How Overtime Works and How to Calculate Overtime
When your employees work longer hours than they are scheduled for, not paying them the appropriate amount for the extra work could force you into some Situs slot. Employees who are eligible for overtime pay and don’t receive it could take their case to court, which will not only cost you in legal fees but also put a serious dent in your company’s reputation. To avoid the hassle and hardship of an overtime pay lawsuit, it is important to understand exactly what overtime pay is, how it is calculated, and under what circumstances you need to offer it to your employees.
What is overtime pay, and how does it work?
Simply put, overtime is the additional time employees work outside of their normal hours. Overtime pay is the amount of money workers are entitled to for putting in that extra time. Employees should receive their overtime wages in the paycheck that follows the pay period in which they worked the overtime hours.
As noted by the United States Department of Labor, unless employees fall under exempt status, per the Fair Labor Standards Act, employees must be paid overtime wages for the time they work past 40 hours in a week. Employers can require their staff to work overtime but must pay them appropriately for it. If employees fail to work the required overtime, according to the FLSA, you can legally fire them. However, the laws vary state to state, so you should look up the standards for your state before taking any actions.
“Before launching a business plan, small business owners should become very familiar with the local, state and/or federal overtime pay rules,” said Tiffany Cruz, assistant general counsel and HR consultant for Engage PEO. She pointed to the following differences in how states handle overtime pay as examples.
In New York, nonexempt employees must be paid 1.5 times their regular rate of pay for all time they work in excess of 40 hours in one workweek, unless the employee is engaged in farm or domestic services.
In contrast to federal law, California generally requires daily and weekly overtime pay for nonexempt employees unless an exception applies. California employers must pay nonexempt employees 1.5 times their regular rate for all time worked over eight hours (up to and including 12 hours) in any workday and for the first eight hours worked on the seventh consecutive day of work in one workweek, and two times their regular pay rate for all hours worked in excess of 12 in a workday and in excess of eight hours on the seventh day of work in one workweek.