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Paying Hourly Employees: A Look at Common Scenarios Employers Get Wrong

If you manage hourly employees, it’s critical to accurately track all of their hours worked. If you cheat an employee of hours, your business could face large fines if a complaint is filed.

Employees are either exempt or non-exempt. Non-exempt employees (commonly called "hourly") must be paid at least the minimum wage for all hours of work and overtime for working more than 40 hours in a workweek.

Generally, if a non-exempt employee’s time directly benefits your company, it is considered working time. And employees must be compensated. Time when employees are completely relieved of work for a set period, usually 30 minutes or more – and they may use the time as they wish – is typically unpaid.

There are many common misconceptions about time and pay laws. Let’s look at tricky situations surrounding hourly workers that cause confusion for many employers and can lead to lawsuits. This information can also help if you employ seasonal workers and are unsure of the legal requirements surrounding non-exempt status.

Waiting Time

Time spent waiting must be paid if the employee has to be at work. For example, if your company’s computer system crashes and your employees are required to wait for the system to reboot, the waiting time counts toward hours worked because you are still requiring your employees to be at the business.

If employees arrive early by their own accord and wait to start working, this is not considered hours worked. You don’t have to pay them as long as they perform absolutely no work functions before their shift starts.

Pre-Work and Post-Work Activities

On the other hand, if employees come in early to prepare for their shift, the time is considered working hours if the activities are for the employer’s benefit. The same is true for post-work activities. Time spent “winding down” from work duties must be paid – even if work performed is not part of the employee’s main responsibilities. Common examples include:

  • Cleaning or preparing equipment used on the job
  • Changing clothes (if the change is required and can’t be done before arriving at work)
  • Counting money or preparing change

Meals and Breaks

Meal breaks are not considered hours worked if they are at least 30 minutes long, and the employee is not doing any work. However, if your employee continues to do work-related tasks, such as answering phones, you must pay for the time.

Break periods of 20 minutes or less are counted as working time. Employees must be paid for these breaks.

Unauthorized Overtime

Many managers mistakenly believe that hourly employees don’t need to be compensated for unauthorized overtime. They think it’s okay if employees volunteer to work “off the clock” or take unfinished work home. Employers are obligated to pay non-exempt employees for all time worked, even under these circumstances.

If employees work unauthorized overtime, they may be subjected to disciplinary action. But not paying them is against the law. Do not allow non-exempt employees to work off the books – even if they volunteer to learn something new, catch up or get ahead. This means not coming in early, leaving late, working through lunch or bringing work home unless the time is approved and paid for. Overtime cannot be waived in any circumstances.

Recordkeeping Requirements

Employers are responsible for keeping accurate records of all hours worked by non-exempt employees to ensure compliance with the minimum wage and overtime requirements.

The law does not require a particular method of timekeeping. There are numerous methods for tracking employees’ work hours, all of which are acceptable. For example, employers may use timeclocks or an electronic timekeeping system — or they may allow employees to maintain handwritten records of their time. Whichever method is used, the records must be an accurate representation of the employee’s work hours.

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