Overtime is the amount of time someone works beyond normal working hours. The term is also used for the pay received for this time. Normal hours may be determined in several ways:
- By custom (what is considered healthy or reasonable by society),
- By practices of a given trade or profession,
- By legislation,
- By agreement between employers and workers or their representatives.
The federal government assumes that all employees must be paid overtime if they work more than a certain number of hours in a week. Calculating overtime for hourly employees is fairly simple, but some salaried employees also must be paid overtime.
How to calculate over time pay
Effective from January 1, 2020, the new overtime rules are now in effect for exempt employees. The new rule has a higher salary level for exemption from overtime, at $684 a week. This means that lower-pay exempt employees may qualify for overtime. The new Department of Labor rule, effective January 1, 2020 increases the salary level for exemption from overtime, from $455 a week to $684 a week.
Who is eligible for overtime pay?
Because of the nature of their work, some employees are considered to be exempt from receiving overtime pay. In order to be classified as exempt, an employee must have specific types of job duties. The 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.