How to Calculate Overtime Pay Like a Boss

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Most people know that overtime is paid to an employee for time in excess of forty hours in a week. These additional hours are usually paid at a rate of one and a half times the employee’s regular rate of pay. While this may sound simple and straightforward, tracking and paying overtime can be a lot more complicated than people think. Incorrectly calculating and paying overtime can lead to costly corrections, audits, and penalties. While some employers may have agreements with employees to limit overtime, it is critical that employees are properly paid for any time worked. All time worked is compensable time and must be paid in accordance with the applicable federal or state regulations. 

The first thing to determine is whether overtime rules apply to the employee or not. The Fair Labor Standards Act (FLSA), among other things, states the federal overtime provisions that employers are required to follow. Certain types of workers are exempt from these overtime rules, and the FLSA provides some general guidelines to help employers determine an employee’s FLSA exempt or non-exempt status. Employers with workers who are covered by the FLSA required to pay eligible hours at a rate of at least one and a half times the employee’s regular rate of pay. 

Per the FLSA rules, the hours counted for overtime calculation purposes include any time worked in a single work week. This means that any paid time off that an employee may have during the work week does not count toward overtime. It is also important to note that a work week is not necessarily the same as a calendar week. The FLSA defines a work week as a fixed and regularly recurring period of 168 hours, or seven consecutive 24-hour periods, which can begin on any hour of any day, and can even vary among different groups of employees. 

There is no requirement for employers to pay overtime for time worked on weekends or holidays under the FLSA. However, different states may have their own rules when it comes to overtime. Some states require overtime based on the number of hours worked in a single day, or based on consecutive hours or days worked. Businesses may also choose to follow a more generous set of overtime rules as an added benefit for their employees. As with most situations involving discrepancies between federal and state regulations, the best bet is to follow the rule that is most beneficial to the employee. 

Some businesses may have employees who work in multiple jobs or positions in the same work week, with different rates of pay for each job they perform. In these cases, the FLSA determines the employee’s regular rate of pay by calculating the weighted average of the rates paid for all hours worked during the work week. This means overtime rates for employees who normally perform multiple jobs can vary from week to week. 

Having a proper system for tracking employees’ time is a crucial part of making sure overtime is handled correctly for your business. Taking advantage of easy-to-use technology and an expert team of payroll professionals can ensure your practices are accurate and compliant, saving you the time and headache it takes to manually track your employees’ hours. Contact Valor Payroll Solutions today and see how we can help manage and streamline your timekeeping process!

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Christina Hageny

President - Valor Payroll Solutions

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Christina Hageny

President - Valor Payroll Solutions

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