Managing unauthorized overtime pay — policies, records and discipline to mitigate abuse

Unauthorized overtime pay can be challenging to mitigate for a business of any size, with Canadian law mandating that a business must pay employees for overtime, even if it was not pre-approved or needed. This payment must be 1.5 times the standard wage and can cost companies well over $3,000 per person per year on average.

What actually constitutes unauthorized overtime?

In Canada, the average employee works two hours of overtime every week, with the statistical average hourly wage now at $27. When calculating a yearly overtime wage, that comes to $2,808 per employee per year, before you even add the overtime wage multiplier.

Before looking at how companies can combat unauthorised overtime, it’s important to define what constitutes unauthorized in the workplace.

Understanding what unauthorized overtime

The most clear-cut authorized overtime is when an employee is specifically asked to or given permission to work extra hours for extra pay. Another form of authorized overtime would be a company that has guidelines allowing employees to work up to a certain number of extra hours per week for overtime pay.

For unauthorized overtime, there are three main types:

1. Traffic-beaters: employees who come to work early and/or leave later to beat the traffic — then claims the extra hours, even though the work could be completed within regular hours. This would constitute unauthorized overtime — unless a company allows it by policy — although the onus is on the employer to specify it is not covered
2. Home-work: Some employees finish up work at home — notably, checking and replying to emails. Although this is not generally allowable authorized overtime, it is best to specify whether home work is considered overtime in written policy.
3. Non-requested: The most obvious case of unauthorized overtime is when an employee simply works extra hours without request of team-leaders. Whether this is because of work overload or inefficiency is irrelevent. Written policy and guidelines is the only way to prevent claims for non-requested over time.

How can companies prevent costly unauthorized overtime?

Official policies 

The most effective way to solve any problems with unauthorized overtime is to issue a set of clear and well-documented guidelines. This official policy should state how many hours employees are allowed to work, the maximum number of overtime hours they can do per week, and the company’s overall stance on overtime as a whole. It is sensible only to allow paid overtime when it is pre-approved by a supervisor/higher-up at the company. This way it ensures that the overtime is needed, wanted, and guaranteed to be paid, keeping all parties happy.

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The policy in question should include several things, including the employees, said policy covers and those who are exempt from the rules. The company should make it clear how overtime is processed, recorded, and officially confirmed. There should also be a procedure in place that punishes/prohibits any repeated unauthorized over time, as this can be detrimental to the company’s efforts.

While an official written policy is a sound basis for overtime rules, it simply isn’t enough when it comes to effectively integrating the system into a workplace. Managers must be on hand to remind their employees of the rules and to single people out when they are disobeying them. This can come in the form of a verbal conversation or periodic notifications, emails, messages, etc.

Management

Solving unauthorized overtime often stems from the management processes of a workplace — and the education of employees at the company. If a person is overworked or is inefficient — and the work is stacking up — they are more likely to be forced into overtime. Therefore, managers at the company must stay on top of workloads and ensure they are playing to their team members’ strengths, rather than overloading them. Today, this is complicated as an increasing number of employees work remotely from home — making it harder to track milestone efficiency and time-management. An online system that logs work and time spent is an excellent solution to this issue. Many work processes, for example, can be set up on the “cloud” — with efficiency metrics and workflow management. Experienced teams often use a connected team project manager, for example.

Accurate records

Unfortunately, there are always some people who will attempt to cheat the system. When it comes to old-fashioned punch cards and manual timesheets, employees can easily manipulate the number of hours they have spent on work. Companies should be looking to implement up-to-date, accurate, online time records to ensure that overtime is monitored closely.

Discipline

While positive incentives for following the rules is always a good idea, pro-active intervention for undisciplined workers can be equally important. Companies should have fair disciplinary measures in place to warn employees when they breach overtime policies, particularly repeat offenders. Often, these mitigating actions would be in the form of a verbal warning, followed by a written warning, and then a suspension — but, only, of course, if there is a written guideline. Withholding pay is not an option, in any situation. In extreme cases, with proper documentation, termination is the most extreme option.

Do you need help with unauthorized overtime of payroll? Contact the experts at Pivotal.