Managing overtime is still a major concern for many businesses.
The average Canadian employee clocks in close to two hours of overtime every week, according to Statistics Canada. With average hourly wages rising to $27 per hour, that means employers are paying an extra $2,808 per employee, per year for overtime — before factoring in the overtime wage multiplier.
Overtime is not an issue if it’s approved by management. However, it is a problem when employees work unnecessary extra hours without authorization.
That said, there are several ways organizations can prevent unwanted overtime and cut down on the extra wage spend.
Recognizing unauthorized overtime
Most conflicts happen due to confusion in understanding what is considered permissible or unauthorized overtime.
For example, an office administrator may come in 30 minutes early to work and leave an hour after the official clock-out time to avoid traffic. The one-and-a-half hours worked by the administrator qualify as unauthorized overtime.
This also applies to company policies or actions that require employees to work beyond their working hours without official permission by the company. An employee could receive and respond to work-related emails during the weekends or holidays, which also falls in the unauthorized overtime category.
However, if a company has a stipulation that allows employees to work overtime up to a certain limit, working after office hours is not considered unauthorized overtime, even if the company is not aware of it.
Impact on business
The biggest impact on an employer is the financial loss from having to pay unwanted wages. Canadian law states that companies are liable for the hours worked overtime beyond the standard workday or workweek. This means employees must be paid overtime even if their employer prohibits them from working after hours or is unaware of them doing so.
Some examples of work that may constitute hours beyond the standard workday or week include:
• working at home outside of office hours
• working during lunch breaks or after hours to meet deadlines
• coming in early to work or leaving after official office hours.
In Canada, employers also must pay 1.5 times an employee’s regular hourly wage for overtime. This affects company finances if there are no contingency plans to account for extra expenditure such as unauthorized overtime.
Curbing unwanted overtime is important to keep employees’ attitude in check, as it shows them they cannot expect to work overtime freely without repercussions.
Of course, it is also an organization’s responsibility to manage tasks so employees don’t have to work overtime to get their jobs done, negatively impacting morale and decreasing work productivity.
Preventing unauthorized overtime
There are a few basic ways employers can work to prevent unauthorized overtime, including official policies, accurate records and disciplinary measures.
Enforcement of official overtime policies
Preventing unauthorized overtime starts with establishing overtime policies. Employers should design a written policy that clearly states the official working hours to which employees are subject, as well as the organization’s stance on overtime. Overtime should only be granted with the permission of a higher-up, and for valid reasons.
The ideal overtime policy should include:
• types of employees who are exempt or non-exempt from the policy
• how overtime is tracked and recognized as valid
• daily or weekly limits for overtime
• overtime procedures.
The policy should also prohibit unauthorized overtime to further deter employees.
However, rules in the policy handbook are not always enough. Employers should also remind staff periodically — through emails, notes or verbal communication — that unauthorized overtime is not tolerated.
Of course, management plays a role in solving the problem. Project managers must understand the capabilities of team members and set realistic expectations for employees, so they’re not forced to work overtime to complete their tasks.
This is particularly relevant today as more employees are working remotely on their smartphones and laptops. This is also happening at night, after working hours and during the weekend, leading to a noticeable increase in unauthorized overtime.
A properly implemented overtime policy combined with effective task management is key in stopping unwanted hours from affecting a corporate budget.
Keep accurate time and payroll records
Timesheet fraud is a real problem for many payroll systems in organizations. While many cases of unauthorized overtime are justified due to employees requiring more time to finish work, there are also times when extra hours are clocked in just for the sake of it.
The problem is much more apparent in outdated systems such as manual timesheets and traditional punch cards as they are vulnerable to manipulation. Software-based tracking is at risk as well if it’s not updated to keep up with the latest industry standards.
The solution is to implement modern payroll and time-tracking tools that help track employee hours easily and accurately. Since these tools are powered by the cloud, employers have access to real-time updates of employee check-ins and check-outs, significantly reducing unauthorized overtime occurrences.
Transparency must be the main focus of an organization’s time-clock software. Ideally, it should allow employees (and project managers) to clearly see and keep track of their working hours in a given week.
More advanced time-tracking software allows employees to check in on their phones or authorized devices such as remote laptops and desktop computers. This gives them security and flexibility to work outside of the office — a benefit that extends to organizations as well in tracking employee activity.
Fair and progressive disciplinary measures
If an employee breaches a company’s overtime policy — even after preventive measures have been implemented — it’s time to look into disciplinary measures.
But employers should remember to be fair. If it’s only the first time an employee works overtime without permission, a verbal warning and a reminder of the company’s policy is more than sufficient as a disciplinary measure.
Repeat offenders should be penalized through written warnings, meetings, suspensions and — if there are no other options left — termination. This deters employees from clocking unauthorized overtime while giving them fair and justified punishment for offences.
However, employers should never use non-payment as a disciplinary measure. Even if the breach is against a company’s written policy, the employer is still required to pay overtime wages.
It’s also recommended that employers discuss overtime with potential employees before hiring. Different provinces have different exceptions and rules regarding overtime pay. So, it’s best for employees to understand them and to have the company’s overtime policy clearly in contracts to avoid conflict. Companies should also consistently enforce the rules, but not in an oppressive manner.
Supervisors and managers should receive training so they can manage team members and deal with overtime-related issues better. They need to know how to prevent as well as stop unauthorized overtime, as well as avoid companies becoming involved in expensive lawsuits. In a nutshell, using clear, transparent communication and leveraging technology such as cloud-based time-tracking tools are a business’ best line of defence in preventing unauthorized overtime.
By taking a proactive approach in creating, managing and implementing overtime policies, an organization can ensure employees work only within their designated working hours, without taking a toll on productivity and efficiency.
Dean Mathews is the founder and CEO of OnTheClock, an online employee time-tracking app. He can be reached at www.linkedin.com/in/dean-matthews-yes or, for more information, visit www.ontheclock.com.
© Copyright Canadian HR Reporter, HAB Press. All rights reserved.