Daylight Savings and How It Impacts Payroll/Wages - Abel HR

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Daylight Savings and How It Impacts Payroll/Wages

Originally, daylight savings time was designed to make the most out of sunlight and reduce reliance on fossil fuels, which were in high demand during the 1900s due to the World War.

However, if you really thumb through the history books, ancient civilizations adjusted their clocks accordingly to make the best use of the light and dark periods. Today, approximately 70 countries continue to observe daylight savings time, meaning that approximately 1 billion people are still trying to remember how to reset their oven clock at the time of this blog’s publication!

Jokes aside about the relative futility of the daylight savings time in today’s day and age, there is no one more bothered by the clock change than your payroll folks (except perhaps the parents of toddlers, who fail to observe such time shifts and continue to wake up in the wee hours!)

The reason it is such a headache is that for companies that operate with night shift workers, it means that they may end up working an additional hour unless their shift is shortened (which could cause a cascade of different hour shifts, with seemingly no end in sight). 

Fair Labor and Standards Act

The Fair Labor and Standards Act (FLSA) requires that employers pay non-exempt employees for all hours worked by employees on the overnight shift. As a result, your payroll should reflect that: 

  • Employees who worked when the clocks “fall” back for daylight savings time in November should receive 1 hour of additional pay UNLESS their start or end times are modified to reflect the time change.
  • By contrast, employees who work when the clock “springs” forward in March should receive 1 hour less, unless their start or end times are modified. 
  • Employees who are owed an extra hour because of daylight savings time must be paid overtime if the additional hour contributes to their clocking more than 40 hours for the pay period. 
  • The FLSA requires employers to pay workers one-and-a-half times their regular rate of pay for all overtime hours worked. Calculating the regular rate is not easy for those who aren’t on a traditional pay schedule (such as those who work on commission or tips), but federal law states that it can be determined by looking at the hourly rate for all non-overtime hours worked in a single workweek.
  • Therefore, if the employee worked an extra hour due to daylight savings time, it may need to be considered when calculating their overtime rate for the period. However, for employees springing forward and losing that hour of work, employers should not include that “non-worked” hour of pay toward any overtime compensation calculations.

Failure To Comply

Failure to comply with these rules can land you on the receiving end of some hefty fines and penalties, and even potentially a lawsuit, for failure to comply with wage and hour laws. So, how should you ensure compliance? 

One of the easiest ways is to have an effective HR system that automates much of this process so that you don’t really have to consciously go in, tally up the time, and start doing the kind of math that would make a seventh grader proud!

At Abel HR, we have such a system, but we also go the extra mile and have our payroll certified by an accountant. This extra “check” may seem silly, but should your payroll practices ever be called into question, the accountant will spring to your defense and help clear up the matter, leaving you to go find that extra hour of sleep you may have missed with all this clock shuffling!

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