Calculating Overtime Pay


Updated

Jul 24, 2018

To calculate overtime, most employees will simply need to figure out their regular rate of pay and multiply this number by the number of overtime hours worked. Despite this seemingly simple equation, many companies (both large and small) underpay their workers by miscalculating and failing to pay overtime. Workers in the retail industry, as well as tipped employees such as waiters and waitresses, are particularly susceptible to overtime violations.

The information below is intended to serve as a guide for workers as to how overtime should be calculated under the Fair Labor Standards Act (FLSA), a federal law designed to protect workers’ rights. If you have questions about how your employer is paying you and suspect your company may be violating the law, fill out our free case review form today.

Step One: Make Sure You’re Eligible to Receive Overtime

Most workers are required to receive overtime pay for any hours worked over 40 in a given workweek. Only certain types of workers are exempt from federal overtime requirements – meaning they aren’t entitled to extra pay when they work overtime. Unless your primary job duties fall within one of these narrow exemptions, your company must pay you overtime for all hours worked over 40 in a given workweek.

Step Two: Figure Out Your Regular Rate of Pay

If you’re a salaried employee…

Your regular rate of pay is determined by dividing your total pay in a workweek by your expected number of hours worked. For many employees, this number of hours is 40.

If you’re an hourly worker…

In general, your regular rate of pay is simply your hourly wage. Some hourly workers’ regular rates of pay, however, may be higher. For instance, if you receive more when you work certain shifts (e.g., overnight shifts) or earn bonuses for meeting certain criteria outlined by your employer (e.g., productivity goals), this should be taken into account when calculating your hourly wage.

Furthermore, when an employee performs two or more different types of tasks in a single week for which different hourly wages have been established, the worker’s regular rate should be the weighted average of the different rates of pay. For example, assume an employee works 50 hours in a given week and 30 hours of that time is compensated at $10 an hour and 20 hours are compensated at a rate of $18, for a total of $600. The employee’s regular rate of pay for that week would be $13.20. (30/50 x 10 plus 20/50 x 18).

Step Three: Figure Out How Many Overtime Hours You Worked

It’s possible that you’re working more overtime than you think. Employees covered by the Fair Labor Standards Act must be paid for all “hours worked.” If you’re not properly calculating how many hours you work per week, you may be getting cheated out of overtime.

In general, your “hours worked” includes all time you are required to be on your employer’s premises. For example, if you are required to remain on call at your office, you are generally entitled to compensation for the time spent on call. Furthermore, time spent booting up computers or changing into required protective gear can also be considered “hours worked.”

Vacation days, paid time off, sick days and leave under the Family Medical Leave Act (FMLA) do not count toward hours worked for purposes of calculating overtime.  

Overtime must be calculated on a weekly basis. Even though you may be paid on a biweekly, semimonthly or monthly basis, your overtime hours must be calculated on a weekly basis. For example, if you work 45 hours in one week and 35 hours the following week, you are entitled to five hours of overtime for the first week. Your company cannot average these weeks together and deny you five hours of overtime for the week in which you worked 45 hours.

Step Four: Multiply Your Regular Rate of Pay by the Number of Overtime Hours Worked

The final step in calculating overtime is to multiply 1.5 times your regular rate of pay by the number of overtime hours worked in a given week.

Alternate Methods of Calculating Overtime

For certain types of employees, such as piece rate workers and fluctuating workweek employees, overtime is calculated differently.

Calculating Overtime for Piece-Rate Workers

Piece-rate compensation programs pay a worker a fixed amount for each “piece” of product they produce. A piece-rate worker’s regular rate of pay is equal to his or her total weekly earnings divided by the total number of hours worked in that particular week. For overtime, the employee is entitled to one-half times the regular rate of pay on top of what they already earned in piece-rate wages.

For example, assume an auto mechanic is paid on a piece-rate basis and receives $25 for each car she works on. In a particular week, the mechanic has worked on 60 cars and receives $1,500 of regular pay. In that week, the mechanic worked 50 hours, thus entitling her to receive overtime pay. In this example, the employee’s regular rate of pay would be $30 per hour ($1,500 divided by 50) and the overtime rate would be $15 per hour (one-half the regular rate of pay). Therefore, the employee must receive $150 in overtime pay in addition to the $1,500 of regular pay for that week.

The Fluctuating Workweek Method of Calculating Overtime (Chinese Overtime)

Under the fluctuating workweek pay method, if an employee’s hours vary significantly from week to week, the company may pay the employee a fixed weekly salary regardless of the number of hours worked. Instead of receiving the normal time-and-a-half for overtime, the worker will receive half pay for any hours worked over 40 in a workweek. The fluctuating workweek method of calculating overtime pay is sometimes referred to as Chinese overtime.

For a worker to qualify for the fluctuating workweek method, the following four criteria must be met:

  • The worker’s hours must vary from week to week
  • The worker receives a fixed salary (excluding overtime), regardless of the number of hours worked
  • The weekly, fixed rate of pay must at least be equivalent to the minimum wage
  • The employee and the company must have a “clear mutual understanding” that the employer will pay the fixed salary regardless of the number of hours worked in a given workweek.

Unless these requirements are met, your employer is not allowed to claim you’re a fluctuating workweek employee who is not entitled to receive overtime at a rate of one-and-a-half times pay, which is what most employees earn for overtime. Employers sometimes take advantage of the system by using the fluctuating workweek method of calculating overtime for employees who should be earning full time-and-a-half wages.

Can Morgan & Morgan Help Me Recover Unpaid Wages?

If you believe you were wrongfully denied overtime, contact Morgan & Morgan today. You may be able to file a lawsuit and collect either two or three years’ worth of back pay.

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