In a perfect world, we're all paid a fair rate for our hard work. But for some people, this is far from reality.
In most cases, employers pay workers each hour they put in. And when they go over 40 hours per week, they're given a bonus known as "time and a half." What is time and a half?
Employees that work overtime should receive a premium equal to 50% of the employee's usual hourly pay.
For example, if you make $10/hr, you will make $15/hr for overtime. Of course, there are exceptions to this law, which we'll cover shortly.
If you own or manage a business, then understanding wage law is essential. Let's review.
What is Time and a Half?
Time and a half is the premium employers must pay to qualified employees. There are federal and state laws that govern this to ensure employers pay employees fairly.
However, this hasn't stopped certain companies from withholding overtime pay. And many of them were outed for their transgressions.
Now, there are legal consequences employers face when they refuse to pay overtime wages. This includes paying fines and legal fees for employees that decide to sue.
For example, some employers land in legal hot water for:
- Withholding a portion of wages without consent of the worker
- Withholding pay as a punishment
- Withholding an employee's last paycheck
Make sure those in charge of your accounting know what is time and a half and abide by local and federal rules. If you're managing your own finances, it may be best to forgo overtime work.
What Counts as Overtime?
Now, there's a bit of confusion about overtime pay - some believe it's daily vs weekly. Make sure to educate your employees about what is time and a half to avoid confusion.
For example, some may believe that if they work more than 8 hours per day, then they should receive overtime pay. However, it's based on the 40-hour workweek.
If an employee works 12 hours per day, 3 days per week, this doesn't count as overtime. However, if the employee works 10 hours per day, 5 days per week, then they qualify because they worked over 40 hours for the week.
Do note that there are some states adopting a daily overtime standard. For instance, California and a few others now require employers to pay overtime for every hour after eight hours.
Are All Employers Required to Pay Overtime?
No, not all employers have to pay employees for overtime work. Your business is exempt if you're not covered under the federal Fair Labor Standards Act (FLSA).
This is a federal wage and hour law that establishes the rules for overtime pay. Most businesses that make $500k or more in revenue must pay overtime. However, this doesn't mean smaller companies don't have to.
If your business conducts interstate commerce, then your business isn't exempt. This involves companies that conduct business between states, including deliveries/shipping and even making calls from one state to another.
Which Employees Meet Overtime Pay Requirements?
Like businesses, not all employees are entitled to overtime pay. However, if you're a company that's covered by FLSA or your state's overtime law, then all employees in your company are nonexempt.
Here's a rundown of all the employees who are exempt from receiving overtime pay:
- Administrative, executive and professional employees (salary-based)
- Independent contractors
- Outside salespeople (those selling goods/services outside of the employer's business)
- Programmers, systems analysts, software engineers and other computer specialists earning $27.63+/hr
- Newspaper deliverers
- Employees engaging in fishing operations
- Certain small newspaper employees
- Employees of religious/organized camps or non-profit educational conference centers (works less than seven months annually)
- Some switchboard operators
- Criminal investigators
- Small farm workers
- Casual domestic babysitters or caregivers
Recent Changes in Overtime Laws
As of Dec 1, 2016, a new overtime rule went into effect. This targets salaried white-collar workers. In the past, the exemption for overtime pay was $23,660. However, the law increased it to $47,476.
Those who earn below the old threshold and above the new one are entitled to overtime pay.
The law makes it easier to determine who's exempt and who isn't. Those who make less than $47,476 annually are eligible. It doesn't matter what your title, managerial status or job description.
The Department of Labor set the salary threshold. It's based on the 40th-percentile salary for workers in the South since it's the lowest-wage Census region.
It's expected that the salary threshold will raise every three years.
What Employers Can Do to Meet the New Requirements
Now, there are several things employers can do in order to meet the new standards for overtime. They can do one of the following:
- Pay employees overtime for each hour they work over 40 hours per week
- Cut back employees' hours to 40 hours or less per week, without lowering their salary
- Give employees a raise that's above the threshold, so they are exempt from overtime (and they still work overtime)
Keep Track of Overtime Pay
Having the best financing tools is essential to managing your employees' wages. Now that you understand what is time and a half and the laws surrounding it, it's time to educate your workers.
Doing so will help prevent misunderstanding in the future. The last thing you need is an unwarranted legal battle.
Create a brochure or forum where employees can go to read up on wage laws. Also, stay abreast of the changes in your state. You may be in a territory where overtime calculates by the day.
If you need help with organizing your payroll, then you can order special tools. At Advapay Systems, we have simplified payroll systems. This includes time clocks, web access, mobile apps with mobile clock-in/out capabilities.
Contact us today to learn more about our systems and how we can streamline your payroll.