GlossaryHR

The Essential List of Human Resource Definitions You Need to Know

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Employee Overtime

How do I control employee overtime?

Employee overtime is defined by the federal government as hours worked beyond 40 in a workweek. State and local laws may also set rules for overtime. Overtime increases business costs by imposing a multiplier on the pay rate for non-exempt workers. The most effective way to control employee overtime is through a combination of policy, employee scheduling, and timekeeping work tech that together avoid scheduled overtime and limit unplanned overtime through clock enforcement.

When is overtime pay mandatory?

Overtime pay is required when hours worked by a non-exempt hourly worker exceed 40 in a defined workweek. The Overtime pay rate under the Fair Labor Standards Act (FLSA) must be at least time and one-half the employee’s regular rate of pay. No limit is imposed on number of hours worked in a workweek for those over age 16. Overtime pay is not required for work on weekends, holidays or regular days of rest, unless the employee has exceeded the overtime hours limit in the workweek. Additional federal, state, and local laws may also apply.

How do I calculate overtime?

Overtime pay is calculated based on federal, state, and local laws plus company policy. Generally, laws set the maximum hours at regular pay during a workweek and the minimum multiplier for the overtime rate. For example, overtime pay for hour 41 for a nonexempt worker during one workweek must be 1.5 times the regular rate, according to FLSA. State and local law may have more restrictive rules, and business policy could set the maximum hours lower and/or minimum multiplier higher. Whatever rules govern a particular business can be set in timekeeping and payroll systems to calculate proper pay.

Who is eligible for overtime pay?

Non-exempt employees are eligible for overtime pay according to FLSA. Generally, hourly workers are nonexempt. Exempt employees are an exception to FLSA and not subject to its overtime provisions. Exempt employees are defined based on annual compensation over a set level, paid on a salary or fee basis, and performing the duties of an executive, administrative, or professional employee.

What federal laws govern overtime?

The Federal Labor Standards Act (FLSA) governs overtime, among other labor standards. The Wage and Hour Division of the US Department of Labor administers and enforces labor law for all private, state and local government employment. FLSA became law in 1938.

Are there state or local laws for overtime?

Yes, many state and local areas have laws for overtime determination and overtime pay. Some states have daily overtime rules as well. For example, Alaska, California, Nevada, and Colorado have laws that require overtime for work beyond daily hour limits. Know the laws governing overtime for your state and local areas.

What is the penalty for overtime violations?

There are steep penalties for violating overtime rules. Compliance with overtime laws requires an understanding of the laws, including when overtime is incurred, what rate must be paid, and when payment must be made. There is often a compounding effect when overtime is not properly tracked and paid, because multiple employees are affected over an extended period of time.

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