The Most Common Overtime Mistakes Small Crew-Based Businesses Make
Overtime can turn a profitable job into a headache fast. Maybe your foreman forgets to track drive time or your crew clocks extra hours that do not get recorded right. When you are running a small crew, these mistakes add up and hit your bottom line hard. This post cuts to the chase on the most common overtime pitfalls for small construction companies and shows you how to fix them with clear crew rules and simple tracking habits.
Why Overtime Rules Matter for Small Construction Crews
You are probably already familiar with the basics. Overtime usually kicks in after 40 hours a week, sometimes daily after 8 or 12 hours, and it can vary if you are dealing with union rules or multiple states. The problem is not the law itself, it is how easy it is to miscalculate or miss overtime hours when your crew is on the move, working different jobs, or clocking in and out on paper.
For example, a 12 person roofing crew might start early, take breaks at different times, and drive between sites. If your foreman just eyeballs hours or writes times on a whiteboard at the end of the day, you are almost guaranteed to miss overtime or pay it incorrectly. That is lost money or worse, a compliance risk.
Common Overtime Mistakes and How They Play Out on the Jobsite
1. Not Tracking All Compensable Time (Drive Time, Setup, Cleanup)
Your crew’s clocked hours might show 8 hours, but if you are not counting drive time between jobs or time spent setting up and cleaning tools, you are underpaying overtime. For example, a landscaping crew working two small sites in a day might spend an hour driving and 30 minutes setting up. That time counts as hours worked under most overtime rules.
Fix: Make foremen responsible for logging all compensable time, including drive and setup. Use a simple checklist or time tracking app crew members can update on their phones. This avoids guessing or missing chunks of paid time.
2. Mixing Up Overtime Thresholds for Different Jobs or Locations
If your crew works on multiple jobs or crosses state lines, overtime rules can differ. A concrete crew working 45 hours in State A might owe overtime, but if they cross into State B with daily overtime rules, the calculation changes.
Fix: Centralize your overtime tracking. Keep job and location info tied to each time entry. This is where a tool like TimeCamp can help by linking time tracking to jobs and payroll, so you do not have to do the math manually.
If you are regularly crossing state lines with your crews, our guide on running construction payroll across multiple states walks through how to set up workweeks, locations, and records so you do not get burned.
3. Forgetting to Include Partial Hours or Rounding Errors
Rounding down hours or ignoring partial hours worked can add up to significant unpaid overtime. For example, if your crew’s time sheets round 7.75 hours down to 7, you lose 45 minutes per person per day. Over a week, that is almost 4 hours per worker.
Fix: Set a clear policy on rounding (for example, nearest 6 minutes or quarter hour) and stick to it. Train foremen and office staff to check time sheets carefully before payroll.
4. Letting Foremen Handle Overtime Without Clear Guidelines
Foremen often manage time tracking on site but might not fully understand overtime rules or the cost impact. This can lead to inconsistent practices, like approving extra hours without documentation or missing overtime entirely.
Fix: Provide foremen with a simple overtime checklist and clear rules on what counts as overtime. Make them accountable for accurate time records and train them on the basics of overtime laws relevant to your crew.
Do Small Construction Companies Have To Pay Overtime After 40 Hours?
If you have W2 employees, you almost certainly have to pay overtime after 40 hours in a workweek, even if you are a small construction company.
Here is how it usually works in the United States:
- Federal law (FLSA) requires time and a half for hours over 40 in a defined 7 day workweek.
- Some states add daily overtime, for example overtime after 8 hours in a day, or double time after 12.
- If state rules are stricter than federal rules, you follow the rule that gives the worker more pay, not less.
Size does not get you out of overtime. A 6 person framing crew and a 200 person GC both have to follow the same basic overtime rules. The only way around overtime is if a worker is truly exempt under the law, which is rare for hands on field roles.
If you are unsure how to define your workweek or how overtime fits into your payroll setup, our guide to the best payroll and time tracking setup for 10 to 50 person construction crews walks through practical options.
Understanding Overtime Pay Requirements for Small Construction Businesses
Overtime pay is not just about hitting 40 hours a week. The Fair Labor Standards Act (FLSA) says you must pay time and a half for hours worked over 40 in a workweek. Some states add daily overtime rules, like paying overtime after 8 hours in a day. For small crews, this means you cannot just track weekly totals and call it done.
For example, if your crew works 9 hours Monday through Friday, that is 45 hours total. The 5 extra hours are overtime. But if you are in California, you owe overtime for every hour over 8 each day, so that is 5 hours of daily overtime plus any over 40 weekly. You need to track both daily and weekly hours carefully.
Also, remember that certain time counts as hours worked under FLSA, including time spent traveling between job sites during the workday, mandatory meetings, and even some training. Missing these can mean unpaid overtime and penalties.
What Counts as Overtime Hours for Small Crew Workers?
This question trips up many owners because not all time on the clock counts the same. Under FLSA, overtime includes all hours your crew is “suffered or permitted” to work. That means:
- Time spent on job tasks, including setup and cleanup
- Travel between job sites during the workday (not commute to first job or from last job home)
- Mandatory meetings, safety briefings, and training sessions
- Waiting time if the crew is required to stay on site
Unpaid breaks do not count, but if you pay for breaks, that time must be included in hours worked. For example, if your crew takes a 15 minute paid break, that 15 minutes counts toward overtime calculations.
If you miss logging any of these, you risk underpaying overtime and facing penalties. Make sure your time tracking captures all compensable time, not just “on the clock” work.
When Does Travel Time Count Toward Overtime?
Travel is where many small contractors get tripped up. Here is the basic breakdown for crews:
- Home to first job and last job to home. This is usually commute time and does not count as hours worked.
- Travel between job sites during the day. This almost always counts as hours worked. If your drywall crew finishes one house at 11:00 and drives 45 minutes to the next, that 45 minutes should be on the clock.
- Required travel from a central yard or shop. If you require workers to report to your yard at 6:30, load trucks, then ride to the jobsite, the time from when they start working at the yard usually counts.
- Out of town jobs. Travel for an overnight job can be partly compensable, depending on when it happens and who controls the schedule. This is where it is worth getting specific advice from your CPA or attorney.
If that travel time pushes a worker over 40 hours in the week, it counts toward overtime. A simple rule for foremen is: if you are telling the crew where to be and when, and they are not free to use that time for themselves, you should assume it is paid time.
Can Small Construction Companies Pay Overtime Hourly or Salaried?
Yes, but it depends on how you classify your workers and how you set up payroll. Most small construction crews pay hourly and calculate overtime based on hours worked over the threshold. However, some owners pay salaried workers who are exempt from overtime, but this is tricky.
The FLSA has strict tests for exempt status, usually requiring a minimum salary and specific job duties. Most crew members who work hands on jobs will not qualify as exempt. Misclassifying workers as salaried exempt to avoid overtime can lead to costly fines and back pay.
If you want to pay salaried workers, make sure you consult a labor law expert and keep detailed records. For most small crews, hourly pay with clear overtime tracking is simpler and safer.
If you also use independent contractors alongside W2 employees, read our guide on handling payroll when you have both W2 employees and 1099 contractors so you do not accidentally dodge overtime rules by misclassifying people.
How to Avoid Common Overtime Mistakes in Small Construction Companies
Here is a quick reality check for your crew’s overtime tracking:
- Track every minute your crew is on the clock. This includes drive time, setup, cleanup, and mandatory breaks if they are paid.
- Know your state’s rules. Some states require daily overtime, others do not. If you work across state lines, you need to track by location.
- Use simple tools that tie time to jobs and locations. This reduces errors and makes payroll smoother.
- Train your foremen and office staff on what counts as overtime and how to log it properly.
- Review time sheets weekly to catch mistakes before payroll.
If you want a deeper dive on handling payroll for crews, check out our best payroll setup for 10 to 50 person construction crews.
A Real Scenario: Roofing Crew Overtime Chaos Fixed
Take a 15 person roofing crew working multiple residential jobs in a metro area. Before, the foreman scribbled hours on a whiteboard at the end of the day. Drive time was not tracked, and overtime was often guessed or ignored. Payroll was a scramble every week, with angry calls from workers about missing overtime pay.
After switching to a simple app that lets crew clock in and out by job and records drive time, the foreman got a checklist:
- Clock in at job site start
- Clock out for breaks (mandatory)
- Clock in and out for drive time between sites
- Note any extra hours over 8 per day or 40 per week
Payroll staff reviewed the app reports weekly, catching errors early. Overtime pay matched actual hours worked, workers were happier, and the owner saved thousands by avoiding overpayments and fines.
If you are still on paper time sheets, our 30 day plan for getting off paper timesheets with small construction crews walks through a simple rollout that does not blow up your jobs.
Step by Step Checklist to Avoid Overtime Mistakes Next Week
- Define compensable time clearly for your crew (include drive, setup, cleanup).
- Train foremen on overtime basics and their role in tracking hours accurately.
- Use a simple time tracking method that ties hours to jobs and locations (apps like TimeCamp help here).
- Set and enforce a rounding policy for hours worked.
- Review time sheets weekly to catch errors before payroll runs.
- Communicate overtime rules clearly to crew members so they know what to expect.
Common questions from owners
Do I really have to pay overtime after 40 hours if I only have a small crew?
Yes. Under FLSA, most non exempt workers must get time and a half for hours over 40 in a workweek, no matter how small your company is. Some states also require daily overtime, for example after 8 hours in a day. You cannot skip overtime just because you are a small contractor or because your crew “agrees” to straight time.
Do I have to pay overtime to 1099 subcontractors on my crew?
Generally no. True independent contractors are paid by bid, unit, or straight hourly rate with no overtime requirement under FLSA. The risk is misclassification. If your “1099s” work your schedule, use your tools, wear your logo, and you control how the work is done, they may legally be employees. In that case, you could owe back overtime, taxes, and penalties. If you are using a lot of 1099 labor on your crews, it is worth reviewing your setup with a CPA or attorney.
When does travel time to and from jobsites count toward overtime?
Commute time from home to the first job and from the last job back home usually does not count. Travel between jobs during the day, or required travel from your yard or shop to a jobsite, usually does count. Any paid travel time that pushes a worker over 40 hours in the week must be included when you calculate overtime.
What counts as overtime hours for small crew workers on different jobs in the same week?
You add up all hours for that worker in your defined workweek, even if they worked on several jobs or for different foremen. If that total is over 40, the extra hours are overtime. You cannot avoid overtime by splitting hours across jobs, projects, or internal “companies” you own.
What are the penalties if I get overtime wrong for my construction crew?
Penalties can include back pay for unpaid overtime, “liquidated damages” that can double what you owe, interest, and legal fees. The Department of Labor can also fine you, and workers can sue. For example, if you underpay overtime by $1,000, you might end up owing $2,000 or more once damages and fees are added.
Wrapping It Up
Overtime mistakes happen because small crews juggle many moving parts and paperwork often falls to the last minute. The key moves are to get your foremen responsible and trained, track all compensable time (especially drive and setup), and use a system that ties hours to specific jobs. Start with a simple checklist and clear communication this week.
For more on setting up payroll and time tracking for your crew, check out our guide to the best payroll setup for 10 to 50 person construction crews at https://payrollforcrews.com/blog/construction-payroll-setup/. If you are thinking about switching payroll providers mid year, our guide can help you avoid headaches: https://payrollforcrews.com/blog/switching-payroll-mid-year/.