Complete Overtime Guide for US Employers

Overtime pay refers to extra compensation that employees receive for working more than their standard hours in a week. In the US, standard hours are typically set at 40 hours per week. When employees work more than these standard hours, they’re entitled to receive overtime pay. For instance, if an employee works 45 hours in a week, the extra five hours would be paid at a higher rate, known as overtime pay.

Determining which hours count as overtime under the Fair Labor Standards Act (FLSA) can be crucial for understanding employee rights. Any hours worked beyond 40 hours in a workweek, or beyond eight or 12 hours in a single workday (depending on state labor laws), typically qualify for overtime pay.

This includes any work-related tasks performed during the employee’s regular schedule, whether on-site or remote. If the employees are required to attend work-related activities, such as meetings or training sessions, outside of their regular hours, it’s likely considered work time and may be eligible for overtime pay. Similarly, if an employee is contacted about work during their off-hours, it’s typically considered work time.

Under the Fair Labor Standards Act (FLSA) in the United States, overtime pay is calculated at a rate of one and a half times the employee’s regular hourly wage for any hours worked beyond 40 in a workweek.

Some states may also have their own overtime laws that require higher rates of pay or different criteria for determining overtime.

Not every employee is entitled to overtime pay. The Fair Labor Standards Act (FLSA) classifies employees as either ‘exempt’ or ‘non-exempt’ from overtime compensation based on their job duties and salary.

Non-exempt employees, such as those performing manual labor or customer service, are entitled to overtime pay for hours worked beyond 40 in a workweek. They typically receive an hourly wage.

Exempt employees, on the other hand, do not qualify for overtime pay. These include employees, including white-collar professionals, administrators, or managers, who receive a minimum salary of $684 per week. Note that this threshold is due to be increased to $1,059 per week as per a proposed rule from the Department of Labor.

Some industries may also have their own regulations regarding overtime eligibility so it’s important to check on these standards to navigate overtime compensation fairly.

Certain employees may be exempt from receiving overtime pay under specific conditions outlined by labor laws.

• Salaried employees earning more than $684 per week (to be increased to $1059).
• Workers at institutions providing on-site care for the elderly, sick, and disabled, if they work over 48 hours per week.
• Employees at bowling establishments working over 48 hours per week.
• Workers over the age of 62 who work 25 hours or less per week.
• Taxi drivers.
• Employees at recreational establishments, amusement parks, hotels/motels, and movie theaters.
• Executive positions involving full-time management of two or more employees, administrative work related to business operations, management or administrative training, and professional work requiring advanced education such as artists, certified teachers, and IT professionals.
• Outside salespersons.

These exemptions can vary by state and are subject to specific eligibility criteria outlined in labor laws. 

To calculate overtime you can use the following formula:

Overtime Pay = (Hourly Rate x 1.5) x (Number of Overtime Hours)

For example, let’s say an hourly employee earns $15 per hour and works 45 hours in a workweek. You can calculate their overtime pay as follows:

• Overtime Pay = ($15 x 1.5) x (45 – 40)
• = $22.50 x 5
• = $112.50

Note that this formula is only applicable to hourly employees. Calculating overtime pay for salaried employees and those earning commission – if they are categorized as non-exempt – is a bit different.

Learn more about how to calculate overtime pay.

Employers typically include overtime pay in the same paycheck as regular wages.

This could be every week, bi-weekly, or monthly, depending on the company’s payroll schedule. Some states also have payday requirements that businesses must follow.

Not all businesses are required to pay for overtime. The Fair Labor Standards Act (FLSA) applies to employers whose annual sales total $500,000 or more or who are engaged in interstate commerce.

However, the definition of interstate commerce is interpreted broadly by the courts. For instance, businesses that regularly use U.S. mail to communicate with other states or have employees who use company phones or computers for interstate business activities may be subject to the FLSA. As a result, the law covers a wide range of workplaces, not just large companies.

The main law governing overtime in the US is the Fair Labor Standards Act (FLSA), which was enacted in 1938. Aside from establishing overtime pay rates and overtime pay eligibility, it also outlines requirements for minimum wage, recordkeeping, and child labor standards affecting full-time and part-time workers in the private sector and in federal, state, and local governments. 

Overtime laws are enforced by the Department of Labor’s Wage and Hour Division. Under the Fair Labor Standards Act (FLSA), eligible employees have the right to earn overtime pay, and the Wage and Hour Division ensures that employers comply with these laws. Whether overtime can be mandatory or not depends on state laws.

If employees believe their employer is not paying overtime as required by law, they can file a complaint with this division for investigation and resolution.

Employers who willfully or repeatedly violate minimum wage or overtime pay requirements may face a civil money penalty of up to $1,000 for each violation.

Willful violations of the FLSA may lead to criminal prosecution, with fines of up to $10,000 and possible imprisonment for repeat offenders. It’s essential for employers to comply with FLSA regulations to avoid these penalties.

Ensuring overtime compliance is crucial for both employers and employees to maintain fair and legal work practices. To achieve this, it’s essential to establish clear policies and guidelines regarding overtime eligibility, compensation rates, and approval procedures. Regularly review and communicate these policies to all employees to ensure understanding and adherence.

Another way you can ensure overtime compliance is by using an overtime tracker to streamline the monitoring process and ensure accurate recording of work hours.

Overtime trackers like Jibble even allow users to set custom overtime rates to fit their specific business needs, and ensure accurate calculation of overtime wages.