Most non-exempt employees in the US earn overtime pay (at 1.5x their regular rate of pay) after 40 hours in a workweek. So, it’s easy to think that if that employee works 46 hours, 6 of those hours would count towards overtime pay. But what happens when some of those hours are vacation or sick hours? Will that affect the employee’s overtime calculations? Yes.
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If an employee needs to receive back pay, this means that the employee wasn’t compensated correctly for their work. An employee may be owed back pay for bonuses, promotions, pay increases, or for hours they worked. Whatever the case may be, back pay is something that employers need to take seriously and handle in a timely manner.
Here’s what you need to know:
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Overtime rules in the United States are generally simple. According to the Fair Labor Standards Act, non-exempt employees who work over 40 hours a week earn 1.5x their normal rate of pay for overtime hours. If employees earn multiple pay rates during their shifts (perhaps due to different positions they may have within a company), business owners must calculate their regular rate of pay for overtime and pay their workers accordingly. If you’re in a state like California, overtime becomes a little more complicated. Employees in California earn daily overtime and may even earn double time depending on how many hours they work. Not only that, but other overtime rules apply when employees are on an Alternative Workweek Schedule.
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Recently, Timesheets.com updated the service to include a notification of any records exceeding a specified value when closing a payroll period. This new feature intends to resolve meal break violations. California, specifically, has a law that requires employees to take a 30-minute lunch break for every 5 consecutive hours worked when the employee works more than 6 hours in a single day. An employer must relieve an employee of all tasks and duties during this meal break period. If the employee does not get a meal break—during which they are relieved of their work duties—for each five consecutive hours worked, a violation occurs. A meal break violation is payable to the employee at the rate of one hour at regular pay. Violation pay does not count towards overtime calculations.
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If you are a non exempt employee or you have non exempt employees in the US, times are about to change! Since 2004, overtime threshold rules have stayed the same. This means that the cost of living threshold increased and the requirements for overtime did as well. The Obama administration took up the issue and directed changes to overtime laws that would have expanded the number of eligible workers. However, the Trump Administration prevented those changes. Nearly 3 years later, the rules are finally slated to change, but severely watered down from the previous plan.
On Sept. 24th, 2019 the US Department of Labor (DOL) announced their final overtime rules that will affect many Americans. In fact, the new overtime rule will make overtime pay available to over 1.3 million workers and will provide an estimated $298.8 million in additional pay. The new overtime rules will become effective officially on Jan 1st, 2020. Here’s what you need to know:
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Many businesses have employees that get paid multiple pay rates during their shift. This happens when they perform more than one specific job function. For those employees, the hourly rate depends on the job they are working on at the time. Hourly rates by job can vary when employees work in the construction, plumbing, caretaking, landscaping, and many other industries. When you have an employee that works under different rates, you need to make sure that you are calculating their regular pay rate properly for overtime. Unless your employee is specifically exempted, employees working at more than one job rate covered by the FLSA must receive overtime pay at their regular rate and not at the specific rate for the job they are doing when overtime is incurred.
Timesheets.com has a handy calculator for simple regular rate calculations when there are two rates for two different jobs.
Employers can make a lot of mistakes with overtime calculations if they’re not careful and this is bad because it can lead to lawsuits. Some employers make some of these mistakes intentionally too and basically test their luck with labor lawsuits.
Some of those mistakes include: avoiding overtime payments by classifying employees incorrectly as contractors, paying employees a salary when they should be working by the hour, “paying” private employees comp-time in lieu of overtime, etc.
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Occasionally, we hear from customers who want to know why an employee has overtime on the payroll report but does not appear to have overtime on the timecard. Under normal circumstances, the two would match but, given the right mix of conditions, they sometimes don’t. I’ll explain why that is and what you can do to avoid it.
Calculating overtime by hand can be risky. The Federal and State governments have set a lot of rules to ensure that employees get paid fairly for the time they work over 40 hours, and if a company doesn’t know and follow all of those rules, overtime lawsuits often result.
(If you need to calculate overtime by hand, try our free overtime calculator.)
Employers who operate multiple companies don’t always realize that their employees who work for both must have their hours at each company combined for overtime calculations.
Timesheets.com has a simple regular rate calculator for these situations that may prove helpful.
When employees work for two different companies owned by one employer (called joint employment), they are still entitled to overtime when their clocked hours at both companies exceed 40 in a week (or 8 in a day in some states).
“Joint employment exists when a person is employed by two or more employers such that the employers are responsible, both individually and jointly, for compliance with a statute.” – DOL
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Do vacation hours count as overtime? This is a common question among employers and employees alike. If an employee takes 8 hours of vacation or PTO on a week where he works more than 32 hours in that week, will those hours over 40 be counted as overtime?
(Before I answer that, I wanted to share a link to our free accrual calculator in case that comes in handy.)
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I have heard this question asked countless times over the years:
“Why does your time tracking system only calculate overtime after 40 hours and not after 80 hours?”
The answer is, because that is how it’s defined in the FLSA. Many business owners don’t realize this but they must calculate overtime after 40 hours and within one workweek, not after 80 hours within two. In other words, it’s not our design, it’s the law for most cases in the US.
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