Lately, a few of our team members have been working with the healthcare overtime calculation for the healthcare industry. Many people are not aware that the healthcare overtime calculation is different from the typical overtime calculation. What makes it different, you might ask? Well, in the healthcare industry, a new rate is determined for overtime. This new rate is called the “regular rate” and includes shift differentials, on-call pay and other types of extra pay. Many healthcare workers that make these shift differentials and other additional pay do not realize that their overtime rate is calculated differently. It’s also pointed out by the Department of Labor that many healthcare providers are not paying the overtime in these healthcare environments in accordance with the FLSA.
Just about every nursing home and hospital that we service, pays employees with shift differentials, on-call pay, or some other pay to entice their employees to work less desired shifts. Working with various healthcare clients, we have discovered that some employers pay the average overtime rate to employees, while others don’t include the additional pay in the calculation of the overtime rate. Instead, they are paying employees at time and a half of their original rate. In a nutshell: Many healthcare providers are not paying overtime exactly how it is outlined in the FLSA.
It seems that providers need to know how it’s calculated if they do not already know how it’s done and healthcare industry employees that receive this extra pay, should know if they are being paid correctly. Here are a few things to point out about the FLSA in a healthcare provider:
- Healthcare providers can choose between a fixed fourteen day, 40 hour per workweek period in computing overtime, called an 8 and 80 system, or the standard 40 hours system. It makes a difference!
- Hospitals and other institutions “primarily engaged in the care of the sick, the aged, or the mentally ill” are covered employers under Section 3(s)(1)(B) of the FLSA. Thus, hospitals, residential care establishments, skilled nursing facilities, nursing facilities, assisted living facilities, residential care facilities and intermediate care facilities for mental retardation and developmentally disabled must comply with the minimum wage, overtime and youth employment requirements of the FLSA.
- Nonexempt employees must be paid at least time-and-one-half their “regular rate” of pay for all hours worked over 40 in a workweek. The “regular rate” includes an employee’s hourly rate plus the value of some other types of compensation such as bonuses and shift differentials.
- The only remuneration excluded from the regular rate under the FLSA are certain specified types of payments like discretionary bonuses, gifts, contributions to certain welfare plans, payments made to certain profit-sharing and savings plans, and pay for foregoing holidays and vacations.
- A common error in calculating overtime pay by health care employers involve the failure to include bonuses, shift differentials and other types of compensation in the regular rate of pay. Errors are also common in the health care industry in calculating the regular rate when an employee works two or more different jobs in a single workweek.
- There is no limitation in the FLSA on the number of hours employees over the age of 15 may work in any workweek. The FLSA does not require overtime pay for hours in excess of eight hours worked in a day (exceptions apply) or for hours worked on Saturdays, Sundays, or holidays.
For much more detailed information, call our office or visit the Department of Labor’s Wage and Hour Division site or call 1-866- 4USWAGE (1-866-487-9243).
Contributing author Andrew, is a CPA with just under 2 years of experience. Andrew wants to learn how to play the drums one day.
Contributing author Jason, is a Director in healthcare services with over 15 years of experience in the healthcare industry. Jason starts his day at 530 a.m. with an hour and a half workout in the pool. He would like to learn another language or two one day.