Employers can make a lot of mistakes with overtime calculations if they’re not careful. Sometimes they avoid paying overtime altogether by classifying employees incorrectly as contractors, paying employees a salary when they should be working by the hour, “paying” private employees comp-time in lieu of overtime, etc.
Even if you classify your employees correctly and don’t deliberately withhold overtime payments, you can still make a lot of mistakes if you’re not careful.
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Occasionally, we hear from customers who want to know why an employee has overtime on the payroll report but does not appear to have overtime on the timecard. Under normal circumstances, the two would match but, given the right mix of conditions, they sometimes don’t. I’ll explain why that is and what you can do to avoid it.
Calculating overtime by hand can be risky. The Federal and State governments have set a lot of rules to ensure that employees get paid fairly for the time they work over 40 hours, and if a company doesn’t know and follow all of those rules, overtime lawsuits often result.
Employers who operate multiple companies don’t always realize that their employees who work for both must have their hours at each company combined for overtime calculations.
When employees work for two different companies owned by one employer (called joint employment), they are still entitled to overtime when their clocked hours at both companies exceed 40 in a week (or 8 in a day in some states).
“Joint employment exists when a person is employed by two or more employers such that the employers are responsible, both individually and jointly, for compliance with a statute.” – DOL
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Do vacation hours count as overtime? This is a common question among employers and employees alike. If an employee takes 8 hours of vacation or PTO on a week where he works more than 32 hours in that week, will those hours over 40 be counted as overtime?
I have heard this question asked countless times over the years:
“Why does your time tracking system only calculate overtime by 40 hours and not by 80 hours?”
The answer is, because that is the way the Feds define it. In other words, it’s not our design, it’s the law for most cases.
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