What is on-call pay?

On-call pay refers to the compensation given to employees who are required to be available for work during certain hours, even if they are not actively working. Essentially, on-call pay compensates workers for their time spent waiting to be called into work, regardless of whether or not they are actually needed. This type of pay is common in industries like healthcare, IT support, emergency services, and maintenance, where employees need to remain available outside of their regular working hours.

On-call pay can be structured in various ways. Some employees may receive a flat fee for being on-call, while others might receive a percentage of their regular hourly wage for the hours they are available. The goal of on-call pay is to fairly compensate employees for the inconvenience of being on standby and potentially disrupting their personal time. Homebase’s payroll software simplifies the management of on-call pay by allowing businesses to track availability, manage schedules, and calculate pay efficiently.

Why on-call pay matters for employers

On-call pay is an essential component of compensation for businesses that require staff availability outside normal working hours. Here’s why it’s important for employers:

1. Attracting and retaining talent

Offering on-call pay makes the role more attractive to potential employees, particularly in industries where being on standby is part of the job. It also helps retain existing employees by compensating them for their flexibility and availability.

2. Ensuring business continuity

In sectors like healthcare, customer service, or IT support, being able to quickly access employees outside of regular hours is often crucial. On-call pay ensures that employees are willing to be available for emergencies or urgent tasks, contributing to business continuity.

3. Legal and compliance considerations

Employers are required to compensate employees fairly for their time, including when they are not actively working but are expected to be available. On-call pay helps businesses comply with labor laws that require compensation for employees on standby.

4. Employee satisfaction

Employees who are on call often have their personal time disrupted or are unable to fully relax. Offering on-call pay demonstrates to workers that their time is valued and compensated accordingly, leading to better employee morale and lower turnover.

How on-call pay works

On-call pay can be structured in different ways depending on the industry, role, and agreement between the employer and the employee. Common methods include:

1. Flat rate pay

Some employers provide a flat fee for each on-call shift, regardless of whether the employee is called in. For example, an employee may receive $50 for being on call during a 12-hour shift, even if they aren’t required to work.

2. Percentage of regular wage

In other cases, on-call pay may be calculated as a percentage of an employee’s standard hourly wage. For instance, an employee may receive 10% of their regular hourly rate for every hour they are on-call.

3. Additional hourly rate for work performed

In addition to the on-call pay, employees who are actually called in to work during their on-call shift may be paid at their regular or overtime rate, depending on the hours worked. This ensures that employees are compensated for both their waiting time and their active work time.

4. Hourly pay for on-call time

For some roles, employees are compensated for every hour they are on-call, even if they don’t end up working. This method is more common in industries where the likelihood of being called into work is high, such as in healthcare or emergency services.

Legal and compliance considerations

On-call pay has important legal implications for both employers and employees. Here are key points to consider:

• Fair Labor Standards Act (FLSA) and on-call pay: According to the FLSA, on-call time may or may not be compensable depending on whether the employee is free to engage in personal activities while on-call. If employees are significantly restricted (for example, if they are required to stay near the work site or can’t leave their home), that time is generally considered compensable.
  
  
• State-specific rules: Some states have more stringent regulations regarding on-call pay. For instance, California and New York may have additional requirements for compensating employees who are on call for extended periods of time or who are required to remain on-site.
  
  
• Overtime pay: If an employee is called into work while on-call, they are typically entitled to overtime pay if their total weekly hours exceed 40. Employers should be mindful of this to avoid non-compliance with overtime laws.
  
  
• Compensation for waiting time: If employees are required to remain available but are free to pursue personal activities, employers may not be required to pay for that waiting time. However, if the employee is confined or severely restricted in their activities, this waiting time may need to be compensated.
  

Real-world example

Imagine a small IT support company that offers on-call services to businesses. Technicians are on-call outside of regular working hours in case an emergency arises, such as a network outage. For each on-call shift, the company offers a flat rate of $40 for the 12-hour shift, regardless of whether the technician is called in to resolve an issue. If the technician is called in, they are paid their regular hourly rate of $30 for the time spent working, with overtime rates kicking in if the shift exceeds 40 hours in a week.

In this scenario, on-call pay ensures that employees are compensated for their availability, while also fairly compensating them for any actual work performed during the on-call shift.

Common mistakes to avoid

1. Failing to define on-call expectations clearly
It’s important to clearly define what qualifies as on-call time, what employees are expected to do, and what compensation they will receive. Lack of clarity can lead to misunderstandings and employee dissatisfaction.

2. Not compensating for waiting time
If employees are significantly restricted during on-call periods (e.g., required to stay near the office or refrain from engaging in personal activities), failing to compensate for that waiting time could lead to legal issues. Make sure to consider the level of restriction and provide appropriate pay.

3. Ignoring overtime regulations
If on-call time leads to overtime hours, employers must ensure compliance with overtime pay laws. Make sure you calculate total hours worked, including on-call time, to avoid inadvertently violating labor laws.

4. Inconsistent pay policies
Be consistent in how you pay employees for on-call shifts. Avoid applying different pay structures to different employees or shifts, as this could lead to morale problems and legal challenges. Standardize on-call pay across the company to ensure fairness.

How Homebase helps with on-call pay

Homebase streamlines the process of managing on-call pay by allowing you to easily track employees’ availability and hours worked. With its automated time-tracking system, you can manage schedules, track on-call time, and ensure accurate compensation for employees, all in one platform.

With Homebase, you can:

• Track employee on-call hours with ease
  
  
• Calculate and apply on-call pay automatically
  
  
• Ensure compliance with state and federal labor laws
  
  
• Keep a clear record of on-call shifts for payroll and audit purposes
  
  

Explore Homebase Payroll to simplify the management of on-call pay and keep your business running smoothly, even after hours.