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    3 Replies Latest reply on Jul 22, 2010 6:07 PM by Timesheet

    Alternative to going over budget paying out overtime

    stokestrip Wayfarer
      I noticed a lot of companies are getting stricter on the overtime and
      employees are having to sue for overtime pay. An alternative to having an employee rack up overtime pay is to institute more unpaid vacation time to balance it out.


      John works for Company XYZ at $15/hr
      Regular work week: $15 x 40 hrs = $600
      Overtime work week: $600 + extra 10 hrs ($22.50/hr) = $825
      (An extra 10 hrs is only 2hrs extra each day for a 5 day work week.)
      $825-$600= $225 extra pay
      $225/$15 = 15 hrs worth of work - almost 2 days.

      The employee would rack up 15 hrs worth of vacation time which is almost 2 days off. If the employee if offered that option and has to take time off in 4hr and 8hr blocks, at the year end the company actually gained an extra hr of pay = $15 because the employee had to take an extra hr to take off a full 8hr work day. $15 is not a lot at a small business of 10 employees, but if the company has 100 people at $15/hr it turns into saving $15 x 100= $1500. For a company of 1,000 the company saves $15000. Remember the example only accounts for 10 hrs of overtime during the course of one week.

      Keep in mind, this alternative only works for fully staffed companies. If you already are short staffed, you may not be able to try this out and see if it works. It works even better for companies trying desperately to avoid layoffs.
        • Re: Alternative to going over budget paying out overtime
          Lighthouse24 Ranger
          Are you certain about this?

          According to the Fair Labor Standards Act (which would surely apply to a company with 100 employees, per the example you used): An extremely frequent misconception among private (non-public) employers is that it is permissible to pay non-exempt employees "comp time" in lieu of cash for overtime worked.

          I'm a business owner and consultant, not an attorney -- but I have to question whether what you're proposing is legal under federal law for hourly (non-exempt) employees. In addition, individual states also have labor laws that are often even more restrictive on this aspect of small business management than federal law is.

          My understanding is that if my employees were given this option and agreed to it (and even used the vacation), they could still file suit under BOTH state and federal law, and I (the employer) could be required pay in cash the overtime I had already compensated them for with time off -- going back as far as three years, plus penalties, court costs, and attorney's fees for all the plaintiffs.

          My advice would be to check with an attorney who specializes in employment law before implementing this policy -- just to be sure.
            • Re: Alternative to going over budget paying out overtime
              stokestrip Wayfarer
              Thanks for the advice I really appreciate it. I have worked for a company in the
              past that had every one choose whether they wanted to take one week off
              or 2 weeks off and offered travel as an incentive, but it was unpaid
              time off. This kept them from incurring costs of overtime pay that would cause a lay off. That company was legally allowed to do that, but I definitely
              understand where you are coming from when you mention checking with a lawyer. Each company in different states have several
              different rules and guidelines that they are supposed to make themselves
              aware of. If your company doesn't allow you to do that, then it is not a program that should be adopted. Anyone who owns a company should check with their lawyers to make sure they comply with the law. I was just proposing it as a suggestion for those who can use it.
            • Re: Alternative to going over budget paying out overtime
              Timesheet Wayfarer
              Another great way to avoid the cost of paying out overtime is to control overtime before it builds up. This can be easily done with a time tracking utility that allows the employer to track how much his employees are working throughout the week. If he sees that an employee works 9 hours on Tuesday, he can send him home an hour early on Wednesday. This isn't easy to monitor if employees are still writing in hours on paper at the end of the week, but with real-time, online time tracking, monitoring overtime becomes easy, esspecially if you use a system with built in overtime tools.