Human Resource Blog

Hourly Employees Averaging Hours

We’re a small company and our employees would like to be able to average their hours over two weeks so they can make up time instead of using PTO for different events. Is that something we would be able to do or would we have to follow the FLSA which requires overtime after 40 hours in a week?

If the federal FLSA applies to your company, yes, you do have to follow the law — even if sometimes your employees would prefer that you did not. We are also going out on a limb and say…it is up to the employer to set reasonable employment policies, and the employees to follow them. Once you start letting employees dictate company policy to you, it almost always results in problems.

The FLSA applies to any company that has annual revenue (not profit) over $500,000. In addition, the law applies to any company that engages in interstate commerce. Examples of interstate commerce are having a company website or internet connection, buying from out of state venders, selling to out of state customers. Any company that accepts credit cards also engages in out of state commerce, becasue the credit card companies are in various states.

Even if your company does not engage in interstate commerce, individual employees might be covered under the FLSA. An employee who answers out of state calls or mail would be covered.

In addition, most states have minimum wage laws and many have state overtime laws. The minimum wage laws require that every employee always be paid for every hour the employee works in that payroll week. Often, they require that the employee be paid overtime after 40 hours in the payroll week.

And finally, it is a best practice in HR to follow the FLSA, because (hopefully) some day your company will grow to that point. You do not want to be caught unaware violating federal employment laws.

We understand the dilemma for your employees. Suzie needs to be off 5 hours this week for her daughters school play, so she works only 35 hours this week and uses 5 hours of PTO. Next week, Suzie is available to work 45 hours. She would rather work 35 hours this week, 45 hours next week and be paid for 40 hours each week, without having to use any PTO.

But under federal (and some state) laws, Suzie must be paid time-and-a-half for the 5 hours of overtime during the second week.

The solution, of course, is for Suzie to work 5 extra hours at some point during the same payroll week that she takes time off. Suppose Suzie worked 2 extra hours on Monday, and 3 extra hours on Tuesday, and took off 5 hours on Wednesday. She is still working 40 hours in the payroll week and you do not need to break the law to make her happy.

If your company is so small that you are not covered by any federal or state overtime law, it is unclear why you would be paying overtime to any employee, ever, anyway.

If you choose to disregard our advice and allow employees to do this, be sure that you keep accurate payroll records, including the exact number of hours that each employee worked on each day.