Overtime, extra work, additional working hours, and the calculation of the subsequent compensation and rewards is a matter of crucial importance for employees and organizations alike. Keeping track of work, hours, and productivity, and translating it into tangible and monetary rewards for the employees are some tedious tasks which require careful handling and long hauls of calculations.
Besides the regular wage and benefits, the Fair Labor Standards Act entitles an employee to at least one-and-a-half times his regular pay as his overtime compensation rate. The calculation of the regular wage of an employee is determined by a formula devised by the FLSA, which equates to the dividend of the total compensation in a given period of work calculated by the total number of hours to be compensated for.
Organizations are obliged to follow this formulated scheme of calculations while determining the regular wages and overtime compensation for their employees, and a failure to comply with those FLSA rules may lead to a lawsuit or litigation. Here are the top five common practices prevalent in the organization that should be avoided to ensure a smooth, legally compliant, and hassle-free overtime and compensation mechanism.
Improper Classification of Employees
Many organizations tend to opt for exempt employment status for their employees, considering they would no more be eligible for overtime pay. This is no more than a mere fallacy. FLSA implements strict rules and criteria to determine the employee classification. So, before classifying your employees in the exempt category, check for the FLSA guidelines as to whether the employees comply with the FLSA defined criteria for exemption or not.
Poor Time and Attendance Record
Time and attendance record keeping is crucial since it is an essential quotient for the overtime and compensation evaluation formula. Most organizations base their time and attendance recording function on manual entries or assumptions that have a high probability of errors and misinformation. Therefore, for accurate and FLSA-compliant overtime and compensation calculation, organizations need to put a greater emphasis on their time and attendance keeping functions.
Influencing Employees to Work Overtime
The FLSA prevents the organizations from exercising their influence or control on employees and force them to work overtime. According to FLSA rules, overtime is absolutely a matter of choice for an employee, and the organization cannot ask or influence their workforce to work for extra hours.
Omitting or Excluding Essential Additional Payments
Many organizations tend to exclude and omit certain additional perks and benefits from the compensation plan and payrolls that are awarded to an employee as per the FLSA rules and regulations. Additional payments and monetary incentives, such as shift differentials, special project bonus, longevity and bilingual pay, or other bonuses, should be thoroughly calculated and included into the payroll.
Inadequate and Unjust Compensation Patterns
Many organizations attempt to trick their employees by calculating their compensations and overtimes based on the pay period rather than the work period. This method of calculation infers an underestimated value that leads to the unjust and unfair underpayment of the employee.