Calculating Overtime for Salaried Employees [Wage & Hour FAQ]
Calculating Overtime for Salaried Employees
[Wage & Hour FAQ]
By Bill Pokorny on September 07, 2011
Q. We have a number of non-exempt employees who are nevertheless
paid a salary. How do we calculate overtime for these employees?
A. The question above is a positive sign, because if you find yourself asking it you've passed the first
hurdle of realizing that not all "salaried" employees are exempt from the overtime requirements of the
Fair Labor Standards Act.
Generally speaking, calculating overtime is a simple affair. Employees must be compensated for
hours worked in excess of forty hours in a single workweek at a rate of one and one-half times the
employee's regular hourly rate of pay. The "regular rate" is calculated by dividing an employee's total
non-overtime compensation for the week by the total number of hours worked. For employees who
are paid a simple hourly rate, this calculation is simple, as the regular rate is simply the employee's
normally hourly rate of pay.
However, things get trickier when a non-exempt employee is paid a salary. Suppose Chuck is paid a
salary of $1000 per week. He works 50 hours in a certain week - 40 hours of straight time, and 10
hours of overtime. To calculate Chuck's overtime pay, you need one more crucial piece of
information: how many hours is the $1000 salary intended to cover?
According to the courts, this issue is a matter of the agreement between Chuck and his employer.
Suppose the company has an employee handbook that says that the normal workweek consists of 35
hours. If, based upon that statement, there is a general understanding that the base salary is
intended to cover 35 hours of straight-time work, Chuck's pay would be (assuming I have my math
right) as follows:
Regular rate = $1000 / 35 hours = $28.57/hr
Total pay = Regular salary + 5 hrs additional straight time + 10 hrs at time and-a-half
Total pay = $1000 + (5hrs x $28.57/hr) + (10 hrs x $28.57/hr x 1.5) = $1,571.40
Franczek Radelet P.C. | Wage & Hour Insights
300 S. Wacker Drive | Suite 3400 | Chicago, IL 60606
312.986.0300 | |
On the other hand, suppose Chuck and the company have an understanding that the $1,000 salary is
intended to cover up to 50 hours of work per week. In that case, no additional straight-time pay would
be due if Chuck works 50 hours. Chuck would still be entitled to an overtime premium for the 10 hours
of overtime worked. However, because his salary covers straight-time for those hours, the additional
overtime premium due is only one half of the regular rate of pay:
Regular rate = $1000 / 50 hours = $20/hr
Total pay = Regular salary + 10 hours at 1/2 the regular rate
Total pay = $1000 + (10hrs x $20/hr / 2) = $1,100
Now, a smart employer looking at the above calculation might say to itself, "Ah, let's agree that the
employee's salary will cover up to 100 hours of work." That would make the regular rate just $10 per
hour, and save the company $50 in overtime expenses, right? If this looks too good to be true, it is.
First, if Chuck is never actually scheduled to work 100 hours in a week, that agreement will likely be
viewed as a sham by the Department of Labor. Second, the regulations say that if Chuck works less
than agreed number of hours, then his regular rate is calculated by dividing his total non-overtime
compensation by the total number of hours worked. In other words, regardless of how many hours the
salary is meant to cover, if he only works 50 hours, his regular rate will still be $20 per hour.
Now, one last wrinkle: suppose it's understood by all concerned that Chuck's salary is intended to
cover his straight-time compensation not for a specified number of hours, but for all hours that he
happens to work in any given week, regardless of how many or how few. While paying a fixed salary
for a fluctuating workweek is permissible and can in some cases reduce your overtime liability, there
are also some strict limitations on this method, and some new uncertainty introduced by some
regulations recently published by the Department of Labor. We'll talk about those in another post.
Copyright ? Franczek Radelet P.C. All Rights Reserved. Disclaimer: Attorney Advertising. This is a publication of Franczek Radelet P.C.
This publication is intended for general informational purposes only and should not be construed as legal advice.
Franczek Radelet P.C. | Wage & Hour Insights
300 S. Wacker Drive | Suite 3400 | Chicago, IL 60606
312.986.0300 | |
................
................
In order to avoid copyright disputes, this page is only a partial summary.
To fulfill the demand for quickly locating and searching documents.
It is intelligent file search solution for home and business.
Related download
- fact sheet 23 dol
- calculating overtime for salaried employees wage hour faq
- determine basic pay united states army
- state of washington department of labor and industries employment
- fact sheet 54 the health care industry and calculating overtime pay
- u s department of labor wage and hour division dol
- es a 8 2 how to calculate overtime washington state department of
- summary almost 2 to 1 members include holiday time when calculating
- student date period 1 1 calculating straight time pay
- elements of consumer math continental academy
Related searches
- labor laws for salaried employees 2019
- new labor laws for salaried employees 2017
- salaried employees pay rules
- overtime for salaried employees 2019
- texas salaried employees pay rules
- overtime laws for salaried employees
- nys salaried employees rules
- maximum hours for salaried employees can work
- salaried employees new law 2017
- salaried employees changes in 2017
- overtime for exempt employees 2019
- salaried employees pay rules 2020