Mistakes in Payroll for Employees Working Overtime

While payroll can be a tricky practice at times, it is on occasion required that an employee work overtime, and these additional hours must be paid as well as their regular work hours. A number of employment laws can be broken if the calculations are done incorrectly, and payroll is already a complex enough task, let alone adding overtime to the mix! This is why Padgett offers professional payroll services to ensure that all payroll and tax duties are done properly and in a timely manner.

Calculating payroll for overtime is very common, yet countless businesses make significant slip-ups due to poor payroll management. Here are several common mistakes that are made when businesses do payroll that involves overtime.

Improper record keeping is the first culprit of managing payroll. Having a reliable system is important so you can make sure that any overtime payments are not missed or forgotten. Paper record keeping or punch card payroll systems can fail if the system is not backed up and undocumented overtime hours will not be unaccounted for.

It is a fairly common misconception to assume that all employees who get paid salary are exempt from receiving overtime. As a small business, make sure to check The Fair Labor Standards Act. There are strict guidelines that determine the classification of an employee and various provisions that include minimum wage and overtime pay.

Never offer comp time instead of paying out overtime to employees. This may seem like a clever way to avoid doing payroll, but many states do not approve of this. It is very easy to shortchange employees on their overtime payments if this practice continues, which creates problems for all concerned. Asking employees to take work home “off the clock” is also an unethical practice that can cause trouble for the company, especially if the employee gets injured during this time.

However, if an employee must take work home with them in order to meet a deadline, it needs to be communicated properly. This “off the clock” time can lead to inaccurate payroll calculations, so the company needs to have an efficient system that records this overtime if an employee is asked to work more than the typical 40-hour work week.

Holiday pay oftentimes creates additional payroll issues. For example, if an employee works their usual shift and then this time goes into a holiday, those particular hours need to be calculated accordingly. This is also true for different types of work shifts that offer any kind of bonus time.

At Padgett Payroll Services®, we are here to assist you with your payroll needs. If you are a business in need of trusted payroll specialists, please contact us today and see how we can help run your payroll more efficiently.

Do you have the support you need to manage your small business bookkeeping? Contact us to schedule an appointment to speak with a local small business advisor.