Local payroll experts share insight into overtime
Calculating overtime pay might seem fairly simple, but taking into account differing state laws and different laws for exempt and nonexempt employees is an important part of ensuring everyone is paid fairly and according to the law.
Overtime laws are regulated by state statutes and the Fair Labor Standards Act (FLSA). While multiplying by 1.5 isn’t a difficult calculation, there is more to overtime pay than meets the eye.
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Because we provide payroll services for many businesses in Danville and the surrounding areas, but across the nation as well, we’re well-versed in overtime calculation and ensuring extra time is paid correctly per state and national laws.
Starting out with the basics, you likely know per the FLSA employers are required to pay an overtime rate of 1.5 times the normal rate of pay for nonexempt salaried and all hourly employees who work over 40 hours in any single week.
As a basic example, if an employee’s rate of pay is $30 per hour and they work 45 hours in one week, their pay would be calculated by determining their extra hours (5 in this case) and multiplying their normal rate by 1.5 ($30*1.5=$45). So:
Standard pay: $30*40 = $1,200
Overtime pay: $45*5 = $225
Total pay for the week: $1,425
Keep one important fact in mind: overtime applies to any given week, not pay period. So, even if you pay your employees every two weeks, you can’t average their hours worked to avoid paying overtime. For example, if an employee works 36 hours in one week and 44 hours the next, even though the total is 80 for two weeks, you still owe 4 hours of overtime for the second week because they exceeded 40 in a single week.
Some employers make the mistake of assuming all salaried employees are exempt from overtime pay, which is not always the case. Employees on salary are only exempt if they earn more than $35,568 per year and perform certain job duties. Employees who earn more than $107,432 per year are never entitled to overtime regardless of what their job entails.
Certain states have their own additions to FLSA. In our home state of California, there are daily requirements for overtime which state any hour worked beyond 8 in a given day must be paid at time-and-a-half, and any hour beyond 12 in a work day must be paid at double time, or twice the employee’s regular rate. Be sure to understand your state’s specific laws regarding overtime.
If you are in need of a partner to help your business with payroll and/or other administrative tasks, or if you have questions regarding overtime, give us a call today!
