Unauthorized overtime: What it’s costing you and how to prevent it

Unauthorized overtime can cause major problems for your small business. Higher costs, lower worker morale and productivity, and higher turnover are just a few ways overtime can result in a headache. And yet for both owners and employers, unauthorized overtime remains one of the most common work afflictions affecting teams every year.

If you get one thing out of this post, and one thing only, it comes down to this: your employees are almost always legally entitled to overtime pay, whether it’s authorized or not.

So, forget dealing with it after the fact. Prevention is key, which requires clear policies governing how and when your workers work overtime.

What is overtime?

In the context of work, overtime is any time worked beyond a normal 40-hour workweek. For the time worked beyond 40 hours, workers are entitled to a rate of overtime pay that’s at least one-and-a-half times their normal rate.

For example, if you normally pay someone $20 an hour, you need to pay them at least $30 an hour for overtime.

What is unauthorized overtime?

Unauthorized overtime is any overtime that isn’t cleared by management ahead of time.

It can be blatant (think asking team members to stay extra hours to meet an inventory deadline) or incremental overtime. Incremental overtime is the more common occurrence. It happens when someone arrives a few minutes early or clocks out 10 to 15 minutes past their shift. This can also be called time theft.

Unauthorized overtime also isn’t all nefarious. Accidental overtime is pretty common, especially without limits set up to prevent it.

It happens to the best of us. Think of any instance that you lost track of time while working, on personal or professional projects. Still, as common and innocent as this is, when done en masse by your workers, it still has the potential to negatively affect your business.

Here are some more common scenarios of unauthorized overtime:

• Working through an unpaid break
• Responding to messages and checking emails after clocking out
• Deciding to stay after opening hours to finish something

In all of these instances, overtime is only applied if your employee tracks their time hourly. In many salaried positions, the above examples wouldn’t be considered overtime, as they’re commonly included in regular duties.

When is a worker legally entitled to overtime?

The federal overtime provisions state that overtime pay must be paid to non-exempt workers who work over 40 hours in a workweek.

Both hourly and salaried workers can be considered non-exempt, as long as they:

• Earn less than $684 per week or $35,568 annually
• Perform job duties outside of the exempt professions

There’s no limit stated in the act for how many overtime hours someone can work in a week. Whether it’s 45, 60, or 80 hours, you still have to pay overtime.

Also, working on weekends, holidays, or regular days of rest doesn’t automatically qualify someone for overtime. But if overtime happens to take place during one of these periods, then that person is entitled to overtime pay.

For example, if the 41st hour of someone’s work week falls on a Saturday, then they may be entitled to overtime, but not the 40th hour.

Why it’s important to prevent unauthorized overtime

Every year, unauthorized overtime affects employers. It costs you time, money, and your team’s morale—and that’s if you’re lucky.

Higher costs

Depending on your situation, you might be losing thousands, if not tens of thousands per year to unauthorized overtime. Particularly if you’re not great at keeping track of scheduling for your team, it can be difficult to know how much you’re paying each staff member. Preventing accidental overtime redirects funds you would be spending on hours back to your bank account.

Lower worker morale and productivity.

The majority of regular, non-overworked teams already report that stress affects their productivity. When they constantly work more than 40 hours per week, productivity and morale erode even more, properly compensated or not. Creating a system and culture that limits overtime helps avoid this scenario.

Higher turnover

The data is clear: given the option to work less and get paid the same—or even less—somewhere else, workers will head for greener pastures. On the other hand, if workers feel like they can’t get overtime through the correct channels, this can also lead to resentment and staff turnover.

Safety risks

When workers take overtime without letting you know, there are fewer support systems in place for you as the employer. If they’re tired or overworked and something goes wrong, or someone’s safety is in jeopardy, you’ve got big problems. Not only could it be a safety violation, but you could also get into some murky water if it’s not clear whether that person is technically on the clock. And it doesn’t stop at work. If someone’s overtired after an overtime shift—especially if they’re a night shift worker—they could be more likely to cause an accident if they’re behind the wheel. Despite affecting worker safety, this is a consequence of overtime that’s often not talked about.

Overall, you don’t want your workers to feel like they need to work extra hours to get the job done. Specifically, you don’t want them draining themselves, driving up their paycheck unnecessarily, and risking their safety in the process.

How to prevent unauthorized overtime for hourly workers

With the right policies, communication, tools, and consistency, unauthorized overtime is very preventable. Regardless of your line of work, here are five tips to help you create a system that effectively prevents unauthorized overtime:

1. Implement a digital time clock system

Before you can plug the overtime holes across your teams, you first have to know where they are—and a time clock system will help you find them.

Whether they’re working at or away from a device, a time clock like Homebase tracks when and how long your team works, including overtime. With everything accurately linked to your schedule and payroll, it’s easy to review your timesheets at the end of each week to find out where unauthorized overtime is happening.

Where time clocks really shine is in uncovering incremental overtime, which is often a bigger culprit than bigger, more obvious chunks of overtime. For example, say you notice a worker logging 40 hours and 15 minutes four times per week.

This works out to four hours of unauthorized overtime per month. Assuming this person regularly gets paid $15.50 per hour, their overtime pay is $23.20 (time and a half), meaning they’re costing you an extra:

• $23.20 per week
• $92.80 per month
• $1,113.60 per year

With the right time clock, such as Homebase, you can catch scenarios like this early on before they burn too big of a hole in your profit. You can also get late clock-in alerts to make sure your workers are on time, manage labor leakage with alerts when workers approach overtime, and auto clock-out when they forget.

2. Set and communicate clear overtime limits

Communicate with your team so workers are less likely to take unauthorized or accidental overtime. Establish limits on how many hours of overtime you allow per month or year.

Beyond having these limits in place, take steps to make sure your workers know they exist. And no, this doesn’t mean a sticky note to the team bulletin board will suffice.

A better approach is talking about your overtime limits during recurring meetings. As well, include them somewhere people will see every day, like your worker portal or time tracking system. You should also include all your policies in a digital welcome package for employees. When you onboard your employees, have them sign back to ensure they’ve read it. A welcome package is a great spot to include detailed policies on accidental overtime, overtime pay, sick days, absenteeism, etc.

In addition to making workers think twice before working overtime for policy reasons, consistently talking about these limits also helps create a culture where workers feel less pressured to work beyond their scheduled hours—even when the pressure’s on.

Limitations on double shifts or shifts longer than eight-hour have a similar effect. For example, limit back-to-back shifts leading to eight hours of work or more to emergencies only, especially for overnight shifts.

Changes like these lead to less unauthorized overtime, healthier, more productive teams, less burnout, and lower turnover rates.

3. Cross-train your workers

You’re finishing up for the day, you greet the next shift as they walk in, and a problem pops out of nowhere that only you can fix. Do you leave the problem with the new, unequipped shift and potentially put them in harm’s way? Or do you stay late and fix the problem yourself?

Unfortunately, scenarios like this one are far too common—and a big reason why workers work unauthorized overtime.

One solution is to make sure that you’re not relying too much on a single group of workers to do certain types of jobs or tasks. This is especially the case if those jobs or tasks are vital to keeping your day-to-day operations running.

By training your workers to be more versatile—or at least able to fix a wider array of problems—you help your teams be able to more easily adapt. You’ll also end up with fewer scenarios where workers feel forced to work overtime to save the day.

Making on-the-fly schedule changes possible can also help avoid these types of scenarios. Using Homebase, for example, you can find coverage for open shifts in a pinch. Homebase makes things easy for your team to pick up or trade shifts. You’ll get alerts to manage overtime, but won’t have to send out numerous texts and emails.

Returning to our example, the worker or shift manager could look at available people, find a replacement, and arrange a takeover. This way, the current worker isn’t left on the hook and forced to stay working unauthorized.

4. Match staffing levels to work demand

Curious what the biggest driver of unauthorized overtime is? We’ll tell you. It happens when you create more work than your workers can handle, or do the opposite and understaff your shifts. To find out if this is the case with you, take a look at your timesheets.

When you look at your workers’ timesheets, do you see any patterns when it comes to overtime? For example, do you notice most unauthorized overtime being done by workers belonging to a certain shift, or working at a certain time of year?

Work done by your workers is rarely constant—it fluctuates depending on the season, shift, department, and all kinds of other factors. As a result, some workers are left doing most of the heavy lifting. This requires them to tap into overtime to finish everything. If you’ve understaffed your business, you’ve likely seen this even more frequently.

Once you know where uneven workloads are taking place, look into ways to more evenly distribute the work. This could be bigger shift teams, longer timelines, or optimized antiquated parts of your process.

To make sure your assigned work never goes beyond your workers’ capabilities, use Homebase to auto-schedule ahead of time. Our scheduling accounts for a wide variety of factors, including availability, overtime limits, sales forecasts, and labor targets.

The end result? Exactly the right amount and types of team members are working at the right time.

5. Create a fair, easy-to-use system for overtime distribution

If your employees are continually logging overtime, invest in a way to fairly assign overtime that isn’t word of mouth.

Sometimes workers take unauthorized overtime because they think managers play favorites. For team members who want overtime hours, going through official channels is a waste of time because the overtime is going to end up going to someone else anyway.

Having a system in place that fairly distributes overtime opportunities can fix this. Your system could be as simple as:

1. List workers by seniority level, with the highest seniority levels at the top.
2. Give the worker at the top of the list first dibs when an overtime opportunity pops up, moving down the list to the next worker if they refuse.
3. After asking each worker, move them to the bottom of the list, regardless of whether they say yes or no.

This system also deters so-called “overtime hogs”. This small percentage of workers take the majority of available overtime hours. They’re more likely to use overtime for underhanded reasons, like time theft. And maybe most importantly, they can cause other workers to feel hopeless about getting authorized overtime, creating a hostile or toxic workplace.

Giving everyone an equal chance restores hope across your teams and makes them less likely to go the unauthorized route.

Take back control of your labor costs

Without a prevention plan in place, unauthorized overtime can take a toll on your savings, as well as your workers’ morale, and safety.

Apply the tips above with Homebase timesheets and payroll to implement the ultimate prevention plan. Manage labor leakage, pay out overtime when needed, and prevent future unauthorized overtime for good.

Create your free Homebase account today.

Unauthorized overtime FAQS

What’s the difference between overtime and unauthorized overtime?

The difference between overtime and unauthorized overtime comes down to approval. Both authorized and unauthorized overtime is time worked by a worker beyond 40 hours in a work week, but unauthorized overtime is not approved by management ahead of time.

An example of authorized overtime is asking a manager to work late one evening, getting approval, having that overtime officially scheduled, and then working said evening.  Similarly, an example of unauthorized overtime is not asking a manager to work late that evening but doing so anyway.

How does unauthorized overtime happen?

Unauthorized overtime can happen for a number of reasons, ranging from accidental to nefarious. These reasons include:

• Uneven work-to-staff ratio
• Lack of time tracking system in place
• Unfair overtime distribution system
• Unclear limits around allowable overtime
• Intentional time theft
• Too few capable workers to handle sudden problems

The good news is that you can solve many of these issues with a clear policy around overtime, detailing how much of it you allow, how it’s tracked, and who’s entitled to it when.

But remember: even the most detailed policy doesn’t do you any good if it’s not clearly communicated and enforced. This means consistently ensuring your workers understand the rules and enforcing them on a day-to-day basis.

3. Are shift workers and hourly workers entitled to overtime?

Shift workers and hourly workers are entitled to overtime as long as they work more than 40 hours in a workweek and are considered non-exempt by the Fair Labor Standards Act (FLSA), meaning that they:

• Earn less than $684 per week or $35,568 annually
• Perform job duties outside of the exempt professions

4. How can I easily track my hourly workers’ hours to avoid overtime?

Avoiding overtime starts with getting a realistic picture of your workers’ working schedules. This includes early clock-ins, late clock-outs, working lunches, and any other subtle and not-so-subtle scenarios where extra time is being logged.

To do this, use Homebase to automatically track and analyze hours, breaks, overtime, and time-off information.

You can then pinpoint situations where unauthorized overtime is happening, dig into the reasons why, and take action to help prevent it in the future.