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Overtime Pay
The FLSA federal statute requires that nonexempt employees receive overtime pay equivalent to 150% of the hourly rate for all hours worked in excess of a 40 hour workweek with no daily hour limit. The employer establishes the workweek. It may begin on any day of the week and at any hour of the day. Hours cannot be shifted from one week to another. A week is a fixed period of 168 hours or 7 consecutive 24-hour periods. But there are exceptions to the rule. For instance:
- A hospital may use 14-day work periods and an 80-hour breakpoint.
- Some employers are permitted week-to-week balancing under a collectively bargained, guaranteed-wage plan.
States may have additional requirements for when overtime is to be paid. For example, the State of California has additional requirements as follows:
- One and one-half times the employee's regular rate of pay for all hours worked in excess of 8 hours up to and including 12 hours in any workday, and for the first 8 hours worked on the seventh consecutive day of work in a workweek; and
- Double the employee's regular rate of pay for all hours worked in excess of 12 hours in any workday and for all hours worked in excess of 8 on the seventh consecutive day of work in a workweek2.
How to calculate overtime.
Calculating overtime pay requires an hourly base rate to be set. Depending on your pay practices, this hourly rate may need to be reset periodically throughout the year especially if you have nonexempt variable pay plans. The table summarizes some of the standard formulas used to calculate the hourly rate:
| Compensation | Formula | Hourly Base Rate | Overtime Rate |
|---|---|---|---|
| $25,000 annual salary |
Divide by 2080 work hours in a year = $12.02 per hour |
$12.02 | $12.02 x 1.5hrs = $18.03 |
| $800 quarterly incentive |
Divide by # of “straight time” hours worked during the quarter (e.g. 520 hours)
then add to original hourly base rate |
$800/520 = $1.54 Add to salary base rate to include incentive payout. New Hourly base rate is: $12.02 + $1.54 = $13.56 |
$13.59 x 1.5hrs = $20.34 |
Recordkeeping
Employers must collect and keep certain information on nonexempt employees to permit the Wage and Hour Division to enforce the minimum-wage and overtime provisions of the FLSA. Employee records are typically maintained through HRIS, Payroll, or Time & Attendance systems.
FLSA recordkeeping requirements include:
- Employee's full name and social security number
- Address, including zip code
- Birth date, if younger than 19
- Sex and occupation
- Time and day of week when employee's workweek begins
- Hours worked each day
- Total hours worked each workweek
- Basis on which employee's wages are paid (e.g., "$9 per hour", "$440 a week", "piecework")
- Regular hourly pay rate
- Total daily or weekly straight-time earnings
- Total overtime earnings for the workweek
- All additions to or deductions from the employee's wages
- Total wages paid each pay period
- Date of payment and the pay period covered by the payment3
Each employer must preserve for at least three years payroll records, collective bargaining agreements, and sales and purchase records. Records on which wage computations are based should be retained for two years. These would be timecards and piece work tickets, wage rate tables, work and time schedules, and records of additions to or deductions from wages. They must be open for inspection by the Wage and Hour Division's representatives, who may ask the employer to make extensions, computations, or transcriptions. The records may be kept at the place of employment or in a central records office.3
Memory Jogger
Under the FLSA, which employee might be eligible for overtime pay?