At the end of your payroll cycle, do you find yourself struggling to determine whether you owe overtime to your employees? To help, we put together the top 3 frequently asked questions we receive about overtime pay.
Q: I pay my employees every two weeks. Does this mean that I pay them overtime after 80 hours worked in a pay period?
No! You must pay your employees overtime after 40 hours worked in a work week (7 days), regardless of your payroll cycle.
Example: Mary worked 35 hours in week 1 and 45 hours in week two. Even though she worked a total of 80 hours, in the two-week pay period, in week two she worked 5 hours of overtime, which means you must pay Mary 75 hours of straight pay and 5 hours of overtime.
Q: What if my employee works overtime without my approval? Does this mean I don’t have to pay them overtime?
No, you still have to pay them overtime even if they did not get your approval. Employees must be paid for all work performed in a work week including overtime. But, if the employee continues to work overtime without your approval, it can become a disciplinary issue.
Q: My employee worked overtime in a week where there was a paid holiday. Do I pay overtime for only hours worked or do I include holiday hours as hours worked during that work week?
Unless it is stated in your guidebook that holidays are considered hours worked within that work week, you do not have to include the holiday as hours worked within that work week when calculating overtime pay. (Don’t have a guidebook? Email us.)
Example: Columbus Day is considered a holiday for XYZ company. Jane worked a total of 44 hours without including Columbus Day as hours worked within that work week, but if you include Columbus Day as hours worked, Jane worked a total of 52 hours during that work week.
So, if you include Columbus Day as hours worked, then you will have to pay Jane 12 hours of overtime for that work week and if you don’t consider Columbus Day as hours worked, you will pay Jane 4 hours of overtime for that work week.
There are situations where an employer may include paid time off (holiday, vacation, sick, etc) in overtime calculations as part of their company policy, but they are not obligated to do so under state or federal overtime regulations.
This is why it is very important to have a guidebook, so employees understand your policies regarding overtime and paid time off.