What is hazard pay?

As an employer, you aim to create a safe, positive work environment for your employees every day. Unfortunately, that’s not always possible. Hazardous work environments can happen for reasons beyond your control—for example, when essential workers have to come into work during a global pandemic. Or, hazardous conditions may simply be the nature of the job, such as working with dangerous chemicals. In both these cases, hazardous duty pay may apply.

In this post we’re answering some important questions like, “What is hazard pay?” and “Is hazard pay mandatory?” We’ll also explain how to implement the hazard pay process if you need to. Read on for an in-depth overview of hazard pay, or use the links below to skip to the section that best applies to your situation.

• Definition of hazard pay
• Types of jobs with hazard pay
• Is hazard pay mandatory?
• How hazard pay works
• How much is hazard pay?
• COVID-19 hazard pay
• Factors to consider when creating a hazard pay policy
• Final thoughts

Definition of hazard pay

• According to the  U.S. Department of Labor , hazard pay is defined as additional pay for employees working under potentially hazardous conditions, performing hazardous duties, or doing work that involves physical hardship.

Types of jobs with hazard pay

Some examples of hazardous jobs include:

• Structural iron and steel workers
• Aircraft engineers and pilots
• Logging workers
• Roofers
• Refuse collectors
• Truck drivers
• Farmers, ranchers, and agricultural workers
• Landscape workers
• Construction workers
• Fishers

Is hazard pay mandatory?

Hazard pay is not federally mandated. Unlike overtime and retroactive pay, hazard pay is not covered in the Fair Labor Standards Act (FLSA), which outlines wage requirements for employers. The document only specifies that hazard pay be offered to federal employees when calculating overtime pay.

What this means is employers are ultimately responsible for deciding if and how they issue hazard pay to their team.

How hazard pay works

Hazard pay is usually paid on top of an employee’s basic pay. This means that they can earn more when they’re working under hazardous conditions or are performing potentially dangerous labor. In general, hazard pay doesn’t apply when an employee is working under normal or safe circumstances. For example, let’s say an aircraft engineer works 80% of their day in an office setting and 20% in the field exposed to hazardous conditions. Based on this rule, they would only be eligible for hazard pay for 20% of their workday.

There are a few ways employers can structure hazard pay:

1. Premium pay: A percentage of an employee’s standard hourly wage or salary. If an employer has a 20% hazard pay policy, the worker would earn 20% more than their regular pay when working under qualifying conditions.
2. Flat rate: A standard amount that’s added to an employee’s paycheck—an extra $200 per paycheck would be an example of flat-rate hazard pay.

Because hazard pay is not required by law, there isn’t a legal standard that differentiates hazardous and safe work environments within the private sector. However, construction sites, health care facilities, dangerous weather, or hostile work spaces are a few common examples where hazard pay may come into play.

As for government workers, there are a couple of characteristics that help define a hazardous work environment :

• Physical hardship: Tasks involving physical hardship that causes extreme physical discomfort or distress and is not completely offset by protective devices or equipment.
• Hazardous duties: Duties performed under conditions where an accident could potentially result in serious injury or death.

How much is hazard pay?

Hazard pay isn’t mandatory for private companies, so it’s up to the employer to determine if and how much hazard pay they will offer employees. As mentioned earlier, hazard pay is usually only applicable when an employee is working in specific hazardous conditions. For example, hazard pay would apply when handling chemicals but not while working at a desk in an air-conditioned office.

Note: Certain federal government employees are legally entitled to hazard pay when performing hazardous duties or tasks that involve physical hardship.

COVID-19 hazard pay

Hazard pay has become an increasingly popular human resources and public health topic as the world continues to deal with the COVID-19 pandemic. Because of the extreme circumstances the pandemic has created, many essential workers are requesting pay increases in the form of hazard pay. Still, private sector employers are not federally obligated to provide hazard pay to those whose jobs put them at risk of exposure to the coronavirus. Some congressional representatives have advocated for “pandemic premium pay” through a bill called the HEROES Act, but at the time this article was written, the hazard pay initiative has not been passed. However, several states and local municipalities have started to draft legislation that could change the rules for essential frontline workers.

Factors to consider when creating a hazard pay policy

Deciding whether to offer hazard pay depends on the nature of your business and the duties your employees are expected to perform. Ultimately, adding hazard pay to your payroll processing is a financial decision, so there are certainly factors to consider as you weigh your options.

Determine which employees qualify for hazard pay

In most cases, hazard pay only applies when employees are working under potentially harmful conditions and not while they’re in a safe work environment.

To implement an effective hazardous pay policy, you’ll have to determine which employees qualify and how you define what’s hazardous and what isn’t. Sometimes this can get tricky, so it’s important to have a high-level process in mind. For example, grocery store cashiers may not face much danger in normal circumstances, but their jobs can become much riskier during a public health crisis.

Determine how you will calculate hazard pay

As an employer, it’s up to you to create your own guidelines for hazard pay structure, eligibility, and payment amounts. Typically, employers will either offer additional compensation for hazard pay as a percentage on top of their regular pay or as a flat rate. You can opt for whichever one best aligns with how you prefer to calculate and manage your payroll.

Create a process for hazard pay processing

While beneficial to your employees, carrying out hazard pay policies can be a big hurdle for employers. To make sure your process is effective, you’ll need to have:

An organized system for recording hours worked in hazardous conditions

Payroll records and reports that allow you to gather data on employee hazard pay and how it impacts your business’s budget

A well-designed process to reconcile payroll, making sure the paychecks you issue line up with your budget and employees’ hours worked

QuickBooks can help you create and launch a process for hazard pay while making sure your business goals and finances align.

Final thoughts

Offering hazard pay can be a big benefit to employees who regularly work in dangerous conditions or those working in essential services under extreme circumstances. Whether you need to provide hazard pay ultimately depends on your work environment, business goals, and finances.

No matter what you decide, QuickBooks can help you create and manage a payroll, bookkeeping, and accounting process that works for you.