Hazard Pay

Definition

The term hazard pay refers to the premium an employee receives when working in a dangerous location or performing physically demanding tasks.  The law does not require employers to provide hazard pay; it is a benefit typically negotiated through collective bargaining.

Explanation

Hazard pay is normally a premium that applies to the worker's hourly rate of pay.  For example, an employer may agree to pay a 20% premium when an employee is working under hazardous conditions.  If that employee's normal hourly rate is $20.00, they would be entitled to a premium of $20.00 x 0.20, or $4.00 per hour.  In this example, the employer would pay the worker $24.00 per hour ($20.00 standard rate + $4.00 hazard premium).

Employers are not required to provide hazard pay under the law.  It is a benefit usually negotiated as part of a collective bargaining agreement.  However, if an employer provides this benefit, the Fair Labor Standards Act (FLSA) requires the employer to include this premium in the employee's overtime rate of pay.  For example, if a non-exempt employee's standard rate of pay is $20.00 per hour, the minimum overtime rate of pay would be $20.00 x 1.5, or $30.00 per hour.  If their employer provides a 20% premium for hazard pay, an employee working overtime would be paid an additional $30.00 x 0.20, or $6.00 per hour.  In this example, the employer would pay the worker a total of $36.00 per hour ($30.00 standard overtime rate + $6.00 overtime hazard premium).

If provided, the hazardous conditions generally fall into two broad categories:

  • Work Location:  includes work that is performed in dangerous locations.  For example, employees may be paid a hazard premium when they are asked to work in a country that is at war, or at a location that has removed everyone except non-essential employees due to hostile conditions.
  • Physically Demanding Task:  includes work duties that may cause the employee physical discomfort that is not completely mitigated by protective gear.  For example, the worker may be exposed to extreme weather conditions, asked to work in tight quarters, or exposed to irritating noise, dust, or fumes.

Related Terms

overtime pay, back payholiday pay, collective bargaining, floating holiday, mandatory overtime