As it pertains to employment and employment rights, overtime is one of the most contentious issues. Overtime regulations have different interpretations, and most of them are not yet clear. However, for the purpose of this article, we have to define what overtime is. The typical work week involves working from Monday to Friday from 9 am to 5 pm every day, which adds up to forty hours a week. Therefore, overtime is considered to be any amount of time spent working beyond the forty hours. As an employer, you need to clearly understand overtime and how it will affect your employees and business. Now that you know what overtime is, the following are several things you should know about overtime pay rates:
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How to Handle Multiple Pay Rates
Employee management is one of the most important factors to consider as an employer or entrepreneur. It is especially so when your company is a startup. For example, you will employ people to do different jobs with different levels of expertise.
Therefore, you will have to pay them using different overtime pay rates since they are performing different jobs. On the other hand, you may have an employee who performs more than one job for the company. In such a case, you may have to offer the employee different rates for the various positions he serves in your company.
Handling the payroll is usually one of the most challenging jobs of a business owner. Multiple pay rates make managing the payroll more complex than paying a flat rate to an employee. As it pertains to overtime, you will need to know how to handle multiple pay rates. It will be challenging to manage overtime when you are handling varying overtime pay rates.
You may need to hire a payroll service provider to help you manage overtime payments, especially if you have employees whom you pay with several pay rates. However, not all payroll service providers will have the capacity to do so.
In that case, you may have to use a more complex albeit expensive payroll software to handle overtime payments. There is software that will track employee overtime and calculate adequate payments.
Overtime Limits
The federal government has no limits on the number of hours an employee can work overtime. However, there are employees in specific industries and jobs who have a limited number of hours they can work per week. Pilots and truck drivers are the best example in this regard.
There are also limits on the number of overtime hours that a child can work overtime. An employer can force anyone who is sixteen years or older to work overtime, depending on the nature of the job. If the job is hazardous, the employee has to be over 18 years old.
Such overtime work is called mandatory overtime. If an employee works compulsory overtime, they have to receive overtime pay.
Overtime Rates
As an employer, you need to know how to calculate overtime pay rates. The amount you pay employees as overtime pay will depend on the type of work they do, Federal and state laws regarding overtime affecting your business.
The Fair Labor Standards Act (FLSA) states that you must pay an employee for any time they work in excess of the standard forty-hour workweek.
According to the act, overtime pay must be more than one and a half times the employee’s regular pay rate. Therefore, if an employee makes 12 dollars an hour, then their overtime should be at least 18 dollars an hour.
Overtime does not cover working at night, weekends, or holidays. In such cases, the typical pay is double what the employee makes as regular pay. Overtime only covers any additional time to the extra forty hours a week. The payment for working on holidays, weekends, and nights depends on an agreement between the employee and employer. There are no Federal laws that require an employer to pay double the standard rate for working on nights, holidays, and weekends,
There are exemptions to overtime pay, but the criteria used are pretty complex. It would be best to classify an employee who does not receive overtime pay as an exempt employee. Those that do receive overtime pay are classified as non-exempt employees.There are three types of employees who are generally exempt from receiving overtime pay. These include creative, professional, and administrative employees. Employees who receive more than $455 a week are also typically exempt from overtime pay.
You should also know that salary and hourly employees receive different treatment when it comes to overtime pay rates. Hourly employees are the ones who receive overtime, but salaried employees do not.
In conclusion, paying employees overtime is a hectic endeavor that involves complex processes. It is even more challenging if some employees have multiple pay rates. Payroll software will be valuable in helping you track, execute and record overtime payments to employees.
