The 3 Most Frequently Asked
Questions About Paying Overtime

The US Department of Labor's literature on paying overtime states "federal overtime provisions are contained in the Fair Labor Standards Act (FLSA). Unless exempt, employees covered by the Act must receive overtime pay for hours worked over 40 in a workweek at a rate not less than time and one-half their regular rates of pay. There is no limit in the Act on the number of hours employees aged 16 and older may work in any workweek. The Act does not require overtime pay for work on Saturdays, Sundays, holidays or regular days of rest unless overtime is worked on such days."

"The Act applies on a workweek basis.  An employee's workweek is a fixed and regularly recurring period of 168 hours ? seven consecutive 24-hour periods.  It need not coincide with the calendar week, but may begin on any day and at any hour of the day.  Different workweeks may be established for different employees or groups of employees.  Averaging of hours over two or more weeks is not permitted.  Normally, overtime pay earned in a particular workweek must be paid on the regular payday for the pay period in which the wages were earned."

Click here to access the US Department of Labor Definition of Overtime.

For your review, we have listed below three of the most common questions employers get asked about overtime pay. 

The Three Most Frequently Asked Questions About Paying Overtime:

Question #1: How Much Is Overtime Pay?  Overtime is one and one-half times the regular rate of pay.  For piece rate jobs, the regular rate of pay is the average hourly rate, which is calculated by dividing the total pay for the workweek by the total number of hours actually worked.  There is no requirement to pay double time for any pay under the federal FLSA.

Question #2: Who Is Subject To And Who Is Exempt From Overtime Pay?  Most employees are subject to overtime pay unless they satisfy two specific requirements and thus qualify as "exempt" from overtime pay.

Requirement #1. Exempt employees must be paid on a salary or fee basis of at least $455 per week.  Salary is defined as "payment each pay-period of a predetermined amount that is not subject to reduction due to variations in quality or quantity of work, regardless of the number of hours worked."  Fee is defined as "payment of an agreed sum for a job without regard to the amount of time required for its completion."

Requirement #2. The second requirement pertains to the type of work done by the employee.  Exemptions are allowed for "white-collar" employees that only meet specific requirements that vary based on the person's particular area of employment.  Executives, administrators, highly educated professionals (such as physicians and attorneys), creative professionals (like writers and artists), computer professionals (such as software programmers), outside sales reps and highly compensated employees that typically perform executive, administrative, or other professional tasks are considered white-collar employees and may be exempt from overtime.  Note that job titles alone are insufficient to determine exempt status and employees must meet specific requirements to be considered exempt.

Question #3: Are There Restrictions On Deducting Pay From An Exempt Employee For Missed Work?  Yes.  Employers may not make deductions of exempt employees if the reason for absence is due to the employer or the operating needs of the business (e.g., work is unavailable and the employee is ready, willing and able to work).  Moreover, deductions may not be made for absences resulting from jury duty, attendance as a witness in court or temporary military leave.  These restrictions carry important implications for the exemption status of your employees.

Executive Summary: While there is no legal difference between paying a non-exempt employee on salary versus on an hourly basis, it is a good practice to pay all non-exempt employees on an hourly basis.  This ensures that overtime is paid properly unless the employee is never expected to work more than 40 hours a week (for example, a customer service representative whose hours are fixed from 9:00 a.m. through 5:00 p.m. each day).  Be sure to visit the US Department of Labor's website to access more detailed information about paying overtime.