Overtime is the additional amounts paid to hourly employees who work more than 40 hours in a workweek. Federal law requires that hourly employees who work more than 40 hours in a workweek must be paid at a higher rate for the overtime hours, at a minimum of 1 1/2 times the employee's regular pay rate.
Employee Pay Regulations
The Wage and Hour Division of the U.S. Department of Labor regulates overtime and other pay provisions, through the Fair Labor Standards Act. In addition to overtime provisions, the Act regulates child labor and minimum wage activities of U.S. employers.
How Overtime is Calculated and Paid
Overtime Pay is the amount of overtime paid to each employee in a pay period. Overtime pay is calculated: Hourly pay rate x 1.5 x overtime hours worked.
Here is an example of total pay for an employee who worked 42 hours in a workweek:
- Regular pay rate x 40 hours = Regular pay, plus
- Regular pay rate x 1.5 x 2 hours = Overtime pay, equals
- Total pay for the week.
A business may pay overtime at a higher rate or it may pay overtime before 40 hours (at 35 hours a week, for example), but the minimum is 1.5 times regular pay after 40 hours in a workweek.
Employees may be paid more than the minimum federally required rates for overtime. Some employers, for example, pay "double time" for holidays. Overtime pay is not required for night, holiday, or weekend work; these rates are determined by the employer or by union contracts.
Some Employees Exempt from Overtime
Because of the nature of their work, some employees are considered to be exempt from receiving overtime pay. In order to be classified as exempt, an employee must have specific types of job duties. The Fair Labor Standards Act (FLSA) recognizes executive, administrative, professional, outside sales, and some computer employees as exempt. Exempt classification is on a case-by-case basis and is not based on the job title of the employee.
Exempt employees are paid a salary, based on an annual rate, at 2080 hours of work per year. Holidays and time off are not deducted from this salary.
As of 2004, exempt salaried employees are considered to be exempt from overtime if their weekly pay is over $455 per week, or $23,660 annually (52 weeks).
Record keeping of Overtime
The FLSA requires employers to keep records of payments to employees, including overtime pay. In the case of an audit, an employer mus be able to prove payment of overtime that meets FLSA requirements.
State Overtime Regulations
Some states have regulations for overtime and other labor laws that exceed those of the federal government. In this case, the more strict regulation must be met. Check with your state's labor department to review state labor laws, or check with your employment attorney.