Employers face many challenges when complying with wage and hour laws of the Fair Labor Standards Act (FLSA). Calculating the premium overtime rate is one of those challenges.
PenSoft recently participated in a roundtable discussion with the U.S. Department of Labor (DOL). We did this in an effort to try to understand challenges employers face when complying with wage and hour laws.
What was the violation that the DOL reps reported most?
Violations in overtime calculations.
What contributed to many of these overtime violations? Employers’ lack of understanding in how to calculate the overtime premium rate. Also, the complexity of their organization’s payment struction helped contribute to the violations.
What is the overtime rate for employees covered under FLSA? Overtime is 1.5 times an employee’s regular rate of pay for all actual hours worked over 40 in a workweek.
What can complicate this calculation?
- Employees have multiple rates
- Other types of pay not calculated on an hourly basis within a single payroll
If you have any of the above types of pay structures you have to calculate the regular rate of pay by a weighed average before determining the overtime premium pay rate.
What Type of Scenarios Require Special Calculations?
Scenarios requiring special calculations*:
- A non-exempt employee with multiple positions within the company, each with a different hourly rate of pay, and has worked overtime hours.
- A non-exempt employee who worked overtime but included is a non-hourly income such as performance bonus, piece rate or
- A non-exempt salaried employee who worked overtime.
Success in calculating overtime premium pay is first to understand what is to be included in “wages” when calculating employee’s regular rate of pay. The DOL provides a wealth of resources for employers and payroll professionals. To learn more about calculating the regular rate of pay and overtime premium pay, visit the DOL website elaws advisor at http://webapps.dol.gov/elaws/pay.html. A useful elaw tutorial is the Fair Labor Standards Act (FLSA) Overtime Calculator Advisor that helps employers understands overtime pay principles by calculating overtime pay based on their data for a sample pay period.
*This not an all-inclusive list
Image courtesy of winnond at FreeDigitalPhotos.net