How to Calculate On Call Pay and How It Works

On-call pay is an important consideration for employees who are required to be available outside of regular working hours. Many employers offer it as a way to compensate employees for their availability.

But how do you calculate on-call compensation? And what are the federal rules in place to ensure fair compensation? In this article, we’ll walk you through the steps to calculate it, including the rules and when to offer it.

What is on call pay?

On call pay means the compensation an employee receives for being available to work outside of their regular hours, even if not actively working. Being "on-call" means the employee must be ready to work if needed, but may not always be called in.

Under the Fair Labor Standards Act (FLSA), non-exempt employees who are on-call must earn at least the minimum wage and receive overtime pay for hours over 40. However, keep in mind that organizations can have different policies regarding on-call compensation.

Industries that typically have on-call employees include healthcare, public safety, IT, customer service, and retail. Some examples of on-call jobs are:

• Doctors

• Nurses

• Firefighters

• Police officers

• Utility repair workers

• IT technicians

• Customer service representatives

• Retail workers (especially during peak seasons)

Calculating on-call requires knowing the employee's regular pay rate. If you feel your employees' pay is not competitive, you can use Salary.com's Compensation Software to access data and insights for confident pay decisions.

How does on call pay work?

As mentioned, under the Fair Labor Standards Act (FLSA), on call staff should be paid based on their regular pay rate for hours worked. If an employee works more than 40 hours in a week, they must receive at least one and one-half times their regular pay rate for overtime hours.

For example, an on-call nurse with a regular pay rate of $20 per hour works 45 hours in a week—5 hours over the standard 40-hour workweek.

Under federal law, the nurse will be paid their regular rate of $20 per hour for the first 40 hours. For the additional 5 overtime hours, they will receive 1.5 times their regular pay rate, which is $30 per hour.

• Regular pay: 40 hours × $20 = $800

• Overtime pay: 5 hours × $30 = $150

Total pay for the week: $800 + $150 = $950

In this case, the nurse earns a total of $950 for the week, including both regular pay and overtime pay.

Speaking of regular pay, it’s important to stay competitive and attract top talent. Compensation Software helps you track wage trends, including minimum wage data, to set competitive regular pay.

The difference between on-call pay vs regular wages

The difference between on-call pay and regular wages is that on-call pay is compensation for being available to work, while regular wages compensate for actual hours worked. In short, the former compensates for availability, while the latter compensates for work performed.

To give you an idea, imagine a nurse earning compensation for being "on call" and staying available after her shift. This is compensation for being ready. Her regular wages are earned during her on-call shifts, which is payment for the work she does.

Federal rules for on call compensation

According to the FLSA's Fact Sheet #22, non-exempt employees (or those entitled to overtime) are paid their regular rate for being on-call unless they work or wait for more than 40 hours a week. If they do, the FLSA requires employers to pay on-call time at the overtime rate, which is at least 1.5 times their regular pay.

Qualifications

For the qualifications, an employee who faces "constraints on their freedom" may need to be compensated for this time. For example, if a firefighter is required to remain on call at the employer's premises, they are considered to be working while "on call."

However, it's important to note that the qualifications for being "on call" can vary depending on the situation.

When should employers offer on call pay?

As per the FLSA, employers provide on-call pay when an employee's freedom is significantly restricted, requiring compensation for their time. If an employee must stay at the employer’s premises or nearby and cannot use the time for personal activities, this time counts as "working while on-call."

Here are a few scenarios:

Scenario 1:

Some employees must stay at the employer's premises or a designated location. For example, a hospital employee who must stay in an on-call room at the hospital is considered to be working while on-call. They can sleep or watch TV, but they cannot leave the hospital. This usually qualifies for compensation due to the limited freedom, and the employee may receive on-call pay.

Scenario 2:

Other employees can leave but must stay close or nearby and be reachable. For example, an apartment maintenance worker who must stay within five miles of the complex and be reachable by pager has more freedom to run errands or relax at home, but must remain ready to respond quickly. Even with less restriction, on-call compensation still applies because they need to be accessible and available for work.

Some states, like California, require employers to offer California on-call pay under certain conditions. This typically happens when the employee must remain available for work, and the employer places restrictions on their personal time during on-call periods.

Scenario 3:

For example, if an employee is on standby or on-call with significant restrictions (like limited movement, frequent calls, or strict response times), the waiting time is considered compensable. Employers must pay for on-call hours, even if no actual work is performed, as long as the employee is under the employer’s control or unable to engage in other personal activities.

How do you calculate on call pay?

On-call compensation is usually the same as a non-exempt employee's regular pay, meaning it is the hourly wage or salary divided by the number of hours worked. Overtime is paid at 1.5 times the regular rate for hours over 40 in a week.

Here’s how to calculate it:

1. Step 1: Find the employee's regular hourly wage

   If the employee is salaried, divide their weekly salary by the total number of hours they are expected to work in a week. For example, if an employee earns $600 per week for 40 hours, their hourly wage is $15 ($600 ÷ 40).

   Organizations must create competitive pay strategies. Compensation Software's Salary Structure feature helps adjust internal pay and set effective pay ranges to achieve this.

2. Step 2: Identify the on-call hours

   Determine how many hours the employee is required to be on call during the pay period.

3. Step 3: Calculate on-call compensation

   Multiply the hourly rate by the on-call hours worked. For example, if the employee's hourly rate is $15 and they are on call for 10 hours, their payment would be $150 ($15 × 10 hours).

4. Step 4: Account for overtime

   If the employee works over 40 hours a week, overtime is required. For example, if the employee's total hours worked were 45, with 5 being on-call hours, the additional pay for overtime would amount to $22.50 per hour ($15 × 1.5).

5. Step 5: Add on-call to regular pay

   Combine regular pay and on-call pay to calculate the total weekly earnings. For example, if the employee worked 40 regular hours and were on call for 10 hours, the total pay would be $600 (regular pay) + $150 (on-call) = $750.

Knowing how to calculate on-call pay is critical for both employees and employers. Accurate salary data ensures fair compensation and compliance with labor laws. Salary.com's Compensation Software can simplify this by providing market insights, promoting fairness, and improving communication between employers and employees.