It is true that “flexible timings” is the new love of today’s young generation, but when it comes to the American workplace rules and employment law, the same old conventional timings from 9 to 5 is still considered as an ideal approach.

When an employee works for 40 hours a week in an organization, he/she is considered as a full-time employee for the company. And for eligible employees, if the working hours go beyond 40 then the employee qualifies for getting overtime wage in addition to his/her regular salary.

But it’s not as simple as it seems to be; last year the U.S. Department of Labor (DOL) released the proposed rule on eligibility criteria for overtime pay. While it’s quite some time now, many employers and employees are still not very clear with this new norm. So, to make you understand that how overtime salary is calculated and what comes under “overtime”, we have explained each and every aspect of the law.

What Makes Employees Eligible for Overtime Pay?

Before getting into the details about the regulation, first it is very important to know whether this law affects you or not. Federally, the Fair Labor Standards Act (FLSA), enforced by DOL’s Wage and Hour Division, governs the wages and standards related to overtime pay. As an employer, you must know that many states have their own rules and regulations for overtime pay.

But most of the jobs, whether private or public, full-time or part-time, regular or contract based, all are regulated by FLSA. Some jobs, while covered by FLSA, are immune to the overtime rules, on the basis of the type of job or if the employee qualifies for exempt status.

How is a Workweek Defined?

Generally, overtime is calculated on a weekly basis. An employee’s workweek is counted over a fixed and recurring period of total 168 hours (i.e. seven consecutive days) and can start from any day and not specifically Monday. Workweek varies from employee to employee and can be different for individual and a group. Averaging hours for two workweeks is not acceptable.

How is Overtime Pay Calculated?

If an employee is covered by FLSA, then any extra efforts he/she puts beyond 40 hours work schedule comes under overtime roof. These hours have to be compensated at the rate of one and one half times of the employee’s regular hourly wage.

For salary based employees who do not fulfill the criteria required to come under FLSA overtime rule, the hourly wage is calculated by the following method:
But, take care “compensation” here only means the salary given for the employment and not the extra payment made for any agreement.

If employers fail to properly understand the overtime regulations, then they may come under serious trouble that can include civil penalties of up to $1,100/violation and also serious criminal charges. An employee can also file a lawsuit if he/she is not paid fairly as per the FLSA laws. Thus, to keep your business running without getting into any hassles or penalties, you must keep yourself updated with the law and related requirements.