According to the U.S. Department of Labor, employees covered by the Fair Labor Standards Act (FLSA) must be paid the hourly overtime rate (at least 1.5 times the regular rate) for every hour worked over 40 hours per week. The FLSA determines which employees are eligible for overtime pay based on their hourly range and the type of work they are performing.
Those that are currently exempt from receiving overtime pay are people who make over $23,660/year. However, the DOL has recently raised the exemption threshold to $35,308. If this proposition goes through (Jan 2020), it will require that all employees who in the past made between $23,660 and $35,308 will now be considered nonexempt employees and must be compensated for overtime hours.
The problem for employers is that there will obviously be more people in the workforce who will now be paid overtime, so how can you eliminate the need for overtime and save money?
We think of a standard workweek being 8 hour/days or 40 hour/weeks. This has been the standard for a 5-day work week since Congress amended the Fair Labor Standards Act, that limited the workweek to 40 hours in June 1940 and went into effect in October 1940. A Gallup poll given to full-time workers has recently shown that the standard work week is closer to 47 hours compared to the original 40 hours with a fair number of applicants saying they work over 50 hours/week. This means that hourly workers are obviously going to need overtime if they go over the “standard” 40 hours/week. So how can we increase productivity to get back to that 40 hours/week and save money on overtime?
According to Workfront, the main reason we use more overtime now is because of having a poor work-life balance.
This becomes a problem when employees start to do more tasks while at work. Whether it’s wasting time or simply because they’re burnt out, these actions cut into overall productivity causing the employee to stay later “overtime” to complete their tasks for the day. Workfront suggests a few things an employer can do to improve employee morale in the workplace resulting in them using their time more wisely while at work.
One suggestion is that managers need to keep an eye on their team’s productivity using some kind of tracking system. This makes it much easier to spot where the inefficiencies are in the plant resulting in quicker problem solving.
Another idea is to make sure your employees have the tools they need in order to be successful while working. They cannot be expected to perform at their full potential if they don’t have the means necessary to accomplish all of their tasks in the normal workday.
Another great way to reduce the need for overtime is to offer incentives to the employees who keep their productivity and efficiency up. This can be done in many ways like pay bonuses, extra break time, extra vacation days, or even a pay increase. The tables below show three examples of how much overtime can cost per week at two, three, and four hours, per employee, per week and how much of a pay increase would be needed to break-even with the cost of overtime while eliminating overtime hours overall.
For example: you can save money on wages per week if you increase wages (as an incentive) by less than what is needed to break-even with overtime costs, and then not have to pay any overtime!
