Overtime pay is required by law.
The federal government has instituted regulations that determine the minimum amounts an employer is constrained to pay employees for overtime work. That pay is based on hourly wage. If you have employees that work overtime, it behooves you to be familiar with these regulations and adhere to them. There are some basic aspects of the rules to familiarize yourself with. In addition, there are some misconceptions of which you should be aware.
Overtime Pay
Overtime compensation must be paid to workers who work more than 40 hours during a week of work. The pay is 150 percent of the hourly wage. If your state, as well, has an overtime pay law, whichever law affords the worker the higher rate takes effect. This does not apply to "exempt employees," generally salaried workers.
Common Misconceptions
The overtime rules apply to the aggregate hours worked in a work week. There are no federal labor rules dictating that overtime must be awarded to work on weekends, holidays, nights and so forth. Such hours aren't eligible under federal rules for overtime or even double time. The only threshold is the total 40-hour limit, as far as federal directives go.
Figuring the Overtime Hours
While employers must pay for overtime hours at the enhanced rate, they still pay for the first quotient of 40 hours at straight rate. Say employee Ralph works 52.5 hours in a single workweek. He would receive 40 hours' worth of wage at his standard, hourly level. In addition, though, Ralph would receive 12.5 hours' of pay at the 150 percent of that level ("time and a half").
Calculate the Percentage and Wage
To take this example and calculate what Ralph would get, stipulate that Ralph's hourly wage is $13.40. To start with, the first 40 hours, at $13.40, come to exactly $536.00. This would be Ralph's pay for a normal workweek. For the overtime pay, multiply $13.40 by 1.5. The result is $20.10. This is Ralph's overtime rate. Now multiply $20.10 by 12.5 to get the overtime pay. This comes to $251.25. Adding the two figures together for Ralph's pay that week, the sum is $787.25.
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