When it comes to paying overtime, terminology matters. While often times company policies or handbooks may refer to things like a “pay week,” “pay period” or even just “week,” where the Fair Labor Standards Act (FLSA) is concerned, the only thing that matters is the workweek.
What makes a “workweek” so special?
All those other terms can be a bit ambiguous: does a “payroll week” start on Sunday or Monday, for instance? Does it end at midnight, or at the usual ending work time in the afternoon, or some other time entirely? By contrast, the term workweek has a very specific definition under the law: it is a fixed, regularly-occuring period of 168 hours (i.e. seven consecutive 24-hour periods) adopted by an employer to comply with the FLSA.
While Federal regulations require you to designate and document at least one workweek, you can have as many workweeks as makes sense for your business. You can assign different workweeks to departments or workgroups, locations or even individual workers. You can designate your workweek(s) to begin on any calendar day of the week, at any hour of the day. Once you’ve designated the starting date and time, the 168-hour clock begins counting off the workweeks that follow.
When making your decision on workweek, consider the implications. How you designate your workweek(s) could potentially have ramifications on your labor costs and your employees’ paychecks.
How does the workweek affect pay?
A major effect of the workweek is on the calculation of pay for overtime-eligible workers. For instance, let’s assume an organization that pays workers every two weeks. For FLSA compliance, they’ve designated a workweek that starts at 8:00am every Sunday.
Some companies make the mistake of calculating overtime based on the payroll period instead of the workweek. In the case of our imaginary organization, let’s say one employee works 10 hours each day, Monday through Friday, during the first calendar week, for a total of 50 hours. In the second calendar week, she works 8 hours per day, Monday through Thursday and does not work on Friday, for a total of 32 hours. Since the company calculates overtime using the payroll period, they add the two calendar weeks together, coming up with a total of 82 hours worked. Compared against the 80 hours of a standard two-week payroll period, they pay the employee for two hours of overtime.
Unfortunately, according to the FLSA, that’s incorrect. The company could be liable for penalties and fines if the employee complains to the Department of Labor or if a Wage and Hour Division audit turns up the discrepancy.
Here’s how the company should calculate overtime using the FLSA workweek: In the first workweek, the employee worked 50 hours, making her eligible for 40 hours of straight time and 10 hours of overtime. In the second workweek, she worked 35 hours, for which she will be paid straight time.
In the end, the employee is still credited with 82 hours of work, but she should get paid for 10 hours of overtime, not just two.
The “workweek” concept can also affect salaried workers. Under the FLSA, companies are not required to pay salaried workers who perform no work at all during a given workweek. (That’s the provision that makes unpaid furloughs possible, for instance.) But before you can determine whether an employee did any work during a given workweek, of course you must have designated a workweek applicable to that employee in the first place.
Change is possible, just not often.
The workweek is distinct from the employee’s schedule. A workweek remains as a constant consecutive 168 hours, regardless of the employee’s actual work schedule or hours during that period.
Once you’ve designated and documented a workweek, you must apply that same workweek consistently in order to comply with the FLSA. You can change to a new workweek when a need arises. But once you’ve established the new workweek, you need to start observing that as the new workweek going forward. You can’t constantly flip back and forth, revise your workweeks too frequently, or manipulate your workweeks to avoid paying overtime. That’s just a quick route to a lot of unwelcome scrutiny from the DOL, followed by hefty back wage assessments, fines and penalties.
Has your organization designated different workweeks for different employees or groups of employees? Or do you use the same workweek for everyone? If you have a payroll period that’s different from a workweek, what do you do to make sure your overtime calculations are correct?