Overtime: one of the biggest annoyances for nearly every payroll manager. However, it’s a necessary part of operating a profitable business. The correct tracking, calculation and payment of overtime is something that needs to happen, in order to avoid breaking a number of employment laws. Accurately paying employees overtime, fosters goodwill with employees who have sacrificed their personal time in order to help your company meet important project deadlines.

We’re all human and sometimes payroll managers make mistakes when calculating overtime. Here are 5 mistakes to avoid when calculating overtime on payroll:

Poor record keeping

When calculating payroll, it’s important to keep up-to-date on payroll recording methods. Using unreliable sources of record keeping, such as paper or punch card payroll, have a tendency to fail when not backed up with a computer-based payroll system. Overtime hours can be easily missed or not documented, making it impossible for the payroll manager to know about overtime hours until it’s too late.

Classifying all employees as exempt status

While you may think that all of your employees are exempt from overtime payment because they’re salaried, this isn’t always necessarily true. The Fair Labor Standards Act has strict guidelines when it comes to determining employee classification, including overtime pay. Check these guidelines before assuming that all of your salaried employees are exempt from overtime payment.

Granting comp time instead of paying overtime

As an employer, it can be tempting to cut corners by offering extra paid time off to employees who have worked overtime instead of paying. However, most states don’t approve of comp time in lieu of paying overtime to eligible employees. If you see that some of your employees are consistently working overtime, check with management to see if there is a shortage of employees and if it’s possible to hire more team members.

Asking employees to volunteer to work overtime

Similar to above, asking employees to work overtime hours that are off the clock is a mistake you want to avoid making. Not only is it illegal under FLSA provisions, but it’s also unethical and can get you in trouble if an employee reports it or gets injured while working.

Missed overtime for off-the-clock work

Sometimes, employees need to take work home or stay later than their scheduled time in order to meet project deadlines. Often times, employees don’t record this time and work hours that are off the clock. This can lead to incorrect payroll calculations. As an employer, if you ask your employees to work more than 40 hours a week, you are responsible for paying overtime.

Many of these overtime payroll mistakes can be avoided by outsourcing your payroll service and by being properly educated on payroll laws. By avoiding these common overtime payroll mistakes, your organization can better control employee costs and have the resources to improve the workplace.

payroll processing savings