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Frequently Asked Questions About Managing Employee Time

Managing employee time accurately and efficiently is vital to the success of an organization. While the rules around managing employee time can be nuanced, labor laws must be closely followed to ensure your organization is in compliance and employees are appropriately protected.

To help, we’ve compiled answers to common questions our church, higher education, and nonprofit clients ask us about managing employee time. Be sure to check with your legal counsel about regulations specific to your state before implementing any policies or practices.

 

Q: Who is eligible to receive overtime pay?

A: Non-exempt hourly and non-exempt salaried employees who exceed 40 hours worked during the workweek must receive overtime pay at a rate not less than time and a half their regular rate. Exempt employees are not eligible for overtime pay, as should be stated in their employment contracts. Our article on Determining Worker Classifications provides an overview of exempt versus non-exempt employees.

 

Q: Can our employees bank their overtime hours as paid time off (PTO) to be applied to a future pay period?

A: Under the Fair Labor Standards Act (FLSA), banking excess hours worked for non-exempt employees as comp or vacation time, or paying them at their regular rate on future paychecks, is illegal. The employee must receive compensation for overtime during the period it’s worked. As a common practice, state and federal agencies permit compensatory time off in accordance with the FLSA.

 

Q: Do our hourly and non-exempt salary employees need to clock in and out or can they complete timecards?

A: To comply with labor laws, it’s essential to track all working hours to ensure you compensate employees fairly for any extra time they spend working. Hourly employees can clock in and out on a physical punch clock or through your payroll system (online or in an app). Your employee handbook should include policies covering the deadline for submitting time for each pay period, the review and approval process for timecard processing, and other expectations.

 

Q: How long do we need to keep time and attendance records?

A: Employers should retain records on which wage computations are based (e.g., timecards, piecework tickets, wage rate tables, work and time schedules, and records of additions to or deductions from wages) for two years.

 

Q: How do we track hours for employees who work in multiple departments?

A: Employees’ hours end when they clock out from one department and begin when they clock into another. For example, if an employee worked 30 hours as a school aide and 20 hours in childcare, the total would be 50 hours and each department would pay for the hours worked by the employee in that department, including overtime. It is important to set up employees in each department they serve.

 

Q: If an employee voluntarily works on a holiday for which they were already being paid, how do we handle their pay?

A: Institute a policy that employees must obtain approval from their supervisor before working on a holiday. If the employee worked without the supervisor’s prior approval and the work was legitimate, the supervisor has the discretion to grant the employee a different day off during the current payroll cycle.

 

Q: What is the difference between sick time, vacation time, and PTO?

A: Some organizations have separate sick time and vacation time that is intended to be used either when an employee is unable to come to work due to illness or vacation time off. In recent years, many organizations have transitioned to a combined PTO practice, which doesn’t require the employee to distinguish between the various reasons for being unable to work.

 

Q: How should we manage PTO from year to year?

A: There are a few different ways organizations approach PTO from year to year. Some organizations have a “use it or lose it” policy under which any accrued PTO not used by the end of the calendar or fiscal year (depending on how the organization distinguishes from one year to the next) is lost.

Some pay each employee the equivalent of their remaining PTO hours at the end of each year. We do not recommend this practice, as it discourages employees from taking time off during the year.

Other organizations allow a certain number of PTO hours to be rolled over from one year to the next.

 

Q: What is the difference between granted PTO and accrued PTO?

A: Granted PTO is the total number of PTO hours allocated to an employee for an entire year of work. Accrued PTO is the total number of PTO hours allocated to an employee for the whole year of work, divided by the number of pay periods in the year.

Some organizations manage PTO by “granting” each employee their total number of PTO hours for the year on January 1. For example, if the employee is given 120 hours of PTO for the year, they can use all 120 hours starting on January 1. There are several issues with this practice, the most obvious being that an employee could use three weeks of PTO in January and then leave the organization.

Other organizations manage PTO by making PTO hours available as they are accrued. For example, at an organization using a biweekly payroll schedule with 26 pay periods in the year, an employee with a PTO allocation of 120 hours for the entire year would accumulate 4.616 hours of PTO per pay period.

 

Q: Can we control when employees take or don’t take their PTO?

A: This ultimately comes down to your internal policies, which can be based on your organization’s busy seasons, staffing levels, and needs. For churches, it would be reasonable to expect that pastors not take PTO on Easter weekend, as this could be one of the busiest times of the year. On the other hand, some nonprofits find that the week between Christmas and New Year’s Day is very slow and close their offices during this time, essentially requesting that their employees take the week off, whether that is incorporated into PTO or not.

We recommend good communication within the organization or departments to ensure that there will be adequate staff to maintain normal operations during common vacation times, such as the week of July 4 or Memorial Day.

 

Q: Can we require employees to take a consecutive week of PTO once per year?

A: Some for-profit businesses and large nonprofits have a policy requiring employees to take one consecutive week of PTO per year. This means that instead of taking a day or two of PTO here and there, employees must take five days in a row. While this is a best practice for identifying and preventing fraud, employers cannot legally require it. It’s also important to consider whether your organization has enough staff to accommodate this practice.

 

Q: Do we have to pay employees for their accrued PTO when they leave the organization?

A: This is up to your organizational leadership and should be articulated in your employee handbook. Some organizations have different policies about this based on the nature of the employment separation. These organizations might pay out accrued PTO if the employee resigns or is laid off, but not if they are fired.

 

Careful consideration and documentation can help your organization maintain compliance while managing employee time in an efficient and effective way. Please contact us if you have any questions.

Authors: Marisol Pereira, Accounting Supervisor; Stan Reiff, Partner and Professional Practice Leader – Consulting; and Chris Purnell, Partner and Tax Counsel

 

Additional Resource:

Determining Worker Classifications

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