How is overtime pay calculated?

The Fair Labor Standards Act (FLSA) establishes specific rules for overtime pay and mandates that employers compensate eligible employees for working over 40 hours in a workweek. Federal law requires overtime to be paid at a rate of at least 1.5 times an employee's regular hourly rate.

Who qualifies for overtime pay?

According to the FLSA, any non-exempt employee is eligible to receive overtime pay. Non-exempt employees are typically hourly workers who perform routine tasks that often involve manual labor. Exempt employees who receive salaries and perform specific types of work aren't eligible for overtime.

What counts as overtime work?

Any time spent performing job duties counts toward overtime. This includes meetings and training sessions, work-related travel between job sites, and time spent assisting customers after regular business hours. Even setup or cleanup time counts if it's part of the employee's duties. Employers should clearly define what activities qualify as work time.

What are employer overtime requirements?

Employers must maintain accurate records of all hours worked, including overtime, as well as the start and end times of employee workdays. Whether tracking shifts with a time-tracking solution or manually, employers are legally required to keep and maintain records for at least three years, in case of an audit or wage dispute. Some states, such as Alaska, California, Colorado, and Nevada, have overtime requirements that differ from federal law.

How do employers track overtime?

Time tracking, including overtime, is a foundation for running accurate payroll. Accurately tracking employees' working hours helps businesses stay compliant and ensure employees receive proper overtime compensation. Some employers manage payroll in-house, while others outsource. Many use an online payroll solution that automatically records exact work hours and calculates correct rates.