Understanding Overtime

May 1, 2017 | Business Tips, General News, Payroll

In most circumstances, employers must pay overtime to nonexempt employees who work more than 40 hours a week. (In some states, overtime is more than 8 hours a day.) But not everyone qualifies for overtime pay.

In most cases, the line is drawn between hourly and salaried employees, and misclassifying your staff can be a problem in the long term. So how do you know which category your team falls into and whether or not you should provide overtime pay?  Here is a basic introduction to the classifications and how they might apply to your company.

  • Overtime rates. There are two primary categories of overtime: “time and a half” and “double time,” which is often referred to as holiday pay. Time and a half is calculated at 50 percent over the employee’s hourly salary. So if an employee makes $10 an hour and works overtime hours, those additional hours would be paid at $15. Double time is the law only in California. Some companies may choose to pay double time as an incentive if an employee works on a holiday. There may be union rules as well.
  • Salary versus hourly. For most people, work classifications are divided between hourly and salaried employees. Hourly employees are paid by the hour. If they work more than the 40-hour-a-week maximum, they earn time and a half. A salaried employee receives an annual amount that is divided up per paycheck throughout the year.
  • Exempt versus nonexempt. The real categories are “exempt” and “nonexempt.” These classifications come directly from the Fair Labor Standards Act (FLSA), which regulates overtime and minimum wage pay. According to the FLSA, the biggest population of exempt workers are classified as “white collar,” which includes administrative, executive, computer or outside sales professionals. If you are uncertain about the classification of your employees, check with the FLSA to learn more.

Are you classifying your employees correctly when it comes to hourly rates ? Give us a call and we’ll be happy to help you sort through the rules and make sure you’re compliant.

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