How to Legally Avoid Paying Overtime Wages [Reader Question] | Human Resources

Last week I got a question in the mailbag that was short and to the point.

How can we avoid paying overtime to employees?

My answer was short and sweet:

I’m pretty sure that there is a point to making overtime wages a required thing, and it’s to avoid questions like this. In reality, the way to avoid paying overtime is to work people less than 40 hours a week, manage a balanced staffing plan so that you have enough floaters and part time help to fill the gaps, and closely watch your trends in customer needs and staffing to make sure they match up.

I’d like to take a deep dive into this conversation and offer some specifics, because I think it’s a common question. I’ve heard many times over the years a variation on this: why pay out extra money when you don’t have to? How can you reduce costs and help the company be more profitable? What strategic part can HR play in this discussion?

Some of the key factors in overtime (especially high usage) may not be related to the actual job duties at all. For example, I’ve often found that overtime can be attributed to performance issues on the employee or the manager side of the equation. While that might not always be the case, it does come up more often than I’d care to admit.

Additionally, if OT is an issue, then the company needs to understand what is truly driving the overtime usage. Which people, which tasks/projects, etc. Is it variable or fixed in terms of workload? The answers to those questions will tell you what to do next. Is it a performance issue? A staffing issue? A workload issue? Each piece of that puzzle contributes in some way to overtime problems, and it’s important to dig deep and find out which is actually driving the numbers.

The short answer, though, is that you can’t legally avoid paying overtime. Don’t even try. Some employers get the bright idea to “make” employees exempt/salaried to avoid overtime costs, but that can’t just happen based on a whim. Additionally, it comes with other challenges that employers often don’t want to deal with.