What is the Correct Way to Calculate Overtime Charges to a Customer?
Question: What is the correct way to calculate overtime charges to a customer? We have the direct costs as well as overhead in the basic hourly rate. Would we just add the increase of the employee hourly rate or just add 50% to rate charged the customer? Would the same method be used for double time, etc.?
Answer: This real question here seems to be one of customer relations, i.e., should we charge specifically for overtime. From an FLSA perspective, the only question is whether the employee who’s eligible for overtime is receiving overtime and that it’s correctly calculated (1.5 times the regular hourly rate for hours over 40)
The amount charged to a customer for overtime and the rate at which we pay an employee for overtime are unrelated. We can choose to charge a customer an overtime rate that is higher than the rate at which we will actually pay the employee. We can choose not to charge for overtime at all. The contractor response below seems to go in that general direction in suggesting a number of options for charging the customer, such as only charging customers without service agreements for overtime.
This response is intended for general informational purposes only and should not be construed as legal advice or a legal opinion, nor is this column a substitute for formal legal assistance. For help with particular legal needs, members are invited to consult with Brooke Duncan III of Adams and Reese LLP. Mr. Duncan can be reached at 504-585-0220 or by email at firstname.lastname@example.org.
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