What is overtime pay?

Simple enough, but there is a lot to it.

Overtime pay is a premium applied to hours worked "over" the standard 40 hours per week, or the standard 8 hours per day (depending on your state).

It only affects non-exempt employees (hourly workers).

By law, overtime must be paid at 1.5x the employee's regular rate.

Overtime pay example

A non-exempt employee works 44 hours, and their regular rate is $20/hour.

Regular pay = 40 hours x Hourly Rate

Regular pay = 40 x 20 = $800

Overtime pay = Overtime Hours x Hourly Rate x 1.5

Overtime pay = 4 x 20 x 1.5 = $120

Total pay = Regular pay + Overtime Pay + Supplemental Pay

Total pay = 800 + 120 + 0 = $920

What determines if an employee is non-exempt?

According to the Fair Labor Standards Act FLSA...

If an employee meets the following three criteria, they are exempt from overtime pay if:

• They earn at least $684 per week ($35,568 annually)
• They are paid on a salary basis, not hourly
• Their job is executive, administrative, professional, computer, or outside sales

So, if they do not meet ALL THREE, they are considered non-exempt and are eligible for overtime pay, so please be sure they get paid fairly.

Weekly overtime pay

Also according to the FLSA, all non-exempt employees are eligible for weekly overtime over 40 hours in a workweek.

A workweek is a fixed, recurring, 7-day period determined by the employer. For example 12 AM Monday through 11:59 PM Sunday.

Contact your time and attendance and payroll provider if you need to change that, otherwise keep it consistent.

Daily overtime pay

All US states must follow the federal law of 40 hours per week, however the following states also require daily overtime.

• Alaska: 1.5x the regular rate over 8 hours per day
• California: 1.5x the regular rate over 8 hours per day. Plus 2x the regular rate over 12 hours per day
• Colorado: 1.5x the regular rate over 12 hours per day

Industry exceptions

Some exceptions may override both federal and state models, for example some industries governed by collective bargaining agreements or state law.

One example includes the 8/80 rule.

This applies overtime pay after 8 hours in a day, or 80 hours in a 14-day period, and can be common for public safety, health care, or unionized industries.

Weighted overtime pay

This can occur when employees are eligible for overtime, however they work at different hourly rates.

If so, overtime is calculated as a weighted overage of their various rates.