What is Hazard Pay?

For some employers, hazard pay is a necessary part of the job. Dangerous worksites, physically demanding tasks, and other high-risk duties may require additional compensation to attract and retain skilled workers. For others, hazard pay might never enter the budgeting equation. Consider this your primer on hazard pay compliance, best practices, and strategic implementation.

What is Hazard Pay?

Hazard pay is a form of differential compensation for employees who perform dangerous jobs or work that involves significant physical hardship. The U.S. Department of Labor (DOL) defines “physical hardship” as “work duty that causes extreme physical discomfort and distress which is not adequately alleviated by protective devices.”

According to employment website Monster.com, five of the most common occupations that receive hazard pay include:

• Fishers and fishing industry workers
• Logging workers
• Aircraft pilots and flight engineers
• Roofers
• Refuse and recyclable material collectors

How Is Hazard Pay Calculated? 

Hazard pay is typically calculated as a percentage of an employee’s base pay, often ranging from 5% to 25%, depending on the level of risk associated with the job. Some industries and government positions have set hazard pay rates, while private-sector employers may determine their own structure based on industry norms and collective bargaining agreements.

The key factors that influence hazard pay calculations include:

• The severity and frequency of hazardous conditions.
• Government or industry regulations regarding hazard pay.
• The organization’s hazard pay policy or any contractual obligations.

Is Hazard Pay Required?

The Fair Labor Standards Act (FLSA) does not require private-sector employers to offer hazard pay. The DOL only mandates that hazard pay be included “as part of a federal employee's regular rate of pay in computing the employee’s overtime pay.”

Instead, hazard pay is typically negotiated through union collective bargaining agreements (CBAs) or voluntarily provided by employers as an incentive to acknowledge occupational risks. Employers who choose to offer hazard pay should ensure that policies are well-documented and consistently applied to avoid disputes and compliance issues.

What Are Collective Bargaining Agreements (CBAs)?

A Collective Bargaining Agreement (CBA) is a legally binding contract between an employer and a union representing employees. These agreements outline employment terms, including wages, working conditions, benefits, and hazard pay provisions. CBAs ensure that workers in high-risk jobs receive fair compensation for the dangers they face. When hazard pay is included in a CBA, employers are legally required to adhere to the agreed-upon terms, making compliance crucial to avoid legal disputes or labor strikes.

HR’s Role in Hazard Pay

HR professionals play a crucial role in ensuring that hazard pay policies are well-implemented, legally compliant, and effectively communicated to employees. The first step is to thoroughly review company policies, legal obligations, and any applicable collective bargaining agreements (CBAs) to avoid potential disputes and ensure compliance with labor laws. Mismanagement of hazard pay can lead to financial penalties and legal ramifications, making it imperative for HR to stay informed and proactive.

Educating employees about hazard pay is equally important. Whether through onboarding sessions, refresher training, or easily accessible documentation, HR should maintain an open line of communication regarding hazard pay policies. Workers must understand when they are eligible for hazard pay, how it is calculated, and how to report any concerns.

Collaboration with payroll and finance teams is also key to accurate and timely payments. Ensuring that payroll staff understand how to calculate and apply hazard pay correctly can prevent costly errors. Regular audits and process evaluations can further enhance efficiency and compliance.

Additional Resources

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• BernieU—free online HR courses, approved for SHRM and HRCI recertification credit
• BerniePortal Blog—a one-stop shop for HR industry news
• HR Glossary—featuring the most common HR terms, acronyms, and compliance
• Resource Library—essential guides covering a comprehensive list of HR topics
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• Community—the HR Party of One Community forum, a place devoted to HR professionals to ask questions, learn more, and help others