Typical nine-to-five employees will put in an average of 40 hours per workweek. But not everyone has a typical job. Those who work in demanding fields or work for businesses that go through hectic seasons may need to put in more than the usual 40 hours at the office.
That’s why it’s important for employers to be sure they’re compensating their workers to match the amount of work put in, overtime or not. If employers don’t pay their staffers correctly, this will most likely be reflected in that company’s audit.
RTR encourages business owners to follow these guidelines when determining a regular rate of pay:
Overtime Pay Basics
For non-exempt employees, hourly pay is usually established in an offer letter. But if a person works beyond 40 hours in one workweek, he or she must be paid one-and-a-half times the hourly rate. The Fair Labor Standards Act (FLSA) states: “the regular hourly rate of pay of an employee is determined by dividing his total remuneration for employment (except statutory exclusions) in any workweek by the total number of hours actually worked by him in that workweek for which such compensation was paid.”
For example, if you pay an employee $20 an hour and he or she works 50 hours during what would normally be a 40-hour workweek, that employee would earn $300 on top of his or her regular pay. Before overtime pay is calculated, employers must include wages that are based on hourly pay and taxable allowances, bonuses, commissions, and any incentive pay.
Exempt vs. Non-Exempt
Non-exempt workers in California can receive overtime pay if they’ve worked more than 8 hours in a single workday or performed more than 40 hours of work in one week. Additionally, employers must double employees’ regular rates of pay if they’ve worked more than 12 hours in one day.
It’s important to note that while the FLSA stipulates overtime payment regulations, the rules do not apply to exempt employees. Exempt employees, unlike non-exempt workers, don’t qualify for overtime compensation because they are paid on a salary basis rather than hourly. Examples of exempt employees may include those who hold supervisory roles or outside sales jobs.
In short, exempt employees must put in whatever amount of time necessary to complete a job with no change to their wages. Non-exempt employees, on the other hand, are compensated based on the hours they have worked.
Other Important Considerations
Note that the regular rate of pay applies to hours that have been worked and does not account for paid time off, vacation days, holidays, or sick pay. Furthermore, employers must calculate the overtime hours worked each week rather than by pay period.
Lastly, it may surprise you that employers cannot waive overtime pay. While business owners may say they have their own policies regarding overtime compensation, this does not actually exempt them from paying employees for the work they’ve contributed.
RTR Consulting has more than 20 years devoted to developing effective and efficient human resources policies, procedures, and best practices for small, start-ups, and medium-sized businesses. Contact us today if you need help keeping your business running like clockwork.