HR professionals must make sure that written policies accurately reflect the legal requirements and that actual procedures follow the written policies. HR professionals also need to ensure that required wage/hour notices are posted. While the basic principles are seemingly straightforward, variations in how employers schedule work and compensate employees create corresponding variations in the method of calculating the overtime entitlement. The process can become quite complicated, and the financial consequences of erring can be astronomical.
When does overtime apply?
You would pay the first 40 hours at their regular hourly rate, and the rest at the overtime premium pay rate. Using our minimum wage employee example from above, here is an example. Employers with hourly wage earners need to know how to calculate overtime to ensure that they are paying employees the right amount and complying with the FLSA. The rate is one and a half times the normal pay rate the employee earns.
How Does Overtime Pay Work?
- Once you have this regular rate of pay, multiply that number by 1.5 for their overtime pay rate.
- Sandra Habiger is a Chartered Professional Accountant with a Bachelor’s Degree in Business Administration from the University of Washington.
- Employers should also be aware that the maximum tip credit differs by state.
- Technology can be very useful—for both sides—in the event of disputes over overtime earnings.
- Review the definition of hours worked.To learn which work-related activities are considered hours worked, review theFLSA Hours Worked Advisor.
- If your employee is an hourly worker, all you need to do is multiply their regular rate of pay by 1.5.
- With salaried employees, employers will have the additional step of determining the regular rate of pay.
There are some important federal overtime laws and regulations business owners how much is overtime pay must follow to ensure workers are fairly compensated. Employers must pay a wage of no less than 1.5 times the employee’s regular rate when that person works over 40 hours. For example, some states follow federal overtime laws that require you to pay 1.5 times an employee’s regular rate of pay for any hours worked over 40 in a week. Others require overtime pay if an employee works more than a set number of hours in a day. Calculating overtime pay is usually easiest with hourly employees who have a single rate of pay and no additional compensation.
Exempt employees
If the number is greater than 40, the employee is due overtime for the excess hours under federal law. The employee might have worked on totally unrelated job assignments or for joint employers during the workweek—the employee is still entitled to overtime for hours in excess of 40 in the workweek. Weekly calculation is required regardless of whether the employee is paid on a daily, weekly, biweekly, monthly or other basis. The FLSA is the primary U.S. federal law regulating the wages and hours of both public and private employers. It requires covered employers to pay eligible employees at least one and one-half times their regular rate of pay—and at not less than the relevant minimum wage—for all hours worked in excess of 40 in a workweek.
What is overtime pay?
Commissions (whether based on a percentage of total sales or of sales in excess of a specified amount, or on some other formula) are payments for hours https://www.bookstime.com/ worked and must be included in the regular rate. Whether the commission earnings are computed daily, weekly, biweekly, semimonthly, monthly or at some other interval does not matter. Keep in mind that states’ minimum wages may be greater than the federal minimum. To calculate the overtime hours, an employer simply totals the number of hours an employee has worked in any given workweek.
- You cannot avoid paying overtime pay if your workers exceed the maximum 40 hours in a work week.
- It’s important to keep an accurate record of the regular and overtime hours worked by employees in case of an audit by the Department of Labor or a lawsuit.
- Remember, you need to pay overtime rates per the law where your employees do the work, so if they’re working remotely, it’s their home state’s laws that apply.
- The FLSA requires nonexempt employees to be paid one and one-half times their regular rate of pay for every hour worked in excess of a 40-hour workweek.
- Changing clothes and washing up required by law, by the employer or by the nature of the job are compensable.
It need not coincide with a calendar week, but must stand alone. Therefore, employers may not average an employee’s time worked over two or more workweeks income statement when calculating overtime pay. They generally must pay the overtime earned in a particular workweek on the regular payday for the pay period in which wages were earned. Under federal law, the total pay would be (regular pay rate x 40) + (extra hours x regular pay rate x 1.5).
