(Photo by Tony Greco)
By Mark Wallace
This column deals with the sometimes-thorny questions raised by members of the community and the media regarding the fire service. Last month’s column considered the question, “Is our department properly budgeting the salary of our shift personnel?” That entry of our series deal with the Fair Labor Standards Act (FLSA) and its implications for fire departments.
Please keep in mind that this article IS NOT legal advice, and any “red flags” that it may raise warrant a more formal review by a FLSA legal expert.
Paying a Regular Hourly Rate
Last month’s look at this question provided the basic requirements of the Fair Labor Standards Act as it applies to fire departments. Hopefully, you have searched the Internet for the Fair Labor Standards Act and how it applies to the fire service. [See 29 USC, 201 et.seq.]
The next relevant decision is if the employees are paid on an hourly basis or on a monthly salary. If the organization’s FLSA documentation shows that firefighters were paid at an hourly rate, the calculations are fairly straightforward to determine the funds needed in the budget to pay that individual. Your pay plan should show you which system your organization is using, although some plans list hourly, monthly, and annual salaries in a spreadsheet or similar document. If that is the case in your department, you will need to talk to the right person in the payroll department or records department to determine if you use an hourly rate or a salary system. There should be a formal document that stipulates which basis of pay calculations is used by the department. If not, such a determination must be formally documented.
I am continuing to use the example of a 21-day work cycle for 24-hour shift firefighters from the first part of this discussion. There are 17.38 “21-day cycles” in a calendar year containing 365 days. (365/21 = 17.38) In each 21-day cycle, an individual is scheduled to work 168 hours. However, nine of these hours must be paid at the overtime rate during each 21-day cycle. (9 x 17.38 = 156.43 hours of overtime at 1.5 times the regular hourly rate.)
Each employee has an hourly rate of pay in the system and this is his or her “regular hourly rate of pay.” For each 21-day cycle, a firefighter must be paid for each actual hour worked up to the maximum of 159 hours in that 21-day cycle at their regular hourly rate AND they must be paid at 1.5 times their regular hourly rate for each hour actually worked in excess of 159 hours or nine hours per 21-day cycle. Each organization will need to look at which hours they pay as actual hours worked. Often the history is that departments pay more than the minimum FLSA standards, counting some hours not actually worked (according to the FLSA) as paid work time. Remember, your organization can pay for more than the FLSA minimums specified in the “letter of the law.” Your department must make a determination of what is considered “actual time worked.” Check your contract for details. Without a contract, you must determine what your organization has been doing over the past years. Is sick leave or vacation leave considered as time worked for FLSA-based overtime pay? What about mealtime, sleeping time, or other activities identified within the provisions of FLSA? Past practices will likely be the determining factor in many departments.
Now you can calculate the total wages (excluding the cost of things like insurance) to determine how much money should be in your personnel cost budget.
So for each shift firefighter, their total salary cost for the year (without “extra duty overtime”) is calculated as follows:
Annual Salary = Hourly rate x 168 x 17.38 + 0.5 x Hourly rate x 156.43
Annual Salary = Hourly rate x 159 x 17.38 + 1.5 x Hourly rate x 9 x 17.38
With 365 days in the year and a three-shift system, two shifts will work 122 shifts while the third shift will work 121 shifts over the course of the year. Based on an hourly rate of pay system, a firefighter on each shift will have a different total income over the year than a firefighter with the same hourly pay rate but assigned to a different shift.
This gets to be really complicated when budgeting each year since each employee could have a different total compensation amount and the same employee could have a different total compensation amount during the following year. Your payroll personnel will have gigantic spreadsheets that are designed to calculate each individual’s regular wages, overtime wages, cost of benefits, etc. This is just for the predictable personnel costs. The overtime pay created by FLSA requirements is predictable and must be calculated on an individual basis.
Then it requires a rough estimate to guess how much “extra overtime” pay and benefits will be required due to the unknown future emergencies all fire departments have in their future. In u experience, far too many fire departments use some kind of system to predict overtime expenditures for the next budget year. The only thing that you can be sure of with future overtime is that your estimate will be wrong. In a good year, you won’t need all of the overtime you have in your approved budget.
A common budgeting mistake of some fire departments is that they pay their personnel on an hourly basis but calculate their salary budget on an annual collective or average basis (percentage of firefighters x average hourly rate of pay x 2920 hours) If an average firefighter hourly pay is used, some make more and some make less. With the use of spreadsheets and other programs, personnel costs should be calculated by each individual.
If your actual salary costs are under your approved budget but your overtime costs exceed your budget, this should be a “red flag” that lets you know you must find out why in more detail.
Theoretically, it takes three firefighters working a 24-hours on/48-hours off schedule to fill one position on the department. However, you must now add in vacation leave, sick leave, any mandatory training that must occur on an uninterrupted basis (so not while on shift) and other leave time. Each department will have to determine how many extra personnel are required to keep one riding position staffed on a 24/7/365 basis. Your department’s policies will determine how many extra shift personnel are needed to maintain minimum staffing levels. This is beyond the scope of this article.
If each of these riding positions is budgeted at an average regular hourly rate for 8,760 hours per year, you must remember the impact of the FLSA-based overtime on your budget. If you haven’t been doing this but have been properly paying personnel for their FLSA-based overtime of nine hours per 21-day work cycle, the result may be that your overtime will exceed your approved overtime budget.
To solve this issue, I suggest that your department calculates two separate overtime allocations. The first is your predictable overtime based on FLSA rules. The second overtime budget is your prediction of the amount of “extra-pay” overtime your department will pay in during the budget year due to large incidents requiring call-backs, hold-overs, training, and special department-sponsored events that have an overtime cost.
Next month’s column will consider the impacts of paying a monthly salary instead of using a regular hourly wage system for FLSA calculations.
Mark Wallace (MPA, EFO, CFO, FIFireE) is the author of Fire Department Strategic Planning: Creating Future Excellence. He is the former State Fire Marshal of Oregon and a former chief in Colorado and Texas. He currently operates Fireeagle Consulting (www.fireeagleconsulting.com). He wrote the planning chapter in the 7th edition Fire Chief’s Handbook, which was released in fall 2014.
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