To comply with the Fair Labor Standards Act (FLSA), employers are required to provide overtime pay to nonexempt employees who surpass 40 hours of work within a single workweek.
Although the federal mandate stipulates overtime compensation at one and a half times the regular pay rate, it’s important to acknowledge that various states may enforce their own regulations. Some states might require paying overtime on a daily basis or even provide double-time pay, making the whole process of managing overtime pay even more complicated for you. We’re here to lend a hand and take the fear out of the word “Overtime”.
Is Everyone Eligible to Receive OT?
Some employees may not qualify for overtime under the FLSA if they earn a salary exceeding the FLSA minimum and perform job duties falling under specific exempt categories. Common exemptions include executive, administrative, professional, outside sales, and computer-related positions. Before denying or allowing a team member to earn overtime wages, it’s important you familiarize yourself with the difference between exempt and nonexempt employees.
We highly recommend checking this page to learn more about exempt position types.
How to Calculate Overtime Pay for Your Team
In certain states, employees are mandated to receive compensation for both daily and weekly overtime. Let’s begin by exploring weekly overtime calculations, as this is the most common type.
According to the FLSA, a workweek is a set period of 168 hours or seven consecutive 24-hour periods. It doesn’t matter when it starts or what time of day, and it’s not tied to how often an employee gets paid, like bi-weekly or monthly. Also, each workweek is looked at separately, so you can’t average hours worked over multiple weeks.
To calculate the rate of pay for overtime hours, simply take their regular hourly rate and multiply by 1.5.
In the following example, the employee earns $8/hour and worked for 45 hours (5 hours of overtime):
$8 x 40 hours = $320 base pay
$8 x 1.5 = $12 overtime rate of pay
$12 x 5 overtime hours = $60 overtime pay
$320 + $60 = $380 total pay
What to Know About Daily Overtime
As of the time of composing this article, Alaska, California, Nevada, Puerto Rico, and the Virgin Islands have implemented daily overtime laws for employees exceeding eight hours of work in a day. Furthermore, Colorado has established daily overtime provisions for those working beyond 12 hours within a single day. We recommend double checking with your state and local laws and regulations to confirm the
Most daily overtime laws require that any hour worked beyond 8 hours a day is considered overtime. Moreover, specific states dictate the duration of a standard workweek. For example, in California and Kentucky, a workweek spans six consecutive days. Any hours worked on the seventh consecutive day qualify as overtime.
Is it against the law to not pay overtime?
Absolutely. Both federal and state regulations stipulate that employers must compensate nonexempt employees with the mandated overtime premium. Failure to do so can lead to civil and criminal penalties.
How to Track Overtime
Most modern time tracking software features automated overtime calculations based on your company’s configuration. Apps like Everyminute can now capture all your overtime in the background for you. This high-tech approach is the fastest, most efficient and most accurate way to track overtime totals for your team members. These applications provide abundant information and enable you to spend your time focusing on other important tasks.
Conclusion
It’s vital for employers to grasp the ins and outs of overtime pay regulations to stay on the right side of the law. By distinguishing between exempt and nonexempt employees and leveraging modern time tracking tools, businesses can ensure fair compensation while sidestepping penalties. Utilizing modern time tracking software can streamline the calculation and tracking of overtime, allowing employers to focus on other critical tasks. Stay informed and make the most of available resources to manage overtime effectively.
