What is Overtime?
Overtime, as defined by the Fair Labor Standards Act (FLSA), is any hours an employee works exceeding 40 in a single workweek. However, it is important to understand that some state laws have a different definition of overtime, which trumps the federal standard!
Overtime is calculated on actual "working hours," which does not include paid time off (PTO), holidays, or other forms of leave. Overtime policies should be communicated to all employees to ensure understanding and compliance.
Overtime Rules
Rate of Pay: Under the FLSA, employees covered by overtime regulations must be paid at least one-and-a-half (1.5) times their regular rate of pay for overtime hours worked.
Eligibility: Not all employees qualify for overtime pay. Exempt employees (such as executives or highly compensated employees) are excluded, but this depends on their job duties and salary thresholds as specifically defined under the FLSA.
State Laws: In some states, stricter overtime rules apply. For example, California mandates overtime pay for employees working more than 8 hours in a single workday. Be sure to understand which laws and regulations apply to which workers - especially if you have multiple worksite locations.
Why Overtime is Important
Legal Compliance: Labor laws, such as the Fair Labor Standards Act (FLSA), mandate specific pay rates for overtime to protect employees from being taken advantage of. There are heavy fines and penalties for noncompliance, including having to provide backpay for overtime hours worked but not compensated.
Employee Well-being: Excessive overtime can lead to burnout and decreased productivity. Be sure to evaluate the need for overtime carefully and allocate it accordingly!
Operational Efficiency: Mishandled overtime can result in higher labor costs, scheduling conflicts, errors and omissions, and many other issues. Make sure that you have a clear understanding of how overtime affects your business, and that your employees know what is required of them!
Need help understanding overtime and its effects on your business and its employees? Schedule a complimentary consultation today!
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