On-call rotations are a fixture for many industries. Having employees on standby in case you need extra help can ensure you don’t fall behind, respond promptly to customers, and keep operations running when unexpected situations arise. That said, employers will want to be familiar with how on-call pay works and the rules set by the FLSA if this type of work schedule is on the radar.
What you’ll learn
What you’ll learn
Updated: June 4, 2025
Key takeaways
- On-call pay is typically required for non-exempt, hourly employees, but not for salaried workers
- Depending on whether employees are “engaged to wait” or “waiting to engage,” requirements are different
- Staying up to date with labor laws and maintaining clear on-call policies can help avoid confusion
As a business owner or payroll administrator, understanding how on-call pay works is a must in order to comply with federal, state, and local laws and make sure you pay employees fairly for the time they put in. But what if you are just getting up to speed on how on-call pay works? In this guide, we’ll explain what this type of compensation is, when employers should use it, and common ways to calculate it.
What is on-call pay?
Simply put, on-call pay refers to the wages you pay your employees when they’re available to perform work tasks outside their regular working hours. When an employee is on call, that doesn’t mean they’re actively working. It means they’re ready to work if you or a coworker contacts them, so they may have to stay in close physical proximity to work and/or be checking their email or work apps to keep an eye out for notifications.
On-call shifts are commonplace at hospitals and big technology firms, but small business owners can also benefit from keeping employees on call, especially in industries like auto repair, legal, and financial services, and retail.
Now that we better understand these types of wages, let’s find out more about how they are used.
How does on-call pay work?
How you pay your employees for on-call shifts typically depends on whether they’re salaried (exempt) or hourly (non-exempt) and whether on-call hours are considered ”hours worked” under the Fair Labor Standards Act (FLSA).
On-call pay for hourly employees can be a flat, per-shift rate or an hourly rate. On-call hourly rates are usually the same or lower than an employee’s regular pay rate. However, the time an hourly employee spends on call counts toward their total hours worked, so if these hours push them over 40 hours per week, they’re entitled to overtime pay.
This leads us to a question that can leave small business owners scratching their heads. To learn more about this topic, we spoke with Peggy James, a certified public accountant with over a decade of experience helping small businesses.
Are on-call pay and overtime the same?
“On-call pay and overtime are not necessarily the same thing. Being on call means you’re available to work outside of your regular work schedule. If you’re a non-exempt employee and regularly work 40 hours per week, you would most likely qualify for overtime pay for the hours worked over 40 that week.
But if you work fewer weekly hours and the on-call hours wouldn’t put you over 40 hours for the week, you probably won’t be eligible for overtime pay for those hours. And if you’re an exempt employee, in most jobs, an employee won’t receive overtime pay at all for any hours worked beyond your regular work schedule.”
— Peggy James, CPA
But does this mean employers have to pay for on-call time? Once more, we asked Peggy to share her thoughts on the subject.
Does an employer really have to pay for on-call time?
“It depends on how the on-call work is structured. If the employee is required to be at the employer’s premises during the on-call shift, they are considered to be working and should be paid for their time. If the employee can be off-site during the on-call hours, they’re generally not considered to be working and therefore wouldn’t have to be paid until they report to the office to work.
That said, if you regularly require on-call shifts for your employees but don’t pay them, even if you’re not legally obligated to do so, it could lead to resentment and poor employee morale.”
— Peggy James, CPA
Although you can offer incentives, you don’t generally have to provide on-call pay for salaried employees.
When should employers provide on-call pay?
Under the working hour laws and standards set by the FLSA and enforced by the U.S. Department of Labor, you must provide on-call pay to your hourly employees if their on-call hours don’t allow them to use their time freely.
For example, if an IT worker is required to be on or near the worksite and expected to respond immediately if called, you’re required to provide on-call pay.
Difference between exempt and nonexempt employees
The FLSA differentiates between exempt vs. non-exempt employees when it comes to on-call pay. Non-exempt employees are usually paid hourly and are entitled to the federal minimum wage plus overtime pay, while exempt employees are paid fixed salaries.
So, how does on-call pay work for these two types of workers?
- Non-exempt employees: Under FLSA regulations, you usually have to compensate hourly employees for on-call hours, even if they’re not actively working.
- Exempt employees: You generally don’t have to pay salaried employees extra for on-call work.
Engaged to wait vs. waiting to engage
An “engaged-to-wait” employee is always on duty. In other words, being engaged to wait means your employee is actively prepared to work when needed. Typically, an engaged-to-wait employee is located at the worksite. However, some workers may stay at home with restricted movement, meaning they’re not permitted to use their time for personal matters or activities.
A “waiting-to-engage” employee is technically off-duty but is expected to respond if the need arises. These workers are given full freedom to use their on-call time as they choose.
In most cases, engaged-to-wait hours are considered working hours, and the employee must therefore be compensated for this time (even if they are not tackling items on a to-do list). On the other hand, waiting-to-engage hours are not considered working hours, and compensation is only offered if and when the employee is called to work.
Now that we’ve covered many of the criteria related to this type of pay, we caught up with Peggy James once more for her insights on the potential advantages and drawbacks of on-call pay.
Potential pros of on-call pay
- It can help employers to maintain coverage of the office if they’re not sure employees will be needed.
- If structured properly, on-call pay could be an incentive for employees to work on weekends or holidays if they know they only have to come to the office if it’s absolutely necessary.
Potential cons of on-call pay
- If you require your employees to be on-site during on-call hours, you will most likely have to pay them for their time regardless of whether they really need to be there to perform work.
- Employers who require on-call work for exempt salaried employees won’t have to pay them whether they work or not. While they may be appealing to the employer, their employees may resent what they see as working for free and having work intrude on their personal time.
Industries with on-call pay requirements
Whether you need to provide on-call pay is not determined by industry but rather by your business’s specific requirements and payment structure. However, on-call pay is more common in some industries than others.
Industries that commonly have on-call pay requirements include:
- Healthcare (doctors, nurses, veterinarians)
- Journalism
- Tech support
- Social work
- Utility maintenance and repair
- Emergency services (firefighters, law enforcement officers, dispatchers, etc.)
- Customer service
Next, let’s find out more about how the dollars and cents come together.
How to calculate on-call pay
Calculation for hourly workers
If your hourly employee is engaged to wait, you can calculate their on-call pay by multiplying the total number of on-call hours by their regular pay rate. For example, if your employee makes $25 per hour, and they’re on-call for 6 hours, their on-call pay for this shift would be $150.
If instead they’re waiting to engage, you only need to pay them for the hours they’re actually called in for work, plus overtime if they work more than 40 hours per week.
Calculation for fixed-rate workers
On-call pay for fixed-rate, salaried employees depends on labor laws and HR compliance rules, your company policies, and employment contract details.
You don’t necessarily have to pay salaried employees extra on-call pay, but you may choose to offer a fixed amount for being available should the unexpected crop up. This is usually calculated daily, weekly, or monthly. For example, you might pay your employee $125 per week in addition to their regular salary for remaining on call.
Calculation for a hybrid fixed and hourly rate
You can also offer your salaried employees a combination of fixed-rate and hourly on-call compensation. In this case, you’d pay your employee a fixed amount for the time they spend on-call, plus an hourly rate for the hours they actually work when called in.
For example, you might offer $75 per week plus $25 per hour worked if your employee is called in.
Calculation for overtime pay
If you require your employee to stay on the worksite and restrict their personal activities during their on-call shift, then these hours count toward overtime. You must pay hourly employees overtime pay for any hours they work beyond 40 hours per week.
For example, if your employee typically makes $30 per hour and works a 40-hour week, they would earn $1,200 per week. If they’re also “engaged to wait” for an additional on-call shift, you must pay them at least 1.5 times their standard hourly rate for these hours. That means you’ll pay them at least $45 for each on-call hour worked.
Employer responsibilities
As an employer, you have a legal responsibility to pay your workers fairly for their time and labor. It’s essential that you understand when and how to compensate non-exempt employees.
You must create clear and consistent on-call policies that fully adhere to federal, state, and local laws and regulations. It can be a good idea to add them to your employee handbook so that they are available in case anyone in your organization needs to reference them.
In any work environment, communication is key. Always tell your employees exactly what you expect of them before you hire them or change your policy. Be clear about when you expect them to be on call, the level of freedom they can have during on-call hours, and when and how they will be paid.
On-call pay has its time and place
For employers who sometimes need team members to help on a moment’s notice, understanding how on-call pay operates is a must. On one hand, employees who are available on standby will expect to be compensated accurately and on time. On the other hand, organizations with these types of workforce needs must ensure they’re complying with all applicable state and federal regulations. While adding on-call pay to your compensation structure requires additional administration, having a transparent process helps ensure you’ll remain compliant over the long term.
Most payroll software platforms make it simple to manage on-call compensation and ensure employees are paid fairly and on time. Whichever solution you choose, our team is ready to help and answer any questions!
Take a tour to see how easy payroll can be.
Jon Davis is the Sr. Content Marketing Manager at OnPay. He has over 15 years of experience writing for small and growing businesses. Jon lives and works in Atlanta.