The holidays tend to complicate small business payrolls, what with employees looking to earn a little extra cash and owners needing coverage for extended hours or shifts. But not all employers must pay overtime and not all employees are eligible. Confused? Here’s what you need to know about your obligations as a business owner when it comes to overtime pay.
When is Overtime Due?
Under the Fair Labor Standards Act (FLSA), both full- and part-time employees have equal rights concerning overtime pay (enforced by the Department of Labor). Some states also have overtime laws. The FLSA requires that covered, nonexempt employees are paid overtime pay at not less than one and one-half times their regular pay rate (hence “time and a half’) after 40 hours of work, per workweek.
It’s important to note that these hours must be within the workweek, so for example, employees who work a 12-hour day on Monday but no other days that week are not entitled to overtime because they didn’t work over 40 hours within that one week – no matter how long their first shift was.
Do all Employers Have to Pay Overtime?
Although most employers are required to pay overtime, there are many exceptions.
To determine if you need to pay overtime, you need to understand what the term “covered” means. A “covered” employee is “covered” by the FLSA and therefore eligible for overtime pay. But not all employees are “covered.” Here’s what you need to know to determine whether your employees are covered:
- If your business does more than $500,000 in sales each year and you have at least two employees, then your employees are generally “covered” and eligible for overtime.
- However, even if you don’t meet these criteria, you must pay overtime if your employees work in what the Department of Labor calls “interstate commerce.” This is a broad category and includes anyone who is involved in producing goods that will be sent out of state. It also covers an employee who makes phone calls or sends letters out of state, employees who travel for business and even employees who do janitorial work in a building where goods are produced for shipment out of state!
If none of these criteria apply to you, you might still be covered by your state’s overtime law.
Read more from the Department of Labor for official explanation of who is covered and who is not.
Which Employees are Entitled to Overtime?
If your business is covered by the FLSA or state overtime laws, most but not all your employees may be entitled to overtime. We’ve just discussed what a “covered” employee is, but it’s also important to understand what an “exempt” or “nonexempt” employee is and how this factors into overtime pay.
While “nonexempt” employees are eligible for overtime, “exempt” employees are not. But what is an exempt employee? The FLSA has a fairly broad list of job types that are exempt, such as newspaper deliverers or seamen, among others. For the complete list, check out this overview of employees who are exempt from overtime rules from the Department of Labor.
There is one category of exempt workers than can confuse employers – administrative, executive and professional employees. Sounds like a broad definition! But here’s the deal: employers aren’t required to pay overtime to these employees if they are paid on a salary basis and earn at least $455 a week, every week and perform certain job duties – generally managerial or supervisory. The Department of Labor offers more information about the basic requirements that determine whether an administrative, executive or professional employee is exempt from overtime.
Do I Have to Pay Overtime to Part-Time Employees
Yes. Part-time and full-time employees have equal rights when it comes to overtime, minimum wage and other requirements of the Fair Labor Standards Act.
Is Extra Pay Required for Weekend or Night Work?
Extra pay for working weekends or nights is a matter of agreement between the employer and the employee. The FLSA does not require extra pay for weekend or night work. However, if covered and nonexempt workers do work more than 40 hours in a work week, they are due time-and-a-half in overtime pay.
When is Double Time Due?
The Fair Labor Standards Act has no requirement for double-time pay. This is a matter of agreement between you and your employees.