You can set capping of overtime for individual employees.
For example, you can specify that a certain number of overtime hours per month are compensated with the salary. Depending on how many overtime hours the employee works, you cap a certain number — they are not carried over to the next month:
- If the employee works no more than the set overtime limit in a month, you cap the overtime and carry none over.
- If the employee works more than the set overtime limit in a month, you carry over only the hours above the limit to the next month.
No exception for a negative overtime balance
If an employee starts a month with a negative overtime balance, you still apply the capping in the next month.
An example: You have set a capping of up to 5 overtime hours per month for an employee. At the end of April, the employee has a negative overtime balance of -3 hours. If the employee works 4 overtime hours in May, then at the end of May they do not have an overtime balance of 1 h, but still a balance of -3 hours.
The reason: with capping, you specify that up to 5 overtime hours per month are compensated with the salary, and only overtime beyond that is credited. Therefore, you cap the 4 overtime hours worked in May and credit 0 hours.
For the employee to offset the 3 negative hours, they must work 8 overtime hours in one month: you cap the first 5 overtime hours and credit 3 overtime hours.
Correct approach
At first glance, this calculation may seem wrong or illogical. On closer inspection, however, it is the correct approach: the employee’s employment contract stipulates, for example, that the monthly salary compensates the 40-hour week — and up to 5 overtime hours per month as well. In other words: with the salary, the company pays for a performance range of 40 h per week plus 0 to 5 overtime hours per month. The 5 overtime hours are therefore compensated with the salary.
If you did, as an exception, credit those 5 overtime hours in the case of a negative overtime balance, then the 5 overtime hours would both be compensated with the salary and additionally booked as overtime. The overtime would therefore be wrongly counted twice.
What is more: an employee could, through clever alternating of extra work and reduced work, manage to never work more than the lower limit of 40 h, yet still always have a balance of 0 overtime in the working time account. In one month they work 5 hours too little, in the next month they work 5 overtime hours, and so on.
Note: This example uses a 40-hour week and a contractual monthly overtime allowance as an illustration. How overtime may be offset against salary, and the limits on doing so, are governed by employment law and any applicable collective or works agreements, which vary by country. Timebutler’s capping calculation works the same regardless of location; set the values to match the rules that apply to you.