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Going Remote? Better Review Your Overtime Rules

Posted by Dawn White on Nov 22, 2021 8:23:18 AM
Dawn White
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woman working late at home | flsa overtime rules and overtime calculations

Now that your company is paying hourly (non-exempt) employees who are working remotely, this is a good time to review your company policies and reacquaint yourself with FLSA overtime rules.

For organizations in the professional services industry, your work-from-home employees may be switching their time between accounts, which adds complexity to your overtime calculations. There are other factors, as well — such as timesheet reporting and your company’s pay schedules.

Let’s take a look at some important overtime rules your company will need to pay attention to with remote workers.

Related reading: Reliable Answers to Top Overtime Payroll FAQs

WFH Means More Flexibility — Within Limits

As more people are working from home, work life has become more fluid. Employees are working odd hours, jumping from project to project at times that work best for them.

It’s tempting for remote workers to do this one work-related task here and this other one there during off hours. It’s up to your company to determine your policy on that type of scenario, but all work must be reported by non-exempt employees — even something as simple as answering emails while watching Netflix in the evening.

While your workers have greater flexibility as remote employees, that doesn’t extend to the way you calculate overtime. For example, FLSA rules won’t allow you to average the hours of two weeks in the same pay period — for example 44 hours in one week and 36 hours in the other.

You also can’t redefine the days of a work week in order to gain or lose overtime hours. FLSA defines a work week as seven consecutive days. Your company can determine what day the work week starts on, but it must remain the same every pay period.

Semi-monthly Pay Pains

That definition of a work week can be a sore spot if you pay employees on a semi-monthly basis (e.g., on the 15th and 30th of every month). When the pay period covers all seven days in the week, calculating overtime is straightforward. But your non-exempt employees could work overtime on a week that straddles pay periods.

Many companies on a semi-monthly pay cycle have trouble calculating the proper overtime rate, even with automated time-and-attendance systems. Because payroll systems can’t look back into the past and account for the overtime, you have to remember to manually calculate the adjustment for the next pay period.

How Will You Distribute Overtime?

For professional services companies, even the most basic overtime scenarios can be tricky, because you need to consider the various accounts or projects that your hourly employees were working under.

For example, an employee may work 35 hours for one client, eight hours for another client, and seven hours that are non-billable. Which account should be charged for the overtime? Overtime redistribution reassigns employee overtime or PTO hours by labor codes worked throughout the week (instead of to the project being worked on when the 41st hour occurs).

Complicating the issue is the fact that different work may have different pay rates — especially if an employee is fulfilling various roles in your company during a staffing shortage.

Overtime redistribution is a solution designed for companies that need to distribute overtime hours or earnings. There are several different ways to approach overtime redistribution, depending on your local labor laws and your business rules. No matter what your policy, you’ll need a way to efficiently calculate overtime redistribution — especially as your company grows and adds staff.

Overtime redistribution evaluates overtime hours based on your company’s needs, in one of two ways:

  • Proportionate to labor codes (dept., job) worked
  • Assigned to borrowed labor codes first

With many time and attendance platforms, the employee overtime hours are designated to the labor code (e.g. Department, Job, etc) in use when the overtime was incurred. But that has implications when your employees switch to a new client or project at the 39-hour mark. If you want to implement a different policy, you may have to rely on manually calculating the correct allocations.

Related: Are Your Remote Employees' Timesheets Accurate?

How to Make Overtime Calculations Easy

Most time-and-attendance systems can’t handle the complexities of these overtime scenarios. But IDI’s integration application can be configured to reassign the labor distribution for the overtime hours determined by the time and attendance system.

Our solution is designed for non-exempt employees that work overtime and need to have their overtime earnings allocated across different labor codes (e.g. department, client, or project). The application can also calculate overtime for semi-monthly pay schedules, non-discretionary bonuses, and other complex situations.

With the click of a button, IDI’s system reads the earnings from the time and attendance system, performs overtime redistribution and other calculations, and passes the results to payroll.

IDI can automate your time-consuming processes and help prevent FLSA anxiety!

Check out our solutions for the professional services industry →

Topics: Professional Services Industry Solutions

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