers believe that any time spent after 40 hours a week is considered overtime. This is partially true. If you have mandatory meetings or training that go beyond the regular 40 hours a week, that time becomes overtime. On the other hand, if the staff meetings or training sessions are elective and not mandatory, then the time spent over 40 hours a week can be paid at the regular, non-overtime rate. Don’t dismiss the idea of elective sessions. A quality staff realizes that elective meetings result in higher productivity, greater knowledge, greater value to the practice and ultimately higher wages.
To help control overtime, certain policies and procedures need to be put into your personnel manual. First, all overtime needs to be pre-approved by a manager or a doctor. Secondly, the employees are required to work their scheduled shift. This prevents employees from chronically “working the clock” by coming in early or staying late. If an employee works unapproved overtime, you cannot withhold their overtime wages.
Your employee manual should have a section on unapproved overtime so that the employee can be held responsible for not following the policy and be disciplined. If it becomes a recurrent problem, progressive discipline can result in probation, reduction in hourly wage or termination. Just remember to document, document, document.
When Overtime Makes Sense
Sometimes, overtime makes better financial sense than adding staff. This has become ever more apparent with the increase in payroll and social security taxes, training/acquisition costs and employee benefits. The key is to decide who is going to work the overtime hours. Will the lower paid staff work these hours first? Or should the more qualified, expensive staff that is more productive work these hours? This usually comes down to a case-by-case decision made by a competent manager.
As staff become more highly compensated and take on more responsibilities, it may be decided that an employee should have an “exempt” or salaried status. Highly paid staff that exceed over $100,000 a year are automatically considered “exempt” from overtime whether they are hourly or salaried. “Exempt” staff usually work more than a 40-hour work-week and are not entitled to overtime. They are entitled to getting paid a full day’s wage even when they have only partially worked once they have exhausted their vacation, sick or PTO time.
One of the most difficult things about overtime is actually monitoring it in a timely fashion. Learning about overtime trends at quarterly meetings is cost prohibitive. Most of the computerized time-clock software available will track hours and send out emails to managers when employees are getting close to an overtime situation. This allows for a proactive and less costly solution. Remember: whatever is watched is improved.
Good overtime policies and procedures coupled with good oversight can lead to greatly reduced overtime costs. This will free up revenue that can be invested elsewhere in the practice and lead to greater growth and productivity in an ever challenging medial environment.