It is the end of a long day, and an employee should have stopped working at 5.00 pm. It is now 6.00 pm, and they feel that they have extended themselves and deserve to be rewarded. Before long, the HR has received a form citing overtime. Is it viable to pay for that “extra time”? Well, it really depends on a range of factors.

Overtime pay refers to the earnings one receives when they work more than their contracted work hours. Outside working hours, employers need to pay a premium rate, which is typically one and a half times their standard pay. This is especially true if the work that is being done overtime is not voluntary, but a requirement at that moment. To ensure that employees and employers do not try to take advantage of each other, it is essential to understand overtime properly.

What is considered overtime?

The typical work week has a total of 40 hours, meaning 8 hours a day over a period of five days. Work hours can be divided over several days, including both days at the weekend and holidays. When calculating overtime, one must not automatically assume that work done on the weekends, public holidays or other holidays requires overtime. It all depends on two things – what has been agreed on by the employment contract, and whether the work on these days exceeds the 40 hour work week.

Who is eligible to receive overtime?

Eligibility depends on the type of employee, whether they are exempt or non-exempt. An exempt employee is one who receives a monthly salary to cover all the work that they do, no matter how many hours they are working each month. This is when the responsibilities of the person working mean that they need to be flexible. Most affected are those who hold management positions or other professionals.

Those who are non-exempt are all other employees within the organization, and they can request for overtime if they have a work week of 40 hours. It is worth noting that in some states, the work week may be different in regard to the number of hours per week.

How is overtime pay calculated?

Legally, an employer is mandated to pay the rate of overtime at one and a half of the regular pay rate. However, they also have the option of paying more if they believe this would be more viable.

Overtime laws

The overtime laws vary considerably from one state to another. For example, in Alabama, there is no minimal wage law or an overtime law so it depends on the Alabama Department of Labor. In Indiana, the amount of overtime to be paid is $7.25 per hour after 40 hours have been worked. In New York, the rate is $11.80 per hour, with the possibility of increase if the federal minimum wages go up as well. In the state of California, when an employee works for more than 12 hours within a workday, they are entitled to double-time pay as a form of overtime.

It is worth noting that it is not possible to avoid overtime. As an employer, one can take the time to understand how to maximize working hours without overtime. Comp time is an option, where hours are transferred from one day to another, to remain within the 40 hour work week.