The healthcare industry faces a lot of challenges when it comes to compliance issues, and especially, payroll. Ask any healthcare practice for their biggest expense, and you’re likely to hear overtime costs in response. Overtime is almost always one of the top-ranked expenditures, and when you factor in incorrect overtime configurations, it’s even more costly.
Not only that, these miscalculations can lead to low employee morale, vulnerability to overtime regulation changes, and even costly lawsuits.
This guide for healthcare practices clearly explains how to track overtime and be proactive in catching overtime blunders. This will ensure that your practice has the knowledge needed to reduce expenses, improve morale, avoid lawsuits, and avoid incorrect overtime calculations.
Tracking overtime is usually all about the time clock. Specifically, calculating how many hours has an employee worked in a given week, exceeding a 40-hour work week.
According to the Bureau of Labor Statistics:
The average American worker works slightly more than four hours of overtime per week. That’s 208 hours per year. Estimating an average wage of $21 per hour time-and-a-half pay, the grand total comes out to $6,552 per employee, per year. With a staff of 20 employees, that’s $131,040 in overtime expenses alone.
A compliant time clock is crucial in ensuring that you’re paying overtime correctly. With such a variety of payment structures to take into account, trying to manually calculate them all will inevitably lead to error. Use a time clock that was built with compliance in mind, like the one provided by HR for Health.
Recommended Reading: The Fundamental Guide to Overtime Rates & Calculations for Healthcare Practices
Daily and Weekly Overtime
If you’re not careful, you could pay an employee twice for the same overtime. Make sure you calculate daily and weekly overtime separately so that an employee is not paid twice for the same work. This mistake is called overtime pyramiding, and is common in cases when overtime is paid on a daily basis as well as a weekly basis. This is often difficult to keep up with, which is why having software that does it for you is crucial to avoiding costly mistakes.
Per Diem Overtime
Per diem overtime is another area that can cause payroll issues since employees are given a set daily rate of pay, no matter how many hours they work. Since per diem employees are common in certain healthcare practices (for roles like a nurse or dental hygienist), incorrect per diem overtime payments over the course of the year could prove costly.
Per diem employees are not exempt from overtime. Their hourly overtime rate should be established by dividing their daily rate by how many hours they are scheduled for that day, then multiplying that number by 1.5.
Overtime for Non-Discretionary Bonuses
Non-discretionary bonuses cover areas like performance standards, sales, production, quality, etc. This overtime must be calculated to include the bonus as well as the employee's regular rate of pay. Bonuses must be allocated back to the previous work weeks covered by this particular bonus period.
Weighted Averages Overtime for Two Different Rates of Pay
This is a blended rate that falls under the federal government's Fair Labor Standards Act (FLSA) which applies when an employee works in roles where there are two different rates of pay for the same employer. To correctly pay overtime to this employee, employers must calculate a blended rate of no less than one-and-a-half times the weighted average of all non-overtime rates used during that work week.
Alternative Workweek Schedules
Alternative Workweek Schedules fall under the California Labor Code Section 511, and in some cases the Industrial Welfare Commission (IWC) Wage Orders. This specific situation includes an employee who works in excess of eight hours without overtime pay in a 24-hour period.
Our time clock has the ability to calculate overtime based on both daily or weekly payment structures per the employers needs. It automatically calculates overtime based on your state’s regulations.We build our time clock features with industry norms in mind to be sure they are fully accommodated.
Here are some examples of how our time and attendance tracking can benefit you and your practice:
- Document and time-stamp all employee activity from meal breaks to overtime to ensure full wage and hour compliance.
- Provide cloud storage for leave of absence requests, ensuring full documentation for future reference.
- Document tardies and absences in order to keep up with wage and hour compliance.
- Provide full access to real-time benefit accruals, including vacation balances, sick leave, and paid time off.
On a most basic level, overtime is calculated with the following formula:
Hourly pay rate x 1.5 x overtime hours worked
It gets complicated when you take into consideration that an employee's hourly rate is calculated differently depending on the state in which you operate and your agreed upon payment structure.
Our software keeps all of this in mind. We know that you have more important things to do than have to worry over overtime calculations. Instead, our integrated system allows you more freedom at your practice. It frees up precious administrative time by automatically creating payroll reports that are exact and laser-focused. Any issues that present themselves can be monitored and adjusted accordingly. There is more time saved, less expense, and robust, precision resources that ensure every faction of your payroll is exact.
Part of proactively managing overtime is knowing the law on who qualifies, the specifics on exempt vs. non-exempt employees, and more. These laws change often. For example, one recent update to the FLSA raised the overtime threshold for exempt workers:
Under the Fair Labor Standards Act (FLSA), the new overtime rule raises the pay threshold for exempt workers to $35,568 per year ($684 per week) from its current level of $23,660 per year ($455 per week). The final rule went into effect Jan. 1, 2020.
Most of the employees who work at your healthcare practice are going to be non-exempt. The most common case of an exempt employee is an Office Manager under the Executive Exemption or a Doctor under the Professional Exemption. More broadly defined, this is typically an employee that performs office work or non-manual work.
States With Daily Overtime
Only five areas have daily overtime. If your practice is in the state of Alaska, Nevada, or California there are certain laws that apply for those who work over an eight hour a day period. Also included in these rules are Puerto Rico and the Virgin Islands. While this can be confusing even if you are aware of the regulations, our software is equipped to handle anything.
Tracking overtime is crucial and being proactive just makes sense when it comes to your practice. Things change often, and overtime rules have changed as recently as January 1, 2020. Having a good grasp of the basics as well as tools to help you track overtime makes all the difference in saving time and money. Keep in mind that you don't have to do it yourself.
We share the information you need and supply the tools to make it happen.
The experienced HR professionals with HR for Health can help you navigate the complexities of overtime regulations. Learn more at HR for Health.
Did you know that we at HR for Health monitor all the specific laws and regulations that affect your practice? If you have questions about compliance issues, please reach out to us. Schedule a call, call (877) 779-4747, or email firstname.lastname@example.org now to learn more.
HR for Health is one of the nation’s leading Human Resources Management Systems (HRMS) used by small to mid-sized practices.
Quick note: This is not to be taken as legal or HR advice. Since employment laws change over time and can vary by location and industry, consult a lawyer or HR expert for specific guidance. Learn about HR for Health's HR services.