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Work Hours—Paid Overtime

Dear Dave
What do you think of the practice of paying the entire staff (hourly and salaried) for all the hours worked each week? Our employees routinely put in a minimum of 48 hours or more a week. We feel it is only fair to pay people directly for contributing this kind of time and effort. I understand paying for overtime is quite common among engineering firms, but I wonder if there are pitfalls we may not be aware of.

Dear GJ
Yes, many firms share your point of view and pay overtime to both exempt (those not required by wage and hour laws to be paid overtime) and non-exempt (hourly and entitled to time and a half for overtime).

Otherwise exempt employees who receive overtime are usually paid at a rate equivalent to straight time for overtime hours. Although recently I’ve come across a few firms who pay any and all staff who work in excess of forty hours in a week at the premium overtime rate of time and a half. Even some principals pay themselves directly for every hour worked, although it is still more common for principals and other senior staff to be paid on a fixed salary basis without direct compensation for overtime.

Firms figure it makes more sense to extend pay than to have to hire, train and manage additional staff. They often can’t find the staff to hire in the first place, and even if they do find them, more staff means more overhead in the form of office space, equipment, benefit costs, etc.

Some firms reason that a salaried, exempt employee’s base salary includes some extra hours and covers up to perhaps the first forty five to fifty hours in any given week and only kick-in additional hourly pay when that base number of hours is exceeded. Other firms track exempt staff overtime and allow staff to take compensating time off during slower periods, or wait and pay out accumulated overtime as part of a quarterly or annual bonus program subject in some cases to overall firm profitability.

Regardless of whether or not you pay overtime, it is very important that you don’t overwork your staff. There comes a point when working too many hours for too long has to take a toll on morale, mental fitness, efficiency, quality of work, etc. It is the nature of the business for any firm to have periods of weeks or even months of end-to-end deadlines and crunches requiring extra effort, but those periods need to be the exception and not the rule. In the long-run there must be occasional slower periods mixed in to allow for adequate rest and recovery. If heavy, extended overtime describes your firm, you should monitor productivity and work quality very closely to make sure you’re getting a true advantage (and not doing great harm) by working as hard as you do.

Wahby and Associates