Key takeaways:

• What is overtime pay? Employers must pay covered, nonexempt employees at least time and a half their regular pay for hours worked over 40 in one workweek.
• What about state laws? Some states have overtime laws that also include daily overtime requirements aside from the weekly standards implemented by federal law.
• Exempt versus nonexempt workers: All employees are covered by federal overtime laws except exempt workers, which include certain salaried employees, independent contractors, some computer specialists and more.

Several laws govern the fair treatment of workers in a variety of workplace settings. Employers must pay close attention to these laws, which may change each year, to ensure they’re putting employee policies in place that maintain compliance. One area that some employers struggle to understand is overtime pay.

This area of federal law outlines standards and requirements for compensating workers extra wages should they work more than the standard workweek of 40 hours. Not all employees are covered by these laws, so it can get confusing fast.

So, how does overtime pay work? This guide will walk through what the term means and federal laws regarding overtime, answer a few common questions and discuss the difference between exempt and nonexempt employees.

The Fair Labor Standards Act (FLSA) created regulations regarding overtime so that employees would be compensated more fairly for extra hours worked. The most recent update was the issuing of the final rule by the Department of Labor in September of 2019, which outlined salary requirements for covered employees who are entitled to overtime pay.

The standard workweek is considered 40 hours, so nonexempt employees that work over 40 hours in one week must receive at least time and a half their regular pay rate for those additional overtime hours. The FLSA does not outline a limit on the number of hours workers aged 16 and older can work.

Here are some commonly asked questions from employers and employees with answers:

What about weekends and holidays?

Overtime pay isn’t required on holidays, regular days of rest or weekends (Saturday and Sunday) unless the worker works overtime on these days.

What is considered a workweek?

The U.S. Department of Labor says that a workweek is a “fixed and regularly recurring period of 168 hours – seven consecutive 24-hour periods.” The workweek doesn’t necessarily have to start and end on specific days of the week, and it could look different to different employee groups. If an employee works more than 40 hours within this period, it is considered overtime.

When is overtime paid?

Overtime pay should be paid on the same normal payday for the pay period when the employee worked the extra hours.

Does it matter how many hours an employee works on the same day?

Federal laws just cover a weekly overtime guideline. However, some states, including California, have daily overtime standards, wherein employees can receive overtime pay if they work more than eight hours in one day.

Are all employers required to pay overtime?

Employers that are covered by the FLSA must pay overtime, meaning they have at least $500,000 in annual sales or the business conducts interstate commerce. However, some states require even very small or local businesses to pay overtime.

Can all employees earn overtime pay?

Overtime laws only apply to covered, nonexempt workers. These terms are discussed more below.

It is important for employers to understand all the moving parts of these overtime laws so they know how to categorize employees and when they need to pay them overtime.

Exempt versus nonexempt workers

All employees are covered by the FLSA or state overtime laws except those who are considered exempt. The following types of employees are considered exempt from federal overtime requirements:

• Independent contractors/freelancers
• Volunteers
• Executive, administrative and professional workers who are paid a salary (instead of hourly wages)
• Some computer specialists
• Outside sales workers
• Seasonal or recreational business employees
• Nonprofit or religious conference center employees, or workers at organized camps that are in operation fewer than seven months out of the year
• Some small newspaper employees
• Workers who deliver newspapers
• Fishing operation employees or seamen
• Small farm workers
• Some switchboard operators
• Criminal investigators
• Some babysitters and caregivers

An employee who’s paid on a “salary basis” has to earn at least $684 per week, equaling $35,568 annually. Their salary must be the same every week, no matter how many hours they work.

For the worker to fit within the executive, administrative and professional category, aside from their salary, they also must perform certain types of job duties. Usually, these require some kind of advanced degree, and they may be managers or in a role that is crucial to the company’s operations and decision-making.

All employees that aren’t included in these exemptions are considered nonexempt and are covered by the FLSA’s overtime pay laws. If they work more than 40 hours in a workweek, they must be paid at least time and a half their normal pay, and it has to be paid in the applicable pay period.

Federal laws like overtime rules aren’t always easy to understand and implement. But, you never want to be at risk of a lawsuit from an employee.

When you need assistance understanding regulations and creating better policies, we’re here to help at StaffLink Outsourcing. We help you set up better processes for time and attendance, risk management, paid time off tracking, onboarding, payroll and more. We are a Professional Employer Organization (PEO) that provides bundled HR services to businesses like you to help you implement better policies.

Request a proposal or contact us at (954) 423-8262 for more information.