I Pay My Employees More than Minimum Wage, So I Do Not Need to Pay Extra for Overtime Hours, Right?
Surprisingly a lot of businesses believe this to be true. Under federal law, non-exempt employees (i.e. not exempt from overtime pay requirements) who work more than 40 hours in any workweek are entitled to 1.5x their "regular rate of pay."
What is the regular rate of pay? For one, it is not 1.5x the minimum wage, or even 10x the minimum wage. Instead, it is the combination of all remuneration an employee receives in that week for work performed. There are exceptions, but they are limited. Example: if a non-exempt employee earns $400 in wages for the week and a $100 performance bonus, her compensation is $500. If she works 50 hours her regular rate of pay is $500/50 hours or $10/hour. So, for the 10 hours of overtime worked that week she needs to be paid at a rate of $15/hour - i.e. 1.5x the regular rate of pay of $10/hour. In the end, her final compensation should be $550, not $500.
Calculating overtime wages is tricky but important business. While the inclusivity of "regular rate of pay" is wide, there are exceptions that employers should understand.
Thompson Coe’s Tips of the Week are not intended as a solicitation, do not constitute legal advice and do not establish an attorney-client relationship.