Armanino Blog

Paying Overtime: Face the Facts

by Jenn McCabe
October 26, 2018

Overtime is perhaps the most misunderstood area of payroll statutes, simply because it's not as straightforward as a rational person would assume. The requirements are, to any sane business owner, seemingly insane.

Noncompliance can cost you. And just because you're a cool, casual and flexible boss doesn't mean you're not at risk. Here are some fast facts to help you stay out of trouble:

  1. Paying a "day rate" is paying someone for eight regular hours. Day-rate workers are eligible for overtime.
  2. In some cases (productions, higher skill levels) it might make sense to pay on a weekly basis rather than hourly. In that case, get professional advice and write and offer letter correctly. There must be a weekly minimum "exempt" wage stated and if the worker works any portion of a week, the entire week is paid time.
  3. Just because someone makes a certain wage or "too much" or "a lot of money," it doesn't mean they don't qualify for overtime pay. As a rule of thumb―although not the ultimate test―to be considered exempt from overtime, a person must make at least 2x the minimum wage. But keep in mind that:
    • Minimum wage varies by city, not just state.
    • The minimum wage changes, sometimes more than once a year.
  4. Don't assume your worker only gets overtime pay if they put in more than 40 hours in a week. In some states, workers get overtime on a daily basis if they work more than eight hours. This means, for example, you can't have someone work 10 hours another day to make up for a six-hour day. If they did, you'd have to pay them for 14 regular hours and two overtime hours.
  5. If an employee works more than five hours without a meal break, they are entitled to "penalty pay" in many jurisdictions. The rules further specify that:
    • They can't volunteer to give up their meal break.
    • The break has to be at least 30 minutes long.
    • Breaks are unpaid.
  6. Don't make the mistake of assuming that the government agrees with industry standards when it comes to paying overtime. Make your own decisions based on the rules, and don't just do what your friends do.
  7. Without timesheets (which are admittedly hideous), an employer has a weak, or no, argument for any wage and hour claim, no matter how ridiculous. Even if you don't have a timesheet, you have to figure out how to pay an hourly worker for all hours worked. (I know this makes no sense.) The safe bet is to use timesheets that are compliant with the wage and hour rules in your city.

The overtime laws were written for uncool, inflexible bosses. But any disgruntled person can take advantage of them, and it can be mighty expensive when they do. So protect yourself and follow the rules, even if they do seem crazy.

Need help deciphering your overtime requirements? Contact our payroll experts.

Stay In Touch

Sign up to stay up-to-date with the latest accounting regulations, best practices, industry news and technology insights to run your business.

Jenn McCabe - Partner, Outsource HR - El Segundo CA | Armanino
Related News & Insights
Armaninos 10th Anniversary Reception in Chicago
Live Event
Rooftop reception to celebrate Armanino’s 10th anniversary with the firm’s supporters and friends.

September 29, 2022 | 02:30 PM - 05:30 PM PT
Nonprofit Symposium 2021
Live and Virtual Event
Nonprofits - Get Back to [Focusing on] the Future

September 29, 2022 | 08:00 AM - 12:00 PM PT
Workday Adaptive Planning 2022 R2 Release
Learn about Workday’s newest features and enhancements.

August 30, 2022 | 10:00 AM - 11:00 AM PT