Attendees of our most recent webinar got answers to some of their most common questions – and the chance to brush off their high school math skills. Led by Jenny Arthur, MBA, SPHR, SHRM-SCP, “Complex Wage and Hour Calculations” demystified some of the more confusing aspects of calculating wages for non-exempt workers.
The first order of business was a general refresher on overtime pay. It’s required for any hours exceeding 40 in a workweek at a rate of 1.5 times the employee’s regular rate of pay. The regular rate of pay is determined by calculating the employee’s weekly compensation (which may include commissions and non-discretionary bonuses in addition to hourly pay) and dividing that amount by the hours worked in that week. Arthur then went on to discuss five common, but often confusing pay issues.
Five Confusing Pay Issues
1. Piece rate pay, an arrangement in which employees are paid per task or per unit. A worker who is paid $5 for every widget she builds is paid piece rate. She may also receive an hourly rate or be paid by piece rate only. An employer with piece rate employees should first calculate the worker’s regular rate of pay to make sure she’s earning at least minimum wage. The regular rate will vary from week to week, depending on the worker’s output, so this has to be done every week for piece rate employees who work overtime.
2. Multiple pay rates. An employee who works in multiple capacities (like as a restaurant host and a server) may earn different rates depending on which job he’s doing. There are a few ways to calculate overtime for these workers. Some employers just pay overtime based on the employee’s higher rate of pay. It’s the easiest way to calculate overtime but costs the employer the most money. The blended method is more popular. With this method, the employer combines the multiple rates to find an average regular rate and uses that average to calculate overtime.
3. Non-discretionary pay, an umbrella that covers most bonuses or commissions that an employee earns. Many employers don’t realize that overtime pay may need to be added to those bonuses. The example was a worker who is promised a bonus of $2,000 after working for six months. If she worked overtime during any of the weeks during her bonus period, the weekly bonus amount must be added to her regular pay rate to determine how much additional overtime pay she earned due to her bonus pay.
4. Travel time pay. This is one of the most complicated topics covered in the webinar. Jenny discussed the circumstances under which a traveling employee must be paid. Making this determination depends on factors like whether the employee is traveling during his regular work hours and whether he’s driving or being a passenger.
5. On-call pay. Does an employee have to be paid for her time when she’s on-call? The answer, of course, is that it’s complicated. If the employer puts restrictions on the employee – like requiring that she stay onsite and wear a uniform while on call – she should be paid. Employees who are less restricted generally don’t have to be paid for time spent on-call.
Wage calculation is notoriously hard, especially when it comes to overtime. Making errors affects morale, and fixing those errors takes a tremendous amount of employee time. Employers found by the DOL to have made wage miscalculations may be required to give employees backpay. The DOL could come knocking at your door for an audit at any time, so bring your overtime wage calculation questions to Commonwealth, our team is here to help.