Insights / Workforce Management
Who Pays Overtime on Temp Workers? FLSA Rules for Ops Managers
Overtime on temp labor isn't just a bigger invoice line — it's a joint-employer question. Here's how the pay, the billing, and the liability actually work.
The staffing agency, as the W-2 employer, pays the overtime premium and bills it through to you, usually at a higher OT bill rate. But if your own supervisors direct off-the-clock extra hours or informal weekend shifts, you can be held jointly liable under the FLSA even though the agency cuts the check.
The confusion that costs you money or exposure
Most ops managers assume overtime on temp labor is purely a billing question: the agency handles payroll, so the agency handles overtime. That's half right. Under the Fair Labor Standards Act, a temp worker can have two employers at once for wage purposes — the staffing agency that issues the W-2, and the client site that supervises the day-to-day work. Both can be held jointly liable if overtime rules get broken, even when the agency processes the paycheck.
There's no such thing as an 'exempt' light industrial temp for overtime purposes. Warehouse, production, assembly, and general labor roles are non-exempt under the FLSA almost without exception, which means anyone working more than 40 hours in a workweek is owed time-and-a-half on their regular rate, full stop. Temp status doesn't change that math, and neither does a handshake agreement between a floor supervisor and a worker.
Who actually cuts the overtime check
The staffing agency pays the OT premium to the worker and bills it through to you — that part is standard. What varies by agency and by contract is how the overtime hours get billed. Some agencies bill OT hours at 1.5x the straight-time bill rate. Others bill the base pay-plus-markup on the first 40 hours, then bill pay-rate-at-1.5x plus a reduced markup on the premium portion only. Neither method is wrong, but they produce different invoice totals, and if your SLA doesn't specify which one your agency uses, you'll find out the hard way at month-end.
Say, hypothetically, you run a temp at an $18/hour pay rate with a 1.55 bill multiplier — that's $27.90/hour straight time. If that person works 45 hours in a week, the agency owes them $27/hour (1.5x pay rate) for the last 5 hours. Depending on the billing model, you might see those 5 hours invoiced at $41.85 (1.5x the full bill rate) or at something closer to $27 plus a smaller markup. On a single worker that difference is a rounding error. Run 30 temps through a two-week peak surge with regular OT, and the gap between billing methods can swing the invoice by a few thousand dollars — which is exactly why this belongs in your staffing agreement, not discovered on an invoice.
The two-site aggregation trap
If you run multiple facilities and use the same staffing agency across sites — or if your agency shares a labor pool across nearby clients — overtime can trigger in ways that surprise both parties. FLSA overtime is calculated per employer, per workweek, not per job site. If the same agency employee works 25 hours at your facility and 20 hours at another client's facility in the same week through that same agency, the agency owes overtime on the combined 45 hours, because it's one legal employer regardless of how many places the person clocked in.
This matters operationally because if your agency's timekeeping isn't unified across sites, that aggregation gets missed — and either the worker gets shorted, or the invoice arrives with an OT charge you didn't expect for hours you thought were under 40. When you're evaluating a staffing vendor that runs multiple accounts in your area, ask directly whether their timekeeping system rolls up hours across clients in real time or whether it's reconciled manually at payroll close. Manual reconciliation is where aggregation errors live.
Where clients get burned: off-the-clock and 'just stay a little longer'
The most common way a client company gets pulled into an overtime liability claim has nothing to do with the agency's billing — it's a floor supervisor asking a temp to finish a pallet, close out a line, or come in Saturday morning, without routing it through the agency's official schedule. If that time isn't logged in the agency's timekeeping system, the worker isn't paid for it, isn't covered by the agency's workers' comp policy while doing it, and both companies are now exposed to a wage-and-hour claim if the worker files one.
The fix is procedural, not complicated: any extra hours, any schedule change, any 'can you stay' request needs to run through the same time-tracking system as the regular shift, every time, with no exceptions for how small the ask feels. If your site supervisors have informal authority to extend shifts on the fly, that authority is exactly what makes you a joint employer in the eyes of the Department of Labor — the more control your team exercises over hours worked, the more exposure your company carries alongside the agency.
Building an overtime approval workflow with your agency
Set this up before your first surge week, not during one. Define a weekly OT hour threshold that requires your sign-off before the agency schedules it — many clients cap it at 5 hours per worker per week without a supervisor approval, then require director-level approval above that. Confirm in writing which OT billing method your agency uses, so finance isn't reconciling a surprise on the invoice.
Ask your agency for a standing weekly OT report broken out by worker and by site, not just a lump-sum line on the invoice. That report is also your early warning system for burnout and turnover risk — a temp regularly pulling 50-plus hours is a flight risk regardless of the extra pay, and it's cheaper to add headcount than to re-source and re-train after they walk. Finally, make sure your onboarding paperwork with the agency explicitly states that only agency-scheduled hours count as assignment hours — that single clause closes most of the off-the-clock exposure described above.
Frequently asked
Does the staffing agency or the client pay overtime for temp workers?
The staffing agency pays it, since it's the legal W-2 employer of record. The agency then bills the client for the overtime hours, typically at a higher OT bill rate that reflects the 1.5x pay premium. The client doesn't cut a separate check to the worker, but the client does absorb the cost through the invoice — and can share legal liability if it directed the extra hours without going through the agency's official process.
Is there daily overtime for light industrial temp workers, or just weekly?
The federal FLSA standard is weekly: overtime kicks in after 40 hours in a single workweek, with no federal daily overtime threshold. Some states impose daily overtime rules on top of the federal standard, so it's worth confirming with your staffing agency or legal counsel how your specific state and payroll setup handle it rather than assuming the federal 40-hour rule is the whole picture.
Can our company get in trouble if a supervisor asked a temp to work extra hours off the books?
Yes. If a site supervisor directs a temp worker to stay late or come in on an unscheduled day and that time isn't logged through the staffing agency's official timekeeping, both the client and the agency can be exposed to a wage claim for unpaid overtime. The worker also loses workers' comp coverage for that unofficial time, since it falls outside the agency's assignment record.
How do I know if my staffing agency is billing overtime correctly?
Ask for a written explanation of their OT billing method before you sign the service agreement — specifically whether OT hours are billed at 1.5x the full bill rate or at pay-rate-plus-reduced-markup on the premium portion. Then request a standing weekly OT report broken out by worker, so you can catch billing discrepancies or unexpected overtime patterns before they show up as a surprise on the monthly invoice.
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