🎯 For Planday admins based in the USA.

Please note that this article only provides guidelines and shouldn’t replace legal advice. If you want more information on the new law, we recommend you read more about DOL's new overtime rule or seek independent legal advice as appropriate for your business.

Options for overtime compensation

What are the changes?

The Department of Labor will introduce a new law regarding salaried employees and overtime compensation, which will come into effect on 1 July 2024.

In short, salaried workers who make less than $844 per week ($43,888 annual salary) will become eligible for overtime compensation.

From 1 January 2025, salaried workers who make less than $1,128 per week ($58,656 annual salary) will become eligible for overtime compensation.

As a result of these changes, businesses can either:

Option 1: Pay employees Overtime compensation in addition to their salary when they work more than 40 hours per week.

Option 2: Convert the employees from a salary basis to an hourly wage and pay potential overtime when they work more than 40 hours per week.

Option 3: Increase the salaries to the new minimum to be exempt from Overtime compensation.

Planday can support you by tracking working time and keeping records of employees’ salaries. This guide will show you different options you can implement in Planday.

Please take a look at the following flow, which shows you the different options and the steps to implement them.

How to assign a salary to an employee

You can set an employee's fixed salary by navigating to People > Employees > click on the employee's name, press Edit > go to the Employment tab > scroll down to the Salary section and click Edit salary.

From there, you can set the following:

1. Payroll information:

Salary amount - Set the employee’s fixed salary amount.
Salary period - Choose between Weekly, Bi-weekly or Annual, depending on the employment.
Valid from - Set a date for this salary or change. This is useful for setting a salary date from the next payroll.
Salary code (Optional) - Set a Salary code (pay code) if you use a payroll integration that requires this information for the fixed salary units. (in most cases, this should be left blank)
Expected working hours - Set the expected number of working hours per salary period. This is used to calculate the daily labor cost in the Schedule.

2. Payroll costs in the schedule

By setting Payroll costs in the schedule, it is possible to estimate how the salary expenses for fixed-salaried employees affect labor costs when scheduling.

Note that this will not affect your payroll report.

Switching from a fixed salary amount to an hourly wage

The first action is to add a wage to each Employee group.

Go to People > Employees > Select the required employee and press Edit > Go to the Employment tab > scroll down to the Employee groups > Add or click Edit on one of the groups.
Set the Default wage type to hourly and set a wage. Set a date when this change should come into effect in the Valid from field. This step will need to be repeated for all Employee groups to which this employee belongs.
Next, from the Employment tab, scroll down to the Salary section and press Edit salary. Set the fixed salary amount to zero 0, select a salary period, and put a date for this change in the Valid from field. Set the cost allocation to No allocation.

Option 1 & 2: Monitor and pay overtime by using Contract rules

Note: The Contract rules feature is not available for customers on Planday’s starter plan; it is only available on Plus and Pro. Learn more about the different Plans.

Using the Contract rules feature is the preferred way to monitor your employees' weekly work hours.

Step 1: Create a Contract rule

First, go to Settings > People > Contract rules > Create Contract rule.

Name the Contract rule and select New interval > Week.
Under Weeks, enter 1; under Total hours, enter 40.
The Start date is valid from when the scheduled hours start counting. For example, if the start date is set to June 1st with an interval length of 1 week and 40 total hours, we can then expect that 40 hours should be worked from the 1st to the 7th, the 8th to the 14th, and so on.

You should set the start date to Monday or Sunday (depending on your business).

If certain Shift types should be excluded from the Contract rule, you can deselect them by going to Applies to > Shift types.

Step 2: Assign a Contract rule to an employee

To assign a Contract rule to an employee, go to the People page, hover over the employee’s name and select the pencil icon to edit.

From the Personal details tab, scroll down to the Payroll section, where you can find the Contract rule. Select the required Contract rule from the drop-down menu and press Save.

Step 3: Use Contract rules while scheduling

When you navigate the schedule, you’ll see a color status for employees with a Contract rule set. The three different statuses are described below:

🟢 Green - The employee is scheduled for exactly 40 hours.
🟡 Yellow - The employee is scheduled less than 40 hours.
🔴 Red - The employee is scheduled for more than 40 hours.

Click on the circle to see more details of the Contract rule:

Note: The scheduled hours for an employee are calculated based on all assigned shifts within the interval date range across all departments. Breaks are subtracted, and if any shift types are excluded from the Contract rule, then shifts with this Shift type are also subtracted from the calculation.

Step 4: Create a Payroll supplement

Note: The Payroll supplements feature is not available for customers on Planday’s Starter plan but only on Plus and Pro. Learn more about the different Plans.

Set up Payroll supplements to automatically generate overtime compensation in your payroll export. This is useful if you want to base your payroll on the hours tracked in Planday. This will work regardless of whether you're using Planday’s Punch Clock or not.

To create a Payroll supplement, go to Settings > Payroll > Payroll supplement > Create Contract rules Supplement.

Fill out the supplement details like below:

Select the Supplement type Contract rules supplement
Select the relevant Contract rule (40 hours a week)
Payment period: For the supplement to kick in after working 40 hours, set the From field to 0 hours. The To field value is the maximum number of hours until which the supplement should be applied.
The percentage adds an increment on top of the base rate/salary
Employee types help you categorize your employees and determine whether overtime compensation should apply to employees within certain categories.
Select the option Affects salaried employees.

You can learn more about Employee types in How to create or edit Employee types.

Optional: Use the Punch Clock to track hours more precisely

Use the Punch Clock to record working hours accurately. With this solution, your employees clock in and out at the start and end of their working hours. This can be done via the Planday app and from a web browser.

To learn more about setting up the Punch Clock, visit Time Tracking and Time & Attendance in Planday collection.

Use the Punch Clock in combination with the Schedule

With this solution, a schedule is created for a period of, e.g. 4 months, where the standard time, i.e. the contractual number of hours, is observed. Employees then register their working hours by clocking in and out via the app or web browser at the start and end of their working day. If an employee forgets to clock in, a manager can adjust the working hours in Planday later.

This method effectively detects any deviations from the planned working hours by comparing the scheduled time with the clock-in times.

Use the Punch Clock without the Schedule

This method is suitable if you want to avoid creating shifts in advance but still want your employees to register their working hours using the Punch Clock.

This method allows for accurate recording of working hours, but it does not identify deviations from the planned working hours.

To enable this feature, go to Settings > Punch Clock > Advanced and select “Yes” for “Possible to punch in outside the schedule”.

Note: A manager must approve the punch times to register the hours correctly.

Option 3 (Alternative) — Increase your employees’ salary to the new minimum

Another option is to increase your employees’ salary to the new minimum to be exempt from compensation. By choosing this method, you wouldn’t necessarily need to monitor your employees’ Overtime and pay for these hours.

If you wish to update an employee’s salary,

Click on Edit salary in the employee’s Employment tab.
Fill out the new salary and set a new valid-from date, then click Save.

If the new valid-from date is before any existing valid-from dates, you’ll be asked if you’d like to insert the new salary or overwrite the future salaries set for the employee.

Note: If you can’t see an employee's Salary section, it must be because this employee has the same Access/Permission level as you. You can ask this person to update their own salary information in Planday.

See related articles:

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