Tag: overtime pay

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5 Tips to Simplify Overtime Calculations

Summary

  • Challenges with overtime calculations don’t just come with the math. It’s all the manual processes involved, especially with different pay conditions and compliance rules.
  • Overtime calculations can be simplified. In fact, an LA-based organization reduced time processing timesheets by 92%.
  • Payroll software can significantly reduce errors and time spent on calculating overtime.

Overtime pay calculations can feel like a full-time job, even if it’s just one of the many things that go into payroll. Different pay rates, tracking total number of hours, changing schedules, and compliance rules make it tricky, especially when you’re running an hourly team on multiple shifts. When you dig deeper into it, however, the real problem isn’t the math. It’s the manual work. 

So, how can you simplify the process, reduce errors, and ensure that employees are paid on time? Here are five practical ways to do so.

1. Improve your onboarding process

Onboarding is not just about welcoming new hires. It’s about setting up systems that make payroll, including overtime, easier to manage.

When we think of onboarding, we usually focus on getting new hires up to speed and integrated into the team. But the behind-the-scenes admin work during this stage plays a massive role in how seamless (or messy) payroll and overtime processing will be down the line.

Proper onboarding ensures accurate classification from day one. If you misclassify employees (exempt vs. non-exempt), you can face overtime compliance issues later on. This is also the perfect time to set clear expectations around overtime—when it kicks in, what overtime premium rates apply, straight time pay policies, and other relevant conditions.

Onboarding is also the time to get new hires up and running on your time-tracking system. 

Show them how to clock in and out correctly and how time logs are generated into timesheets. Getting new hires set up in your time-tracking system early prevents payroll errors later.Onboarding on its own can feel like too much admin and paperwork. Workforce.com has an automated system for getting new hires onto your system. New hires get a link to the onboarding platform and input their information, minimizing errors and admin work for your team. You can also upload contracts, handbooks, and other key documents, plus create employee profiles with base pay and classifications.

2. Automate time and attendance tracking

Employee work hours are at the core of processing payroll and calculating overtime pay. Manually processing timesheets and payroll is not only time-consuming but also increases the risk of payroll errors, underpayments, and compliance issues. 

An automated time and attendance system ensures all hours of work are recorded accurately, so you don’t have to second-guess overtime calculations. Workforce.com captures time logs through a tablet placed on your job site or directly from an employee’s mobile phone. The system logs location data, which is essential if you manage teams in different locations. 

Clock ins and outs are generated into timesheets, indicating the total number of hours. Overtime hours are flagged, and managers can quickly review and approve in seconds and fix any discrepancies before payroll processing. 

For Lisa Hanna, business manager at Ethos Orthodontics, payroll used to be a three-day ordeal. “Generally, I’d spend a few hours each Sunday printing out and processing timesheets to get them ready for payroll that week,” she shared.

With Workforce.com, Hanna got her Sundays back as the system prepared the timesheets for her. It now only takes a few clicks to approve and export timesheets for payroll, reducing the admin load and compliance risks.

3. Set overtime alerts

Overtime is sometimes necessary, but it shouldn’t be eating into your budget unless it absolutely needs to. 

Workforce.com keeps overtime under control with real-time visibility. When scheduling, managers get an alert when an employee is scheduled for more than their regular hours. If it’s intentional, great—no surprises on payday. But if it’s an accident? You can fix it before it turns into an unnecessary payroll expense.

The system also flags when employee hours are about to hit overtime. If someone’s shift is over but they’re still clocked in, managers get notified. At that point, they can check in: Did the employee forget to clock out? Are they actually working? If so, is overtime work truly needed, or can the task wait until the next shift?

These real-time alerts prevent unplanned overtime, keep labor costs in check, and even promote better work-life balance for your team.

4. Use payroll software

Payroll software can simplify overtime calculations, but only if it’s built to handle the complexities of your workforce. 

Consider your payroll needs and go for the solution that meets your requirements. Whether you’re looking for software or planning to switch to a different system, consider the following: 

  • Overtime and labor laws – Can it keep up with changing labor laws? Does it account for both federal and state overtime rules? Can it automatically update tax rates?
  • Integration and data entry – Does it sync well with time tracking and HR? Can data flow smoothly from one module to the next, or will you be stuck with manual entry?
  • Customization – Aside from employee’s regular rate, can it handle shift differentials, different rates, fluctuating workweeks, non-discretionary bonuses, weighted average calculations, and other conditions and exemptions?
  • Ease of use and implementation – How long does it take to roll out? Can employees actually use it without a steep learning curve? Even the most advanced features are useless if your team avoids the system. 

Mikhuna, an LA-based food truck business, teamed up with Workforce.com to simplify payroll processing, time and attendance tracking, and employee scheduling. Because everything is now done on a single platform, they saw a 92% decrease in time spent correcting timesheets and saved three hours on payroll processing.

“It used to take me between two to three hours to run payroll,” Cynthia Carreiro, Mikhuna’s CFO, shared. “Now it takes no more than 3 minutes.” 

Beyond saving time, Mikhuna also gained real-time visibility into labor costs. “A year from now, I’ll be able to look back at a pay run from the same time last year and see if I’m losing or making money,” Carreiro adds.

When payroll software is built right, it doesn’t just save time. It gives you the insights you need to make smarter business decisions.

5. Understand overtime rules that apply to your workforce

Even with the best payroll software, your managers and HR team still need a firm grasp of how overtime rules work not only for processing payroll but also for answering employee faqs. 

At the very least, managers should know existing federal laws and state rules around overtime. Under the Fair Labor Standards Act (FLSA) rules, nonexempt employees must receive overtime pay for hours worked in excess of 40 in a workweek at one and a half times their regular rate of pay. But here’s the kicker—what actually makes an employee exempt or nonexempt? The Department of Labor set the guidelines on what makes an employee exempt or non-exempt to overtime pay. While hourly employees are typically non-exempt, salaried employees may also be entitled to overtime if they meet the criteria on salary levels and job duties.

What about regular rate of pay calculations? What goes into in exactly? Aside from regular hourly rate, salaries (for salaried, nonexempt employees), nondiscretionary bonuses, shift differentials, piece-rate pay, and commission must be included in the computation.

Leadership teams should be able to provide a clear, high-level explanation on these areas, especially when they concern employees’ total compensation.

Also read: Exempt vs. non-exempt employees: knowing the difference

If you operate in a state with stricter overtime laws, that’s another layer of compliance to manage. Take California, for example. Daily overtime is recognized in California, which means that workers are entitled to overtime payments when they work more than 8 hours in a single workday or over 40 hours in a single workweek. This is different from FLSA rules, which calculate total overtime based on hours worked in a 40-hour workweek rather than a single workday

The overtime pay rate also varies in California. Employers must pay one and a half times the regular rate of pay after 8 hours a day. But double time or twice the regular rate of pay takes effect for employees who work after 12 hours a day or after 8 hours on the seventh consecutive workday.

Also read: California Overtime Laws Explained: What Employers Need to Know

Payroll software can handle the calculations for you according to applicable federal and state laws. However, your team still needs to understand the rules, both to ensure your systems are running correctly and to confidently handle employee questions.

Stop Working Overtime to Calculate Overtime

Calculating overtime wages shouldn’t steal your weekends or keep you at the office late. With the right system, you can automate not just the math but also streamline its administrative side.

Workforce.com automatically calculates overtime, no matter how complex your pay setup is. Whether you have shift differentials, double time, fluctuating workweeks, or non-discretionary bonuses, the system handles it all.

It also keeps up with labor laws to ensure compliance at every step. Need to update an employee’s pay rate or adjust your overtime policy? Just enter it once, and the system updates everything—from time tracking to payroll—without extra work on your end.

Overtime shouldn’t be an admin nightmare. See how Workforce.com makes it simple for businesses worldwide. Check out our customer stories or book a demo today. 

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California Overtime Laws Explained: What Employers Need to Know

Summary

  • California has some of the most comprehensive employment laws in the country, including overtime rules.
  • Compliance can be tricky because there are many nuances and rules that employers need to understand and implement.
  • Payroll software can ensure that workers entitled to overtime compensation in California are paid correctly and simplify compliance for employers.

California has some of the strictest overtime laws in the country, ensuring that employees are paid fairly for the extra hours they work. However, due to these strict rules and recent court decisions, many employers struggle to get it right, which can lead to costly lawsuits and hefty fines. 

If you’re running a business in California, understanding overtime rules and staying updated with the regulations is crucial to staying compliant and paying your workers correctly. This guide will explain who qualifies for overtime, how it’s calculated, and best payroll practices to get it right. 

Knowing the difference between California’s overtime rules and federal overtime laws

Under the Fair Labor Standards Act (FLSA), non-exempt employees earn overtime pay if they work more than 40 hours in a workweek at a rate no less than one and a half times their hourly rate. This is also known as time and a half pay.

Sounds simple, right? Well, California has its own rules. According to the California Division of Labor Standards Enforcement (DLSE), overtime applies when an employee works more than 8 hours in a single workday or over 40 hours in a single workweek. Additionally, for especially long shifts, California law requires double-time pay, a rule that goes beyond federal law.

When federal and state laws differ, the more beneficial rule to the employee prevails.Here’s a brief breakdown of how federal and California overtime rules differ:

RuleFLSA LawCalifornia Law
When overtime pay takes effectOver 40 hours a weekOver 8 hours in a workday or 40 hours in a workweek
Overtime pay rate1.5x of regular rate after 40 hours1.5x after 8 hours a day
2x after 12 hours a day
Seventh consecutive dayNA1.5x for first 8 hours
2x after 8 hours
Double timeNA2x regular rate after 12 hours a day or after 8 hours on 7th consecutive workday

Key areas of CA overtime rules that employers must know

California’s overtime laws are strict, and understanding them is essential for staying compliant and ensuring employees are paid correctly. Below are some of the most important areas employers should know when handling overtime pay.

Regular rate of pay

Understanding an employee’s regular rate of pay is at the core of calculating overtime pay in California. So, what is it exactly?

The regular rate of pay refers to compensation for the work done, and it goes beyond a worker’s hourly wages. It could also include commissions, piecework earnings, and salary. The regular pay rate should never be lower than the applicable minimum wage. 

It’s important to note that bonuses may or may not be included when computing the regular rate of pay. If it’s a nondiscretionary bonus or bonuses tied to work performance or output, it’s typically included in the computation of the regular rate of pay. Discretionary bonuses, meanwhile, are not included since they are bonuses or rewards that are not usually incentives that are discussed before work commences or are given during special occasions. 

Alternative workweek schedules and multiple pay rates

What if your employees don’t work the standard 8-hour workday, 40-hour workweek? If your employees work on an alternative schedule, like 10 hours a day for 4 days or 12 hours a day for 3 days, the computation for weekly overtime will still apply once you hit the 40-hour mark for the workweek. 

Meanwhile, if an employee has two or more pay rates, the overtime computation will be based on a weighted average based on their total earnings for the workweek. 

Commissions and piecework payments

California employees earning commission or piece-rate pay have two ways to calculate their regular rate of pay for overtime. First, they can use the commission as the regular rate of pay and calculate overtime by one and one half times (1.5x) that rate for hours exceeding 8 hours in a day or two times(2x) for any hours beyond 12 in a single day. 

Meanwhile, another way to calculate is to get a regular hourly rate from all the earnings. You do that by adding up all earnings for the week (including commissions and overtime pay) and dividing it by the total number of hours worked (including overtime hours). For each overtime hour, an employee gets an extra .5 pay for hours over 8in a day or 40 in a week or an extra 1x pay for hours over 12 in a day. 

If a team works together on a piece-based pay, the total number of pieces made is divided among the workers. The regular rate is calculated by dividing their earnings by their work hours. The regular rate cannot be less than the minimum wage.  

Unauthorized employee overtime

What employees work overtime and it’s not authorized? Employers still need to pay up. Workers are entitled to overtime pay if they “suffered or permitted to work, whether or not required to do so, ” meaning that it is work that the employer knew or should have known about. 

In such cases, employers can discipline their workers if they incur unauthorized overtime, but workers must still be paid.  

Collective bargaining agreements

According to California’s Labor Code, allows some exemptions from state overtime rules if a valid collective bargaining agreement meets specific conditions such as a clear outline of overtime rates and rules, a regular hourly wage that is at least 30% more than the state minimum wage, and providions for wages, hours, and working conditions.

CBAs in construction, hospitality, motion picture and TV production, healthcare can often modify overtime rules.

Who’s entitled to overtime pay in California? 

Most hourly employees qualify for overtime. Salaried employees may also be eligible if their job duties don’t meet exemption requirements. Typically, executives, administrative professionals, and some high-level salaried employees are exempt, but employers must ensure they meet the strict exemption criteria.

When should employees receive overtime pay? 

Overtime must be paid by the next regular payday, but not later. Regular wages for hours worked must be paid on time according to the usual pay period. Only overtime can be deferred to the next regular pay period.

The cost of noncompliance to California overtime rules

Non-compliance to California overtime laws can set your business back big time. It can result in repayment of unpaid wages, penalties, massive settlements, and expensive lawsuits.

Take the case of AOCLSC. While the company didn’t admit to the allegations, it settled a $920,000 lawsuit filed for allegedly failing to pay the correct hourly, minimum, and overtime wages under California law. The complaint also included failure to provide meal breaks, rest periods, and accurate wage statements.

As a result of the settlement, non-exempt employees who worked for the company in California between May 8, 2019 and May 15, 2023. The same goes for the Private Attorneys General Act class of AOCLSC employees who worked between June 1, 2021, and May 15, 2023.

Then there’s Alvarado v. Dart Container Corporation of California, which underscores just how precise overtime calculations must be. It centered around how the regular rate of pay for overtime calculations was computed, especially with a flat-sum bonus involved. In this lawsuit, the plaintiff received a $15-dollar bonus for working the weekend, and the court ruled that the bonus should be included in calculating the regular rate of pay. 

Again, this further reiterates that employers should carefully examine all the remunerations an employee receives because even seemingly minor bonuses can impact payroll calculations.

The takeaway? Getting overtime laws wrong, even unintentionally, can lead to financial consequences and wage claims. California’s wage and hour laws have comprehensive rules and protections to ensure employee are paid fairly. However, they can be complex, and employers must correctly calculate regular pay rates, bonuses, and overtime wages to avoid costly mistakes.

Payroll best practices for complying with CA overtime rules

California overtime laws can be complicated, nuanced, and constantly evolving, with court rulings shaping how they’re applied. But with the right payroll practices, California employers can stay compliant, avoid mistakes, and pay employees accurately.  

Classify employees correctly from the start

Misclassifying employees is one of the biggest (and most expensive) mistakes employers make. Get employee classifications correct upon onboarding. If you get this right from day one, you’ll properly calculate accurate wages, pay proper overtime, and comply with the rules. However, that can be easier said than done, and you should double-check whether a worker’s duties meet the overtime pay criteria. 

Many assume salaried employees are automatically exempt from overtime, but that’s not always true. Some salaried workers still qualify for overtime, depending on their job duties and earnings. Always double-check the latest state and federal rules to properly classify employees.

Track employee time accurately

Overtime calculations are only as good as your timekeeping system. Wage and overtime calculations will depend on employee time logs. You should have a system that accurately records total hours of work, break and rest times, and hours of overtime, not just for accurate pay computations but also for proper recordkeeping. 

If you ever face an audit or a wage dispute, having clear, reliable time records can protect your business and prove compliance. Invest in a digital time-tracking system that makes it easy to maintain accurate records and minimize errors.

Calculate the regular rate of pay correctly

A miscalculated regular rate of pay can easily land you in legal hot water and result in unpaid wages. Overtime pay is based on this rate, so it must include all eligible earnings like commissions, piecework, and nondiscretionary bonuses. Get this wrong, and you risk underpaying employees, leading to potential lawsuits and penalties.

Automate compliance at critical steps

Compliance mistakes often happen when things slip through the cracks. Automation can safeguard your team from committing unintentional violations. Implement a system that alerts you when you’re about to hit unplanned overtime, an employee missed a meal or rest period, there are discrepancies in time logs, or when you’re creating schedules that can create unnecessary overtime.

Optimize schedules to minimize overtime

Overtime isn’t necessarily bad, but it’s often unavoidable when demand is high. However, excessive or unplanned overtime can drain your budget and create compliance risks.

Using labor forecasting, you can prevent unnecessary overtime, ensure proper staffing levels, and avoid last-minute surprises. With demand-based scheduling, you can pay overtime when it’s needed, but never by accident.

Workforce.com payroll can simplify compliance with CA overtime laws

Workforce.com is an all-in-one system designed to handle complex labor laws and ensure you release accurate pay every payday.

Payroll compliance starts long before payday. It begins with onboarding, time tracking, scheduling, and shift management. Workforce.com streamlines each step to reduce errors, prevent compliance risks, and ensure workers are paid correctly. 

  • Onboarding is automated; employees enter their details, eliminating double data entry and reducing errors.  
  • Time and attendance tracking records employee time logs, daily overtime, and ensures employees take meal and rest breaks.
  • Alerts will be sent when employees fail to take breaks, are about to exceed their legal work limits or hit unplanned overtime.
  • Accurate payroll calculations based on employee classifications, overtime rates, and state-specific rules that are automatically factored into payroll. 

See Workforce.com in action and discover how it can help you ensure compliance in California and beyond. Book a call today. 

This information is for general purposes only and should not be considered legal advice. While we strive to keep it updated, laws and regulations can change at any time. It’s always a good idea to consult with a legal professional or relevant authorities to compliance with the most current standards.

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Management tips on overtime equalization and tracking hours

scheduling; time and attendance; forecasting

Many schedules like 24-7 operations have built in overtime, just to make sure there’s coverage, but in any organization there’s potential that employees may accrue unplanned overtime. For managers trying to run a tight ship, this can complicate a precisely planned schedule and budget. 

Sometimes there’s too much work and not enough resources or employees to accomplish these tasks, leading companies to give too much overtime. “That’s a matter for management and leadership to assess and to determine whether they need to hire additional talent,” said Chuck Buiocchi, senior director of BPS operations at Kelly Services.

It’s vital that managers get payroll correct, and while many companies still use old school paper time cards, third party platforms can help a lot, he added. 

Several workplace experts shared management tips for organizations trying to manage overtime more accurately and precisely. Here is their advice. 

Overtime equalization can help you decide who gets extra hours

Some employees may want more overtime hours to help ensure financial stability, Buiocchi said. Managers want to be fair to employees in situations like this, and if there’s more demand for overtime than supply, they’ll want to create a method of allocating those hours fairly. 

Overtime equalization — the attempt to balance overtime among employees — can be dependent on factors like employee tenure and reliability. But more often than not, organizations have to consider the people with the most relevant skill sets first, Buiocchi said. 

Sometimes overtime is built into schedules and interested employees can ask for those hours, but in general managers want to avoid unnecessary overtime as much as possible. 

Also read: A technology integration is an intervention to dissolve common payroll errors

The key here is understanding the root cause of this increased need for labor, Buiocchi said. If employees are spread too thin, maybe it’s time to hire more employees. If the reason for more overtime is a decrease in productivity, drill down on what’s impacting productivity and address it. This is a much bigger project and requires deeper discussion, but it’s necessary if something is impacting the team to such a degree, he added. 

Allocating overtime hours during the pandemic 

The COVID-19 pandemic has complicated overtime allocation to some degree. Now when determining overtime equalization, organizations may deal with a world of juxtaposition, said Traci Fiatte, chief executive officer, professional and commercial staffing at Randstad US. Some employees are dying for extra hours and income for a variety of reasons, like those working 60 or 70 hour weeks at two different jobs because their spouse lost their job. But others don’t want to go to work at all or are scared. 

Meanwhile, employers are desperately trying to manage overtime and not pay it, because many organizations’ revenues have declined since the pandemic began. 

Smart scheduling is especially important during the COVID-19 pandemic, when offices or places of operations might have to stagger out their shifts so that employees can be socially distanced, Fiatte said. Or maybe they need to operate at a lower capacity than usual so that employees can more easily stay away from each other. She also suggested adopting scheduling tools that allow managers to take floor plans into account as they create schedules and socially distant staff appropriately. 

“Overtime is best managed when you know who is working when and where, even in terms of floor planning —  which is a concept we never had to worry about pre-COVID. We certainly had to worry about shift scheduling before, but we never had to worry about who was where,” she said. 

scheduling, labor tracking

Even during the COVID-19 pandemic, companies are eager to produce as much as they usually have or more, but whether or not they’ll have the same employee headcount as before is uncertain, she said. And with fewer employees, maintaining that production schedule can be tricky.

One strategy organizations have adopted to address pandemic challenges is relying on more shifts with fewer employees, she said. During times like this, that may be more effective than longer shifts with more people on the floor at the same time. 

Actions speak louder than words

One of the main problems with labor tracking and monitoring is that it’s difficult to accurately track or monitor overtime, said Albert Rizzo, adjunct assistant professor at the NYU School of Professional Studies within its human capital management program. HR needs to do it and not just pretend to do it, he said. 

Also read: Shift scheduling strategies can be improved through technology

Also, he added, HR needs to make sure the overtime policy is not just a few lines in the employee handbook but something that’s actionable. Best practices here depend on the size of the company. 

For a mid-sized company with many employees, for example, one common mistake is that HR is given the responsibility to track labor, Rizzo said. But it’s actually be more efficient and accurate if lower level managers were given the task of tracking this.

“Rather than put the burden on one department like HR or one HR manager to track, the best practice would be to get the person closest to the employees typically incurring the overtime and have that person manage it,” he said. 

While many managers view overtime as a problem, they should be looking at it more from the solution mindset, he added. When team members are accruing too much unplanned overtime, there’s a solution to be discovered. Managers can speak to the people accruing the extra hours and find out why that’s occurring. Maybe there’s no clear policy on what constitutes overtime and what doesn’t. Maybe the location is short staffed.

Ensure that your employees are properly classified

HR needs to make sure they’ve properly classified employees to begin with so that exempt employees are truly exempt and nonexempt employees are truly nonexempt. Misclassification frequently happens in HR, Rizzo said. 

Regarding overtime, perhaps an analysis could be done on what exact duties employees are performing. Managers can potentially shift certain duties from A nonexempt employee to an exempt employee who won’t be paid overtime for working extra hours.

“HR should be very careful about classification of exempt and nonexempt employees,” he said.

Cover your tracks with labor tracking 

An important part of this conversation is what the burden of proof is on overtime claims and who holds that burden, Rizzo said. If an employee claims they have worked unpaid overtime, employers must have the information on file to disprove that claim. If the employer doesn’t have any records that accurately track if the claim is true or not, the U.S. Department of Labor will pursue assuming the employee is telling the truth.

Also read: Labor analytics: A how-to guide for company leadership

“If an employee says 60 hours and the employer has no way to refute the claim or doesn’t refute it sufficiently, then the employee’s statement of how many hours they worked will be taken as the truth,” Rizzo said, adding that this is something employer often take for granted or don’t know.

“There has to be a real tracking system, Rizzo said. “It doesn’t have to be sophisticated but it does have to be monitored carefully.”

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Using software to simplify payroll and overtime

payroll, software

Scheduling employees is difficult. Creating a schedule that factors in overtime can make the task even more time consuming.  

For companies that run in shifts or have round-the-clock operations, overtime is often a necessity. Poorly managed overtime can result in unnecessary cost overruns, cause mistakes on the production line and result in fatigue-related accidents.

Don’t work overtime to figure out your employees’ overtime. There are digital solutions that can simplify scheduling, address overtime requests and streamline the payroll process. Utilizing technology to develop a sensible overtime policy is essential to streamline payroll and will result in a safer, more productive workforce.

Why institute an overtime policy?

According to the Department of Labor, employees covered by the Fair Labor Standards Act must receive overtime pay for hours worked in excess of 40 in a workweek of at least one and one-half times their regular rates of pay. An effective overtime policy helps employers sort through daily and weekly overtime calculations to remain compliant with state and federal regulations.

Balancing Productivity

Scheduling overtime is often done to meet increased deadlines. Scheduling with a hair-on-fire approach — a practice followed by way too many employers — doesn’t necessarily equal optimal productivity.

Inefficient shift schedules lead to excessive and ineffective overtime levels. Many operations with fluctuating work demands have outdated scheduling systems that leave some employees idle and others too busy. Scheduling solutions can solve that headache.

Consider how many employees are needed to work overtime without affecting your team’s mental and physical health. Evenly rotating overtime schedules also can cut the animosity between employees and encourage a more supportive environment.

How technology helps

Technology plays a huge role today in helping organizations manage and reduce overtime expenses and meeting rigorous compliance standards. If you’re still using manual timesheets, it’s time to upgrade to an automated timekeeping system.

Automating overtime management provides streamlined processing, an impartial implementation of policies, fewer errors and more accurate record keeping. Time keeping and employee scheduling software significantly reduces the workload for supervisors while balancing employee requests and providing significant savings with the elimination of unneeded overtime.

Many organizations already have access to all the data they need to predict overtime costs in their payroll and time and attendance software. However, they don’t utilize it to its full effectiveness and wait until the end of a pay period to begin a deep-dive analysis into employee hours.

Instead, be proactive! Incorporate real-time analytics to track hours as the week unfolds to help identify employees who are on track to work overtime and allow for changes in staffing to minimize or eliminate these situations. Extract the data and examine it in a meaningful, practical way.

Perhaps most importantly, your compensation data can help avoid costly compliance violations, overtime lawsuits and steep fines.

Delicate balance between work and life

Resources are thin. Too much overtime — or not enough overtime — can cause stress, fatigue and burnout. Consider your employees’ health, your workplace culture and your business’ bottom line when scheduling overtime.

Workforce.com’s software simplifies operations and untangles complex overtime regulations. It also gives the entire organization the confidence that employees will be paid correctly.

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The FLSA Nightmare Behind Chipotle’s Bonus Program

Last week Chipotle announced a new bonus plan that could earn its employees up to an extra month of pay each year. Per the chain’s press release, the program is offered quarterly and can result in a bonus worth one week’s pay, calculated as an individual’s average weekly pay per quarter. To qualify for the quarterly bonus program, restaurant teams must meet certain sales and cash goals.

This bonus program has the potential to be a great way for the restaurant to break through in a tight labor market to attract talent. It also, however, has the potential to pose an FLSA nightmare. Bonus payments often count as part of a non-exempt employee’s regular rate of pay, thereby increasing the overtime premium owed to that employee.

Section 7(e) of the Fair Labor Standards Act requires the inclusion in the regular rate of pay all remuneration for employment—except seven specified types of payments). Non-discretionary bonuses do not full under one of those seven exempted categories. A bonus paid pursuant to an incentive program (like the program Chipotle just announced) is the definition of “non-discretionary,” and therefore must be accounted for in the calculation of an employee’s regular rate of pay for overtime calculation purposes.

For purposes of calculating the regular rate of pay, the bonus does not have to be included in its entirety in the week it is paid. Instead, an employer can apportion the bonus amount back over the workweeks of the period during which it was earned. The employee must then receive an additional amount of compensation for each workweek that he worked overtime during the period equal to one-half of the hourly rate of pay allocated to the bonus for that week multiplied by the number of statutory overtime hours worked during the week. If it is impossible to allocate the bonus, an employer can select some other reasonable and equitable method of allocation.

If a bonus payment already accounts for the overtime premium, then no additional payment is required. For example, a bonus plan may pay, as a bonus, a 10% premium of an employee’s total compensation, including overtime premiums. In this instance, the payment already covers overtime, and no additional overtime is required.

Like most wage and hour issues, the handling of bonus payments to non-exempt employees is complex, and presents a real trap for the unwary employer. If you are considering paying bonuses to hourly and salaried non-exempt employees, you should run it past employment counsel before making the payments to ensure you are not committing an FLSA violation in the mechanics of the bonus payment.

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