In prior years, the Department of Labor (DOL) released the news that Halliburton, an oil and gas service provider, paid about $18.3 million in overtime that was owed to more than 1,000 of their employees across the U.S.
One of the biggest blunders Halliburton ran into was inaccurately categorizing employers as overtime exempt. In total, 28 employees were not paid overtime due to this misclassification.
The Fair Labor Standard’s Act (FLSA) sets basic rules that include overtime pay protections and a guaranteed minimum wage.
Protecting Your Company From Overtime Implications
Consequences like those Halliburton is seeing could truly happen to any business, no matter the size. Take necessary precautions, as listed below, to protect you and your business.
Familiarize yourself with the FLSA exemptions.
Besides the required salary basis, which could change, take a look at the FLSA Overtime Security Advisor. This resource will help you understand terms used, compensation requirements, specific employee positions and their exclusions, an occupational index and more.
Track your employees’ hours.
As Halliburton found out, failing to keep accurate records of hours can bring big implications.
As we know, manually tracking your employees costs you time and money. In fact, businesses have a 2% error rate with manual time tracking. Say you have a $500,000 payroll a year. With a 2% error rate, you’d find you were wasting $10,000.
Using an automated time and attendance system not only will save you that $10,000 in wasted payroll dollars, but will also help to avoid overtime implications like Halliburton saw.
All of this can sure add up! Stop wasting money; use an automated time and attendance system.
What is Overtime?
Under the FLSA, overtime pay is considered time and a half of an employee’s regular rate of pay for hours worked over 40/week. For example, an employee who makes $11/hour and works 50 hours a week would receive $11 for 40 hours (or $440) and $16.50/hour for the remaining 10 ($165).
Salaried Employees Aren’t Necessarily Exempt
It’s incorrect to assume that salaried and highly compensated employees (HCE) are exempt from overtime. According to the DOL, neither job titles nor job descriptions determine the exempt or nonexempt status of an employee.
The FLSA provides an exemption from minimum wage and overtime pay requirements for individuals employed in executive, administrative, professional and outside sales positions, as well as certain computer employees. This is sometimes referred to as white collar workers.
Current FLSA regulates that white collar workers who make $455/week, or $23,660/year, are exempt from FLSA. An exemption for highly compensated employees (HCE) comes into play if the employee earns at least $100,000 annually.
However, a proposed rule may change these salary limits.
Volunteering to Work Late Doesn’t Count
Nonexempt employees must be paid for all hours worked, including time spent doing work not requested by the employer but still allowed (also known as working off the clock). Employees generally may not volunteer to perform work without the employer having to count the time as hours worked. It is the responsibility of management to exercise control and see that work is not performed if the employer does not want it to be performed.
Overtime and Independent Contractors
Independent contractors or contracted workers are typically not entitled to receive overtime since they are not considered employees under the FLSA. However, a contract may not be sufficient enough to determine that your contractor is in fact just a contractor.
The IRS has set common law rules regarding classifying independent contractors & employees. It’s important to weigh the following degrees of control and independence to ensure your contractors are just that:
- Behavioral: Does the company control, or have the right to control, what the worker does and how they do their job?
- Financial: Are the business aspects of the worker’s job controlled by the payer? This includes things like how the worker is paid, whether expenses are reimbursed, who provides tools/supplies, etc.
- Type of Relationship: Are there written contracts or employee type benefits (e.x. pension plan, insurance, vacation pay)? Will the relationship continue and is the work performed a key aspect of the business?
Click here to continue reading what factors the Supreme Court has ruled as significant.
PrimePay at Your Service
We are here to support with efficient, accurate, and cost-effective workforce management solutions.
Please read our disclaimer here.