In the United States, the Fair Labor Standards Act defines overtime as working more than forty hours in a workweek. The rate of pay that must be legally paid is 1.5 times the regular rate. If you work in HR, in the States or elsewhere, you need to be aware of how there are different rules for different kinds of workers. The payment process for a freelancer will not be the same as an employee and freelancers do not receive all of the same benefits that employees do. So, you need to know how to handle freelancer overtime.
Record-keeping Is Vital
First and foremost, whether you are handling the payment records for contracted employees or independent freelancers, maintaining excellent records is crucial. For instance, if a worker disputes his or her overtime, as long as you have up-to-date and accurate records, you can easily discover whether the dispute is valid. If it is, you can then take steps to settle it before the worker decides to take legal action.
Using pay stubs is an excellent and transparent way of record keeping. A pay stub contains a worker’s payment details, such as the salary paid, taxes paid, and overtime hours worked. By using an online pay stub maker, it is quick and easy to generate pay stubs for employees and freelancers.
Make Sure All Workers Are Classified Correctly
Overtime payment lawsuits often happen due to improper employee classification. So, you should always make sure freelance contractors are not misclassified in order to avoid payment disputes. But it is just as important that you do not misclassify employees as independent contractors.
In the US, overtime must be paid to employees who work more than forty hours per week. Some companies try to get around that legal requirement by reclassifying workers as independent contractors. However, under the Fair Labor Standards Act, anyone who works more than forty hours a week is entitled to overtime pay. Furthermore, as far as the law is concerned, titles such as “employee” and “contractor” are not as important in proving whether an individual is an employee or contractor. Instead, it is the economic realities test that matters. That means establishing whether the individual worker is truly in business for him or herself or whether he or she is financially dependent on the employer to make a livelihood. As an HR professional, you should ensure that all workers are correctly classified so that overtime disputes do not occur.
Understand Overtime Laws for All Kinds of Workers
Many industries frequently hire freelancers. However, hiring freelancers can sometimes cause administrative and financial headaches. In the US, there are state-specific regulations that apply. So, many businesses have changed their approaches by hiring freelancers as temporary employees. Under that approach, businesses often believe that the temporary worker would receive a fixed amount for each day worked, regardless of how many hours the person worked in a day. Therefore, many businesses believe they do not have to effectively pay overtime. The problem is when W-2 temporary employees are paid a day rate, they are actually entitled to overtime rates. W-2 freelancers are also legally obliged to track their hours to receive overtime pay. If a W-2 temporary employee fails to track his or her hours and is not paid the overtime he or she is entitled to, the company would face legal liability and potential hefty financial penalties.
HR departments need to fully understand the rules concerning overtime for all kinds of workers to make sure overtime is paid correctly and their companies do not end up facing legal action.
PlatoAi. Web3 Reimagined. Data Intelligence Amplified.
Click here to access.
Source: http://hrnews.co.uk/how-should-hr-departments-handle-freelancer-overtime/
