What Is Construction Overtime and How Do You Calculate It?

Construction overtime is the pay given to employees for every hour they work over 40 hours a week. It’s federally mandated and must be paid at 1.5x the worker’s typical hourly rate.

If you run a construction company, you’re probably well aware of overtime pay. It’s something managers and owners try to avoid at all costs.

The reason for this is simple: every hour of overtime worked means 50% higher costs and lower profits.

What’s more, the labor law is complicated, and many construction firms fail to comply with every aspect of it. This means being at risk of fines, or even imprisonment, for failure to comply.

Just recently, a filing has been made against a stadium subcontractor in Nevada who has repeatedly been violating the Fair Labor Standards Act (FLSA). Since 2010, Nevada has recovered over $19 million from 1,615 companies that violated the FLSA.

Thankfully, there are several ways to reduce your overtime bill (or eliminate it) and fully comply with the law. We’ll break these down below.

The federal government mandates that overtime is paid to all non-exempt employees working over 40 hours per week. Every hour of overtime worked is paid at 1.5x the worker’s typical hourly rate — it’s that simple.

Which construction workers are exempt from overtime?

The only workers exempt from overtime entirely are independent contractors.

The law doesn’t classify independent contractors as employees, and you’re not required to pay them overtime.

However, there are two downsides to using independent contractors:

• They are often more expensive per hour compared to employees.

• The federal government is taking a harder stance against companies that use contractors instead of hiring employees.

Construction companies using independent contractors often treat them like employees. This is against the law.

Contractors are entitled to different working practices compared to employees, and all construction companies should be aware of this.

Failure to differentiate these two roles means risking a fine.

In 2019, a construction company in Florida had to pay over $178,000 in back pay for violating overtime rules and misclassifying workers as contractors.

High-level employees aren’t exempt

It’s important to know that, unlike other industries, construction is not able to benefit from the FLSA Section 13(a)(1) exemptions.

This section relates to employees who meet certain requirements and are paid the equivalent of more than $684 a week.

In the construction industry, overtime applies to any worker, no matter how much they are paid or what their position is.

This means that overtime pay applies to all of your construction employees.

Check in with your state laws

Don’t forget to reference your state’s specific regulations around overtime pay.

Some states apply overtime provisions to certain industries or have a different rule for exemptions.

Hawaii, for example, states that an employee earning more than $2,000 on a monthly basis — guaranteed — is exempt from the state overtime law.

That said, you should always consult a professional before making payroll decisions as they’ll know your business, employees, and state laws.

To calculate the overtime amount, follow these steps.

• First, add up the total hours worked for that week for one employee. If you recall from above, any hours over 40 per week for non-exempt employees are considered overtime. Subtract 40 from the total number of hours to get the number of overtime hours.

• Then, take that employee’s typical hourly rate and multiply it by 1.5.

• Finally, you’ll multiply that new hourly rate by the number of overtime hours to see how much you need to pay them.

Here’s an example of how this might look if an employee works an extra 15 hours one week.

• 55 (total hours worked) - 40 = 15 overtime hours

• $17/ hr (employee’s normal hourly rate) x 1.5 = 25.5

• 15 (overtime hours) x 25.5 (overtime pay rate) = $382.50

The potential of paying 1.5x pay for additional hours of work is not one that most construction company owners or managers want to entertain.

Thankfully, there are several ways to lower or eliminate overtime.

1. Reduce overtime by using contractors

Bringing on contractors can help you reduce overtime pay by allowing you to scale up your workforce when you need to. They can slot into your site and take on time-consuming tasks that would push your full-time employees into overtime territory.

Bringing on subcontractors to tackle a specific part of your build (e.g., electrical, concrete, or drywall) can save you from overtime expenses. However, you should be ready to pay specialists for their expertise.

Fail to do so, and you may end up facing fines.

2. Eliminate overtime with temporary workers

Using temporary workers that you can pull in at short notice can help you eliminate overtime costs.

Temporary workers can be as skilled as your current employees and can take up the additional responsibility of completing tasks and jobs on-site. Usually, temp workers are available at the same or similar rates of pay as your employees.

They can take on tasks that your current employees aren’t skilled at doing, aren’t able to do, or don’t have the time to do.

If you’re thinking of using temporary workers, start now by building up a network and a contact list of workers who are available for short notice and short-term work.

3. Track work hours better with GPS construction time tracking software

It’s easy to unexpectedly reach overtime hours when you’re only getting timesheets at the end of a pay period.

On the other hand, if you’re constantly up-to-date on everyone’s hours, and can see how much of the project budget has been used, it’s much easier to adjust the schedule.

Tools like Hubstaff’s time tracking with geofences for construction make it easier to understand what your employees are doing throughout the day by sending daily time cards straight to your inbox.

Running as a lightweight app on your team’s mobile devices, Hubstaff accurately tracks hours and locations throughout the workday. You can see where your crews are, how much time has been put into a project so far, and even when they’re in transit to get more supplies.

Hubstaff allows you to automate the clock-in process by setting up digital geofences around your various job sites. When someone enters or leaves a job site, time tracking automatically starts or stops. It’s that easy.

One construction company, Everbuild, uses Hubstaff to reduce the amount of time they spend tracking down crews and their time cards. This helped Everbuild to streamline payroll and eliminate the time-consuming process of reporting hours.

4. Cross-train your employees

Once you’ve implemented Hubstaff time tracking to track crews and their shifts, it’ll be easier to identify who has more time and who has a full schedule.

For those who have more availability, take advantage of cross-training so they can jump into other roles as needed.

The benefit of this is that you can reassign tasks when you need to, and prevent overtime hours.

For example:

If your roofing team can work 30 hours a week and get their tasks completed properly and on-schedule, each employee has a spare 10 hours per week they can spend on a second project at the same site. Or, they can drive over to help with another job.

These surplus 10 hours per week are paid at the standard hourly rate and mean you are no longer required to pay an extra 50% for employees to complete the tasks using overtime.

Now that you know exactly what the rules are regarding construction overtime pay and how to reduce your overtime costs, it’s time to get going.

Start by calculating your current overtime costs per week or month. Then, look into hiring subcontractors or short-term workers to pick up jobs on-site and keep overtime hours down.

Long-term, look at reducing downtime and increasing productivity with GPS time tracking apps like Hubstaff. You can use the information you gain from Hubstaff to cross-train your employees, create better and more efficient schedules, and eliminate the need for overtime entirely.

Over time, you’ll find that your need to pay 1.5x for overtime dramatically reduces and that your projects get completed on time and within budget.

This article is intended to convey general information only and not to provide legal advice or opinions. Information is current as of the date published; overtime changes may have been made since this article was created.