Sometimes, duty calls unexpectedly. Whether troubleshooting a network failure or providing round-the-clock assistance to a valuable client, you can’t always predict when a high-priority assignment will enter the workflow.
On-call employees respond to work needs no matter the time or day. They fill in the gaps when urgent tasks need handling. As an employer, it’s your duty to repay them by carefully complying with rules and regulations regarding on-call pay to avoid scope creep and ensure fair compensation.
This guide will clarify everything you need to know to handle on-call pay laws and policies, including when compensation is necessary and how to calculate on-call pay for nonexempt employees.
What is on-call pay?
On-call pay is provided to employees while they remain available to work outside their regular working hours. It compensates them for staying prepared to promptly respond to work-related needs and emergencies, even if they aren’t actively working during that time.
On-call pay acknowledges their readiness during on-call shifts, ensuring that they’re fairly compensated for their availability and responsiveness. This differs from regular wages, which are paid for actual hours worked. In some cases, employees are compensated for both the time they’re available to respond to work and any hours they’re called to actively work during their on-call period.
When do employers need to provide on-call pay?
Federal regulations in the U.S. require employers to compensate nonexempt workers for all hours worked, including on-call hours. Exempt workers—employees with a fixed salary above a certain threshold—don’t qualify for the same wage protections under the Fair Labor Standards Act (FLSA) on-call pay laws.
Regarding an on-call policy for hourly employees and independent contractors, the big question is when inactive waiting time is considered “compensable hours.” This is primarily determined by whether an employee’s time is restricted. If it is, they need to be paid. If not, you probably don’t need to compensate for inactive on-call work hours.
Whether waiting time is considered restricted or unrestricted depends on an employer’s rules regarding their employee’s location and freedom to use their time. On-call employees may be confined to their home office or required to stay near the workplace. Being on call may impose considerable limitations that restrict their ability to enjoy personal time.
Let’s break this down further:
Engaged to wait
If an employee must remain on or near their employer’s premises and their time is significantly restricted, their entire on-call period must be compensated.
For example, a maintenance worker required to stay at the warehouse during on-call hours is considered to be working, even if they spend a portion of their time reading in the breakroom or napping. Likewise, if they can spend inactive working hours at home but frequent calls interrupt their ability to enjoy free time, the entirety of their on-call period is likely considered hours worked.
Waiting to engage
On-call employees who can work from anywhere and use their waiting time for personal activities are generally compensated for the time spent actively working. Imagine an IT specialist who works from home and spends their on-call time pursuing personal hobbies. If they have a six-hour on-call shift and receive a call to perform an hour of work, you may only need to pay them for the hour worked.
How to calculate on-call pay
On-call pay is calculated based on the employee’s regular pay rate, which may be hourly or flat. According to FLSA regulations, compensation must follow minimum wage requirements. This compensation covers the employee’s compensable hours spent on-call, ready to respond quickly to work-related tasks and urgencies.
Payroll services can structure on-call pay in several different ways, including the following:
Calculation for hourly workers
Imagine a pay-as-you-go IT specialist who works from home and is free to spend on-call time on personal hobbies. They’re paid $20 per hour for a 4-hour shift. If they actively work for 2 hours, they’re owed $40.
Calculation for fixed-rate workers
A nonemployee traveling nurse works on-call and must stay at the hospital. Each shift is 12 hours for $720. Although they only actively worked 8 hours, they’re owed the full $720.
Calculation for a hybrid fixed and hourly rate
Some employers choose to pay a fixed rate for on-call shifts with additional pay for active work hours. For example, a remote customer service representative works an eight-hour shift for $120 per shift. Every active hour worked is an additional $20. If they actively work six hours, they’re owed $240.
Calculation for overtime pay
For nonexempt workers, overtime regulations apply when the total compensable hours exceed 40 hours in a workweek. Typically, overtime pay is 1.5 times their regular rate.
How does on-call pay work? Building an on-call policy
Beyond following the FLSA’s rules and guidelines, a well-structured on-call policy helps clarify expectations and ensure fair compensation. Make sure your on-call policy performs the following functions:
- Clearly define on-call time: Define shift periods and how quickly employees must respond to work-related tasks and urgencies.
- Detail the compensation: Outline how on-call pay is calculated, such as an hourly rate or flat fee per shift. Include policies regarding overtime pay, minimum pay, and additional compensation for actual work performed during on-call periods.
- Check eligibility requirements: According to the Fair Labor Standards Act, an employee is exempt from overtime pay requirements if they are a salaried worker (not hourly) earning at least $43,888 per year (set to increase to $58,656 per year in 2025) or an executive, administrative, professional, or outside sales employee. All other workers are nonexempt, meaning they must earn overtime pay for weekly hours worked beyond 40.
- Detail scheduling procedures: Determine how on-call shifts are scheduled, including advance notice given to employees and protocols for swapping shifts or managing unexpected absences.
- Define restrictions: Determine when an employee is considered on-call, detailing whether they need to be on-site or close to the workplace. Likewise, include limitations on what employees can do during their on-call periods, such as not being allowed to take naps or engage in activities that impair their ability to complete work-related tasks.
- Include FLSA compliance statement: Include federal guidelines for wages and hours to ensure transparency and compliance with the Fair Labor Standards Act.
Guarantee fair on-call pay to your employees
On-call employees play a crucial role in keeping the organizational gears turning. Their roles require a unique mix of flexibility and readiness, and a well-defined on-call policy ensures that their contributions are acknowledged and compensated fairly.
Oyster’s global contracting services ensure that your policies are compliant, clearly communicated, and built to satisfy the needs of top global talent. Schedule a demo of our global employment platform today.
About Oyster
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