Calculating the pay for employees who are on salary can be determined by first knowing the number of hours the salary was intended to cover. The method used to calculate overtime pay depends on whether the salaried employee is paid for a standard workweek of 40 hours, a “fluctuating workweek,” or a “fixed workweek.”
Definition of workweek for overtime pay
Federal law defines a single workweek as 7X24 = 168 hours. It does not, however, require that a standard workweek be from Monday through Friday during the hours of 9 to 5. A workweek can be started on any hour of any of the days of the week, and it may be different than for other employees. Overtime pay is to be given for hours worked on Saturdays and Sundays, as well as on holidays or other days of rest. Extra pay is to be given when working on weekends or nights. Overtime pay must also be given for working on standby duty; this occurs if you are required to carry a company cellphone, except when you are not allowed to use the standby time for any personal uses. Overtime cannot be earned when rules are in place to limit it.
When it comes to how many hours you can work overtime, Federal law does not place any limit on it. It does place limits on how many hours a child can work overtime in the labor laws for children. An employer can force an employee who is 16 and older to work overtime, and when there is hazardous duty, the person must be at least 18. When an eligible worker works mandatory overtime, they must be paid in overtime pay.
The effects of working long hours are going to be fatigue, poorer quality of work, mistakes and errors. The employees in a few industries, such as pilots and truck drivers, have limited hours that they can work. Another field where hours are in the process of trying to be limited is nursing. The Safe Nursing and Patient Care Act of 2007 has not yet been passed, but a few states are working to pass laws relating to overtime for nurses.
How much is overtime pay?
Exactly how much you will be paid for overtime hours depends on your employee type and what Federal and state laws apply. If you are classified as a non-exempt employee who works for hourly wages, the Fair Labor Standards Act (FLSA) requires you to be paid for time worked in excess of the standard 40-hour workweek.
Overtime pay must be a minimum of one-and-a-half times that employees regular pay rate. For an employee who makes minimum wage, which is $7.25 per hour, every hour more than the required 40 hours will be paid at the rate of $10.88 (minimum). On some days, such as on a holiday, overtime is often double-time, or twice your regular hourly wage. Most of the time, getting paid double time is based on an agreement between the employee and the employer. Federal laws requiring double time pay do not exist.
Overtime pay is not required by the Fair Labor Standards Act (FLSA) for working at night, or on weekends or on holidays. It is required only when an employee works more than 40 hours in a week. Employers will often pay more for working on weekends, nights, or on holidays, but it is completely voluntary on their part.
How do you calculate overtime pay?
Under federal law, overtime compensation is paid at a rate of at least 1.5 times the employee’s regular pay rate, otherwise known as “time and a half.” There’s no maximum amount that a company can pay to compensate a person for their overtime work, so businesses sometimes offer double pay or higher for overtime, usually when the shift being considered for overtime is particularly undesirable.
Using the time-and-a-half rule of thumb, you’d calculate overtime pay by multiplying an employee’s hourly rate by 1.5 and then multiplying the result by the number of overtime hours they worked. You then add that total to the amount they make within a 40-hour workweek.
The equation works regardless of how much overtime you offer your employees. Note that this equation only applies to nonexempt employees, and the total pay for the week, including the additional payment for overtime, is subject to regular tax rates.
Tip: You must pay an employee at least 1.5 times their normal hourly rate for each hour of overtime they work.
Are salaried workers covered by overtime rules?
When most people talk about overtime, it’s typically in the context of a 40-hour workweek paid on an hourly basis. Salaried workers, however, do not get paid by the hour. While it may be safe to assume that they would not be able to collect overtime, Robert L. Föehl, business law and ethics professor at Ohio University, said that couldn’t be further from the truth.
“It is absolutely critical for employers to understand that paying a salary for a job does not automatically exempt that job from the overtime requirements of the FLSA,” he said. “Many employers do not intuitively understand this.”
According to Föehl, if you have salaried employees, it’s imperative to determine whether they match the exemptions outlined in the FLSA, meaning “the minimum salary must be met and the required duties must be performed.”
What are overtime pay exemptions?
Certain employees are exempt from both overtime pay and minimum wage regulations. According to the FLSA, an exempt employee can’t collect overtime if they are “paid on a salary basis at not less than $684 per week” and work as “bona fide executive, administrative, professional and outside sales employees.” The Department of Labor also exempts “certain computer employees” from overtime pay regulations.
When determining the standard salary level of an employee, according to the FLSA, an employer may let 10% of it include a “nondiscretionary bonus and incentive payment (including commissions) paid on an annual or more frequent basis.”
Negotiating Overtime Work
Highly-valued employees may be able to negotiate arrangements with their employer to avoid working overtime. You might consider asking to discuss your situation with supervisors in a confidential setting and cite any legitimate concerns like eldercare or childcare responsibilities, or health concerns that make it difficult for you to work extra hours. Of course, co-workers may express some resentment toward you if an exception is made.
Some unions or individuals will negotiate collective bargaining agreements or employment contracts that prohibit employers from requiring overtime. Certain employers have enacted policies that place restrictions on the amount of overtime that is permissible. In those cases, workers can take up the issue with supervisors and/or human resources representatives and request clarification of the policy.