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Standard Hours

What are standard hours?

The term Standard Hours is defined as the total number of hours a full-time employee may work per week that is 40 hours per week, as per the Fair Labor Standards Act (FLSA).

It is usually calculated everywhere that the standard hours’ time is 40 hours per week for a non-exempt employee but is most commonly utilized in production houses where there are shifts in different times to carry on production operational activities.

In production houses of clothing, footwear, FMCGs (fast-moving consumer goods), power plants of electricity generation, gas stations, oil refineries, and installations of the countryside in terms of defense essential services of the States, the terminology of the standard hours are followed for duty roster administration as well as compensation management of workers.

What is overtime payment in terms of Standard Hours work?

The employer must compensate the exempt workers, who are allowed to work overtime of more than 40 hours per week. The compensation for overtime payment is 1.5 times more than the existing per hour wage of the worker.

Such a scenario is warranted if only the following conditions are met:

The standard hour system – a cent percent gains-sharing sys.

In some instances, the standard hour system is also known as the 100% gains sharing system. Because here the compensation to workers is paid by the employer for the standard time irrespective of the time input more or less than standard hours requirement.            

How is the term Standard Hours related to the activity Labor Routing?

When we talk about the production industry it is altogether a different scenario from the office work conducive environments working in air-conditioned rooms and halls on laptops. The production houses are the ones where standard hours are referred to most in terms of the number of units produced in a certain total amount of hours calculated for accounting periods’ compensation management purposes of your employees.

The regular number of hours required for producing a unit is derived through standard labor routing. Labor routing is the estimated labor time for manufacturing a unit. In business organizations, if the employer takes an opinion of non-inefficiency, no breakdowns of power, zero incidents, no emergencies, etc. that means it will change the scenario of standard hours a week a worker allocated to work.

Actual labor hours spent per unit production are compared with the standard hours per unit that should have been spent, for analysis of profitability.

As per Labor Routing is based on the actual number of units produced multiplied by the actual hours spent per unit production.

For example:

XYZ and Co. are planning to produce 100 units during March and the standard hours through labor routing is estimated 2 hours for producing a single unit.

Hence the standard hours for this production lot of March would be allowed as:

Number of Units to be produced       X        Time allocation per Unit

Therefore,

100 multiplied by 2 = 200 hours (Allocation as Standard Hours)

Standard Hours: Time Wages Guaranteed / Non-guaranteed 

Standard Hours system is as discussed above in two perspectives. One as per Law according to FLSA that is Hours = 40 per week as standard 7 days week and every day is equal to 24 hours. Another we learned is in terms of Labor Routing.

Here we are telling you something more about it that is Standard Hours’ Time Wages Guaranteed and Non-Guaranteed case-based scenarios:

In Standard Hours - Time Wages Guaranteed system, the employees are guaranteed standard wages even if the time taken is less than the regular time required (standard hours required) for a production time of a certain number of units as per labor routing. This means even if the time spent is more, the wages would be standard, and not more wages; unless a worker is under standard hours’ time wages guaranteed system. The following two cases would make it clear to understand:  

 

Case # 1 - Standard Hours’ under Time Wages Non-guaranteed System                     

Standard hours as per Labor Routing for completion of unit production=   2 hours
Total number of units produced
=   100 units
Actual Time is taken for production of 1 unit
=   1.5 hours
The hour for wages calculation of one worker, in this case, would be
=   2 X 100
=   200

Case # 2 - Standard Hours’ under Time Wages Guaranteed System

Standard hours as per Labor Routing for completion of unit production=   2 hours
Total number of units produced
=   100 units
Actual Time is taken for production of 1 unit
=   2.5 hours
The hour for wages calculation of one worker, in this case, would be
=   2.5 X 100
=   250

Wrap up

You may choose your options for standard hours’ allocation to your workers: as this not illegal to reduce the time allocation per week as per your requirement of the operational procedures. The FLSA 40 hours per week is the maximum workload a full-time non-exempt employee can work in a week consisting of 7 days, each day of 24 hours – and that can be started any day of the week and at any time as per the mutual understanding of the employer and the employee or as per the need of the organization.