Should I pay overtime for salaried employees?
We are a new startup with a small team. We are able to offer our employees minimal salary compensation with some benefits. Everyone has been putting in overtime lately in order to really scale our business and make it successful. I want to the team to know we recognize their hard work but I'm not sure the best way to do so. Is compensating them with overtime smart?
I think the best thing to do is to give them a bump in the salary by 5-10% or you can choose to hire a couple people part-time (hourly) to do some of the tasks. You will lose if you try to pay your salary employees overtime and it's not worth it. The other choice is to have them work different hours so the next person can pick up where the previous person left off.
sure if the work is beyond the contracted job. If they are adding to the business, then it should be recognised.
I have another suggestion. You give them extra bonus instead of overtime. Overtime can be misused in the longer time but Extra Bonus is recognition of Extra Efforts.
Prefer paying "Timely Target Completion Award" instead of overtime.
Gift cards - It's compensation that says "Thank you" rather than, "This will happen constantly."
As a rule, salaried employees do not get paid overtime. The rationale is weird, but that is the "law" in most states, if not all. You situation is different as you can have a party to show how much they all mean to you and as a form of celebration. In addition, you can provide everyone some form of money such as gift cards (generic ones so they can use them anywhere), you can do cash as long as it is the same for everyone (same goes for the gift cards).
Congratulations on having a team that is working to make the business successful; that is an AWESOME accomplishment for you. It means your people trust, respect you,and are willing to do whatever it takes to make the business successful. Most entrepreneurs only dream of having that kind of a team.
Mr Daniel, this question should have been asked before you allowed them to work overtime. However, looking at the future, they do need to be compensated because without asking for anything or rather expecting anything, they worked to scale your business. Give them all kinds of recognition. Florence MacDonald
I've been reading all of the fancy answers and most are true. If you ignore all of the legal stuff and go to the human side you will have your answer. The fact that you are asking the question shows that you are concerned about your employees. Thank you. You should never need to worry about the legal if you do what is morally right. I was taught that I should give an honest day's work for an honest day's pay. It is also true that you should give an honest day's pay for an honest day's work.
All of us have 24 hours and we choose how we spend that time. There needs to be some sort of benefit for what we use each hour doing. If you have hired someone with the expectation that they are being paid for 8 hours a day, and you ask them to work more hours, they MUST receive a fair benefit for investing their time in you. A simple handshake and a thank you is not enough benefit for their extra investment. If they don't have a direct benefit from you for working extra hours, you are a self centered egomaniac that doesn't care about people.
I was a salaried employee for a large company. They sent out a memo directing all salaried employees to work 10 additional hours each week. Those extra hours were to replace hourly employees time. They did not offer any extra perks or compensation for that extra investment in time. They said that is was to help the company make more money.........This had a chilling impact on my, and others, moral. Nearly all of us left the company within 6 months....enough time to find a new job.
So, if the extra hours do not directly benefit the employee working them, you should make a change immediately. They SHOULD get a benefit commensurate to their efforts, and not some HOLLOW "perk".
Just my opinion.
Your team needs to be recognized orally but also through your deeds. This can be in form of overtime, bonus, time off, celebration retreats, gift certificates, or a combination. You are the best judge of the mix.
In my opinion, paying over time is not very motivating or inspiring. I would prefer a good team celebration in a restaurant/resort where you acknowledged their extra efforts with a token financial bonus.
How you organize it and how you express your recognition will determine the continued support from your team. By the way, I would use part of the celebration to hear the self-assessment for improvement going forward from the team members.
For the salaried employees to pay overtime in the initial phase of your business is not a valid option. Talk to your employees about for incentive program with dead line to complete the project in time. Once you know that they are working in your interest and company interest. Design some gift cards or a family dinner by thanks giving or Christmas time to show your gratitude towards their hard work.
Most small businesses it works. In case you want to give some monitory benefits get some gift cards keep the receipts for you to claim at the end of financial year.
I think there are three issues/questions.
1. What expectations did the firm set when it hired the people? And what did the employees accept?
2. Legal obligations vs moral obligations
3. Can you afford it in the short term?.
If you offer someone a job and explain what they can expect in terms of remuneration, other benefits, recognition of their contribution, bonuses, shares, profit share and so forth, they know what they are signing up for. They know it's a start-up and they know that their contributions in the early days will enable the business to grow. If you say at the outset that overtime or additional remuneration is not going to be available in the short term because we are growing and we need all the cash we have to fund growth and employees accept that, then that's the end of the discussion.
If you don't set expectations up front, before a person starts their job, you can be in for a bumpy ride.
I don't think that most people joining a start-up expect big salaries or to be paid overtime while the company is trying to grow rapidly. It makes no sense to join a star-up if you expect big dollars and to receive extra compensation until the company is able to afford it.
LEGAL vs MORAL OBLIGATIONS
Employers obviously have to comply with the law for obvious reasons. Then there's the moral oblifation of rewarding people for the extra effort they willingly put in. If you disclose the company's financial position and where it really needs to spend its cash in the short term, then you are engendering commitment and loyalty.
In addition, the owners of the business should demonstrate that they are not taking big salaries.
What will happen to the company's ambitions if it diverts money from growth strategies into additional remuneration. I think employees can answer that question.
You can set up stock options or profit share schemes or bonus schemes to reward contributions down the track. Start-ups who pay people overtime are being financially irresponsible. Employees understand that they can't have their cake and eat it too.
For example, if the business is a start-up accounting firm, employees know that they are not joining KPMG.
Bottom line, the owners of a small outfit should be consulting employees about what they want. If you layout the company's financial position and projections, employees can see that paying overtime doesn't make sense.
For example, if you say that the company wants to allocate $100k to marketing this year and that money is designed to triple the firm's income, but if we use that money for overtime, we will not grow at all, I think people will get it. They didn't join a start-up to make market rate salaries.