An Employer’s Guide to Overtime Pay

When employees meet certain eligibility requirements, they must be paid overtime according to the Fair Labor Standards Act

If an employee works more than 40 hours a week, in most cases, those extra hours are considered overtime. The government sets regulations on how these workers are paid for their extra hours. Employers need to understand the terms and how to comply with both federal and state laws and regulations.

Here is a deeper dive into:

• What overtime pay is
• Who qualifies for overtime pay
• How overtime pay is calculated
• What happens if an employer doesn’t comply

What is overtime pay?

Overtime pay is a higher wage paid to employees who work more than 40 hours in a given workweek. The Fair Labor Standards Act (FLSA) outlines federal regulations for overtime, including exemptions. The guidelines were created to avoid employers exploiting their workers. Legal action may be taken if employers don’t comply with these laws.

The FLSA states that the overtime wages must be no less than time and a half the worker’s regular pay rate. However, the FLSA doesn’t include:

• A limit on the number of hours workers over age 16 can work in a week
• Overtime pay requirements for holidays, weekends or regular days of rest

The law also doesn’t prohibit, on a federal level, the number of hours an employee can work in a day. However, some states enforce regulations about the daily number. Essentially, the federal law only applies to the overall 40 hours for the regular workweek, no matter how many hours per day the employee works (so they could work 5 one day and 11 the next, as long as the week’s total is 40 or under).

Who qualifies for overtime pay?

Workers must receive overtime pay if they do not make at least $35,568 a year, or $684 a week. Qualified employees are considered “nonexempt.” Exempt workers make no less than the $684 per week threshold. The FLSA also includes executives, administrators, outside sales employees and certain computer employees as exempt from overtime pay.

While the assumption is that salaried workers are exempt and that the guidelines only apply to hourly workers, in actuality, salaried employees are still eligible to receive overtime pay under the same salary limits and requirements as mentioned above. 

How overtime pay is calculated

Employers must pay an overtime rate of at least regular pay and a half. So, if a worker makes $30 per hour, their overtime hourly wage would have to be at least $45. Employers have the right to pay more than that, but they must meet the minimum requirement.

Note that overtime pay only applies to the overtime hours, not the regular 40 hours. So, if the same $30-per-hour employee worked 45 hours in one week, they would receive 40 hours at $30 per hour and 5 hours at $45 per hour.

What happens if an employer doesn’t comply?

It is important that all employers comply with the FSLA and any state legislation that impacts you and your workers. Failure to pay your employees overtime could easily result in a lawsuit from current or former workers. You may also be liable for the overtime you should have paid on top of all the other legal costs.

When you add damages to the overtime you already owe, those costs can add up fast and you end up paying a lot more than the overtime would have cost. The Department of Labor’s Wage and Hour Division oversees and investigates these cases.

It is important to note that an employer may require employees to work overtime. Doing so is allowed as long as overtime is paid for anything over 40 hours.

Advantages of working with a PEO

When you’re unsure about employment laws you need to follow, a Professional Employer Organization (PEO) can help. PEOs can work alongside your team to help you set up compliance procedures and support with payroll administration.

When you need assistance from a PEO, work with the experienced professionals at StaffLink Outsourcing. We help you bundle payroll, benefits, risk management and HR solutions for your small to mid-sized business so you can focus more on growth and other priorities.

We have been in business for 25 years and have the lowest attrition in the industry. Request a proposal and or contact us at 954.423.8262 for more information.