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Under federal labor laws, employees classified as hourly satisfy their overtime requirements after working 40 hours in one week. While working overtime, employees must receive one and one-half times their normal hourly salary.

This sounds simple enough on the surface, but small businesses often find themselves facing fines and other legal consequences because they do not understand overtime requirements.

Palmetto Payroll outlines what all business owners need to know about overtime pay:

What Counts as Overtime Hours?

Federal law only imposes overtime requirements on employers when employees work more than 40 hours in seven days, regardless of how many hours they work each day.

For example, an employee could work 10 hours for three consecutive days, nine hours the next day, and be off work for three days in a row. This would make a weekly total of 39 hours, which does not make the employee eligible for overtime pay.

However, some states impose an overtime mandate for hourly employees who work more than eight hours a day. This is true even when they work less than 40 hours a week. California is the largest state with this overtime rule.

Keep in mind that a week does not have to necessarily run from Sunday to Saturday. Employers can select their reporting period for payroll purposes as long as it remains the same from week to week.

Exempt Employees and Overtime Regulations

Employers sometimes assume that all non-hourly employees are ineligible for overtime pay, but this is not always the case.

Under the Fair Labor Standards Act (FLSA), employees must work in an administrative, executive, outside sales, professional, or sales position to be exempt from overtime pay.

Both federal and state laws can be complex surrounding this issue, with each category of employee needing to meet specific requirements to be ineligible for time and one-half for hours worked over 40 in a single week.

Generally, employers do not have to pay overtime to the following classifications of workers:

  • Casual domestic childcare workers
  • Criminal investigators
  • Computer specialists who earn at least $27.63 per hour
  • Employees who work on small farms
  • Fishing operations workers and sailors
  • Independent contractors
  • Newspaper delivery workers
  • Salaried workers
  • Seasonal employees of recreational or amusement businesses
  • Some switchboard operators
  • Volunteers

Schedule a Consultation with Palmetto Payroll to Learn More

Learning that you have violated overtime regulations when an employee sues you is a costly mistake, in both monies paid to settle the claim and your business reputation. The best way to avoid such a scenario is by outsourcing the work to a professional payroll company.

We invite you to request a consultation with Palmetto Payroll to learn more about your responsibility for paying overtime as an employer. Our company also offers numerous other outsourced services to support your small business.