Calculating overtime pay in Alabama can be challenging, especially with varying rules for different employee payment structures. Understanding how overtime is calculated is essential for both employers and employees to ensure compliance and fairness.

This article provides a comprehensive guide on calculating overtime pay, covering the specific methods and overtime calculations for hourly, salaried, piece rate, and commission employees.

**This Article Covers**

**Understanding Overtime in Alabama**

- Which Overtime Laws Apply in Alabama?
- How Much is Overtime Pay in Alabama?
- Who is Eligible for Overtime Pay in Alabama?
- Who is Exempt from Overtime Pay in Alabama?
- What is the Regular Rate of Pay in Alabama?

**Overtime for Hourly and Salaried Employees in Alabama**

- How do you Calculate Overtime for Hourly Employees in Alabama?
- How is Overtime Calculated for Salaried Employees in Alabama?

**Overtime for Complex Pay Structures in Alabama**

- How do you Calculate Overtime for Tipped Employees in Alabama?
- How do you Calculate Overtime for Commission Employees in Alabama?
- How do you Calculate Overtime for Piece Rates in Alabama?

**Additional Considerations for Alabama Overtime**

- What is the Statute of Limitations for Claiming Unpaid Overtime in Alabama?
- What are the Recordkeeping Requirements for Overtime Wage Compliance in Alabama?

**Understanding Overtime in Alabama**

**Which Overtime Laws Apply in Alabama?**

Alabama has no state-specific overtime laws, meaning that state overtime is governed by the Fair Labor Standards Act (FLSA). This federal law sets the guidelines for overtime compensation. Under the FLSA, non-exempt employees are entitled to overtime pay for any hours worked over 40 in a workweek.

The overtime rate must be at least one and a half times the employee’s regular rate of pay. For example, if an employee’s regular wage is $18 per hour, their overtime rate would be $27 per hour.

Overtime hours are only required for hours exceeding 40 in a week, regardless of whether those hours were worked on weeks, nights, or holidays. The FLSA defines a workweek as a fixed, recurring period of 168 hours consisting of seven consecutive 24-hour periods.

**How Much is Overtime Pay in Alabama?**

Overtime pay in Alabama is determined by the FLSA, which requires employers to pay non-exempt employees an overtime rate of one and a half (1.5) times their regular rate of pay for any hours worked over 40 in a workweek.

To learn more, check out our guide on Alabama Overtime Laws.

**Who is Eligible for Overtime Pay in Alabama?**

The FLSA governs overtime pay eligibility in Alabama. Under the FLSA, non-exempt employees are eligible for overtime pay for hours worked over 40 in a workweek. Non-exempt employees are typically those who are:

**Paid hourly:**Generally, hourly employees are considered non-exempt and must receive overtime pay for any hours worked over 40 in a week.**Perform non-exempt tasks:**Employees performing tasks that do not fall into the executive, administrative, or professional criteria defined by the FLSA. This includes clerical tasks, customer service, manual labor, and other similar positions.

Check out our guide on Overtime Rights in Alabama.

**Who is Exempt from Overtime Pay in Alabama?**

The FLSA is the federal law that outlines specific criteria for exempt employees and determines exemptions from overtime pay in Alabama. These exempt employees are not entitled to overtime pay, even if they work over 40 hours.

To qualify for exemption, employees must meet the following:

**Salary Basis Test:**Employees must receive a fixed salary, regardless of the number of hours worked or the quantity of work completed.**Salary Level Test:**Employees must earn a salary that meets the minimum requirement of the exemption threshold. As of July 2024, the minimum salary threshold is $844 weekly or $43,888 annually.**Duties Test:**The employee’s primary job duties must involve executive, administrative, or professional responsibilities, which include exercising discretion and independent judgment in significant matters.

In addition, there are certain industry-specific exemptions which include:

- Airline employees
- Babysitters
- Commissioned sales employees
- Drivers and loaders
- Live-in domestic employees
- Farmworkers on small farms
- Federal Criminal Investigations working for federal agencies
- Fishermen
- Railroad employees
- Salesmen and mechanics
- Switchboard operators
- Taxicab drivers

**What is the Regular Rate of Pay in Alabama?**

The regular rate of pay in Alabama is defined as the amount an employee earns for each hour worked and is determined depending on the type of employee’s payment structure:

**Hourly employees:**The regular rate of pay is the employee’s hourly wage.**Salaried employees:**Divide the employee’s weekly salary by the number of hours the salary is intended to cover (typically 40 hours).**Piece rate employees:**Divide the total earnings of tasks completed by the total hours worked in the week.**Commission employees:**Divide the total earnings, including the weekly commissions, by the hours worked in the week.

**Overtime for Hourly and Salaried Employees in Alabama**

**How do you Calculate Overtime for Hourly Employees in Alabama?**

Hourly employees in Alabama are paid based on the number of hours they work instead of receiving a fixed salary. To calculate overtime pay:

**Determine the regular rate of pay:**This is the hourly wage the employee is paid. For example, if the employee earns $15 per hour, their regular pay rate is $15.**Calculate overtime rate:**The overtime rate is 1.5 times the regular rate of pay. If employees earn $15 per hour, their overtime rate would be $22.50 per additional hour.**Identify overtime hours:**Overtime is calculated for any hours over 40 in a single workweek. If the employee works 45 hours a week, the overtime would be 5.**Calculate the overtime pay:**Multiply the overtime rate by the overtime hours. Employees who worked five overtime hours would earn $112.50 ($22.50 x 5) in overtime pay.

Read our guide on Your Rights as an Hourly Employee in Alabama to learn more.

**How is Overtime Calculated for Salaried Employees in Alabama?**

Salaried employees in Alabama may be eligible for overtime if classified as non-exempt under the FLSA.

To calculate overtime for non-exempt salaried employees, their weekly salary is first divided by the total number of hours they typically work in a week to determine their regular hourly rate. If no set number of hours is specified, the FLSA assumes a 40-hour workweek. Once the regular hourly rate is established, any hours worked beyond 40 in a workweek must be compensated at 1.5 times the regular rate.

For example, if salaried employees earn $800 per week and work 40 hours, their regular hourly rate would be $20. If they work 50 hours a week, the ten additional hours must be paid at the overtime rate of $30 ($20 x 1.5). Therefore, the employee would receive a regular salary of $800 plus $150 in overtime pay for the extra hours worked.

Check out our guide on Your Rights as a Salaried Employee in Alabama.

**Overtime for Complex Pay Structures in Alabama**

**How do you Calculate Overtime for Tipped Employees in Alabama?**

Employers must first ensure that the tipped employee earns at least the minimum wage of $7.25 per hour when combining their tips and cash wage. The FLSA allows Alabama employers to pay tipped employees at a cash wage as low as $2.13 per hour, but the employee’s total earnings, including tips, must still meet or exceed $.7.25, meaning the tip credit must be at least $5.12.

To calculate overtime for tipped employees:

**Determine the regular hourly rate:**The tipped employee’s regular rate of pay is considered the full minimum wage of $7.25, combining cash wage and tips. However, some employees may receive more tip credits making the employee’s regular hourly rate higher than the minimum wage.**Calculate the overtime rate:**Multiply the regular hourly rate by 1.5 to get the overtime rate.**Determine the number of overtime hours:**Any hours worked over 40 in a workweek are considered overtime.**Calculate the overtime pay:**Multiply the overtime rate by the number of overtime hours.

For example, if a tipped employee receives the minimum cash wage of $2.13, the tip credit must be at least $5.12 to make up the difference from the minimum hourly wage of $7.25. If the employee receives $7.25 at their regular rate, their overtime rate would be $10.88 ($7.25 x 1.5), and if the employee worked 50 hours, their overtime pay would be $108.80 (10 x $10.88).

### How do you Calculate Overtime for Commission Employees in Alabama?

Commission employees receive a mix of hourly wages and commissions and are entitled to overtime pay. To calculate overtime for commission employees:

**Determine the regular rate of pay:**A commission employee’s regular rate of pay is determined by adding their total earnings (commission plus any base pay) for the workweek and dividing it by the total number of hours worked during that week.**Calculate the overtime rate:**Once the regular rate is determined, multiply it by 1.5 to get the overtime rate. The overtime rate of a commission employee may fluctuate as the commission is factored into weekly earnings.**Determine the number of overtime hours:**Any hours worked over 40 a week are considered overtime hours.**Calculate the overtime pay:**Multiply the overtime hours by the overtime rate.

If a commission employee receives $700 weekly and earns $100 in commissions for the week, the commission employee has a total earnings of $800. If the employee works 50 hours, their regular hourly rate would be $16 per hour ($800 / 50). For the ten overtime hours (50 – 40), the employee must be paid $24 per hour ($16 x 1.5). So, for the overtime hours, the employee would receive $240 ($24 x 10) in overtime pay.

### How do you Calculate Overtime for Piece Rates in Alabama?

Piece rate employees are paid per unit produced or task completed. To calculate overtime for piece rates employees:

**Determine the piece rate:**Identify the rate the employee is paid per unit of work completed, such as per item produced or task completed.**Calculate the total earnings:**Multiply the number of units completed by the piece rate to find the employee’s weekly earnings.**Calculate the regular hourly rate:**To determine the regular hourly rate, divide the total earnings by the total number of hours worked in the workweek. If an employee earns $800 and works 50 hours, their regular hourly rate would be $16 per hour ($800 / 50).**Determine the overtime rate:**Multiply the hourly rate by 1.5 to find the overtime rate. For a $16 hourly rate, the overtime rate would be $24 per overtime hour.**Identify the number of overtime hours:**All hours worked beyond 40 a week are considered overtime. If an employee works 50 hours, the overtime hours would be 10.**Calculate overtime pay:**Multiply the overtime rate by the number of overtime hours. From the example above, if the employee worked an additional 10 hours, the employee would receive $240 ($240 x 10) in overtime pay.

**Additional Considerations for Alabama Overtime**

**What is the Statute of Limitations for Claiming Unpaid Overtime in Alabama?**

In Alabama, the statute of limitations for claiming unpaid overtime follows the federal guidelines under the FLSA. The standard statute of limitations is two years from the date the unpaid overtime was due. However, if the violation is found to be willful, such as the employer knowingly or recklessly disregarding the law, the statute of limitations can extend to three years.

This means that, depending on the nature of the violation, employees in Alabama have two or three years from the date of the alleged violation to file a claim for unpaid overtime.

**What are the Recordkeeping Requirements for Overtime Wage Compliance in Alabama?**

Recordkeeping requirements for overtime wage compliance in Alabama follow federal guidelines under the FLSA. Employers must maintain accurate records of all employees covered by the FLSA, including those who work overtime. Key recordkeeping requirements include:

- Employee information (Full name, social security number, address, occupation).
- Work hours (daily and weekly hours worked, including the time the workweek begins, as well as regular work schedules).
- Total wages earned during each pay period (Regular hourly rate, overtime compensation including overtime hours worked, and the corresponding overtime pay).
- Pay dates and periods (The date wages are paid and the specific pay period covered).
- Deductions and additions (Any deductions or additions to wages, such as for taxes, benefits, or other withholdings).

Employers should ensure these records are accurate and accessible, as failure to comply with recordkeeping requirements can result in penalties and challenges during wage disputes. To ensure compliance with overtime wage regulations, employers can use any timekeeping method, such as manual records or automated time and attendance software.

**Learn more about Alabama Labor Laws through our detailed guide.**

**Important Cautionary Note**

This content is provided for informational purposes only. While we make every effort to ensure the accuracy of the information presented, we cannot guarantee that it is free of errors or omissions. Users are advised to independently verify any critical information and should not solely rely on the content provided.