FLSA: Calculating overtime when travel time is involved
Do you know how to calculate overtime pay for this employee without running afoul of the FLSA?
Here’s the scenario: You pay a non-exempt employee who travels a lot on the job one rate for in-office work and another, reduced rate for when he’s merely on the road traveling and not doing normal work.
Calculating OT
Calculating overtime in cases like this actually aren’t as tricky as they first appear. At the very least, you have to calculate overtime pay for the employee using the employee’s average pay rate.
An example
This kind of legal pay policy is best illustrated with an example:
Say you’ve got an employee who regularly works 35 hours in the office a week, but also has to spend an additional 10 hours a week traveling on the job (commuting to and from work doesn’t count).
He earns $15 an hour for his regular in-office work and gets paid only $10 an hour for travel time.
So he earns $525 for his in-office work (35 x $15) and another $100 for his travel time (10 x $10).
That makes for a total weekly compensation of $625 for 45 hours of work ($525 + $100).
To determine his average pay rate, divide his total weekly compensation ($625) by the total amount of hours worked (45). That comes to an average hourly rate of $13.89.
So his overtime must be paid at the rate of $20.84 per hour, which is 1.5 times his average rate of pay.
Make it transparent to employees
Although this type of compensation structure is perfectly legal, the key to avoiding employee confusion and gaining their buy-in is to explain the breakdown in advance, so there are no surprises come payday.
Even though you’d be able to win a dispute — if one were filed by an employee — with the Department of Labor, you don’t want it to reach that stage.
Source: Labor lawyer Rich Paul of the San Diego law firm of Paul, Plevin, Sullivan & Connaughton, spoke at the 2012 LEAP symposium in Las Vegas.
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