New regulations are being wrestled with regarding overtime and salaried employees. For some people, having to pay overtime seems an unreasonable burden on their businesses. Here is a different point of view.

The only people in our company receiving a salary were the owners: me and my wife, Nina. Why? We carried all the risk. At the same time, we were away a lot. Our employees were all hourly. We paid time and a half after 40 hours and complied with the regulations regarding overtime.

Our thinking was this:

  • If it takes someone more than 40 hours routinely to do their job then their job description needs to be changed and/or someone else needs to be in that position. People need to have lives outside of work to be effective when they are at work. If they are always working, they never have time to rest.
  • 40 to 45 hours a week, maximum, makes sense to me for an employee. We budgeted for the needed overtime. If someone routinely was running at 45 hours a week, we would work together to see what could be taken off their plate or help them be a bit more on task during the baseline 40 hours.
  • Time cards are good. They help employees use their time more efficiently. They help the company job cost as much of a position’s time as possible. Often salaried employees do not keep time cards, as it is just “too much work.”
  • Our production manager needed 45 hours to do her job. She also wanted to be on salary. What we did was take her salary goal and see what that looked like with 40 hours of straight time and 5 hours of overtime to get her hourly rate figured out. That is how we paid her.

If a company runs by paying people salaries and they work 50 hours plus, then the business model is flawed. Likely there are inefficiencies in the model that require extraordinary effort to overcome.

To be truly successful a company needs to pay its employees fairly and allow them rich and active lives outside the company. Hour by hour, our lives go by. Pay them accordingly.