Overtime pay is a cornerstone of fair labor practices, but the rules aren’t always straightforward. Understanding the basics of the Fair Labor Standards Act (FLSA) is essential to avoid costly compliance issues.
Table of Contents
- The Basic Rule
- Key Definitions
- Example
- State Law Variations
The Basic Rule
The FLSA requires that covered, non-exempt employees receive at least one and one-half times their regular rate of pay for all hours worked over 40 in a single workweek.
Key Definitions
- Workweek: A fixed, regularly recurring period of 168 hours (7 consecutive 24-hour periods). It does not have to be Sunday to Saturday.
- Non-Exempt Employees: Employees who are not exempt from the FLSA’s overtime requirements. Most hourly employees are non-exempt, and many salaried employees are as well unless they meet specific tests.
- Regular Rate of Pay: This is not just the hourly wage. It includes all non-discretionary payments like non-discretionary bonuses, shift differentials, and commissions. You must total all earnings for the week and divide by total hours worked to find the true “regular rate” for overtime calculations.
Example
An employee paid $15/hour works 45 hours in a week and earns a $50 non-discretionary bonus.
- Regular Pay: 40 hours x $15 = $600
- Calculate Regular Rate: ($600 + $50 bonus) / 45 hours = $14.44
- Overtime Pay: 5 hours x ($14.44 x 1.5) = $108.30
- Total Pay: $600 + $108.30 + $50 = $758.30
State Law Variations
Some states have stricter overtime laws. For example, California requires daily overtime (1.5x pay for hours over 8 in a day) and double-time for hours over 12. Always check your state’s Department of Labor.
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