This program discusses how to calculate overtime under the FLSA rules for nonexempt employees. Includes definitions of overtime and calculation examples.

Calculating overtime pay for nonexempt employees sounds so simple. Common folk lore says you simply count the hours the employee works beyond 40 hours a week. Then you multiply that by 1.5 times their hourly pay rate and you’re done right? Not so fast. The truth is that overtime rules and the mathematics required to arrive at the correct calculation can be extremely tricky. Overtime under the Fair Labor Standards Act is based on a unique term, created in 1938, known as the regular rate of pay. And calculating the regular rate of pay is more complex than it appears. What’s included in the calculation? The reasonable cost of meals, lodging, nondiscretionary bonuses, commissions, on-call pay, shift differentials, cash benefit payments from Section 125 Cafeteria Plans, the list goes on… And that’s just computing the regular rate – we haven’t even touched overtime yet! For example, when a bonus must be included in calculating the rate what overtime does it apply to? When the bonus is paid or when the bonus was earned? What if the bonus spans a long period of time such as a quarter or a full year?

Then what happens if you get it wrong? Nobody pays attention, do they? According to the Department of Labor they collected more than $230 million in back wages for more than 190,000 workers in FY 2021 alone. Of that amount collected, $138 million was for back overtime.

Penalties for overtime violations can be severe with the possibility of fines, imprisonment or both! Add civil suits to the mix and the results can be devastating to any business no matter how large or small! And just to make it interesting, most states use the same definition to calculate overtime as the FLSA does. So, one error can earn you double the penalties.

In this program we start with section 1 which covers determining eligibility for overtime. In our next section we will cover the definitions that you need to understand to calculate overtime correctly. From this point we will explore the Portal-to-Portal Act to determine what exactly are “hours worked”. Once we have this basic information down, we can then segue to understanding the term regular rate of pay and how it affects overtime calculation. Using this information, we can review the calculations needed to correctly pay overtime, considering the type of additional pay given and whether more than one workweek is involved. And finally, we can review other types of calculations that affect the payment of overtime such as multiple rates of pay.