TMCnet Feature
January 24, 2020

Dieter Dammeier Explains How to Determine Your Overtime Rate

Unfortunately, most employers are not aware what their overtime rates should be for each employee. Often, your hourly rate gets buried in accounting as you focus on managing the business or department. However, it is a good idea that you know your employees’ regular and overtime rate so that you can be sure that you are compliant with state and federal labor laws.

As a practicing attorney in labor law in Rancho Cucamonga, California, Dieter Dammeier is well-versed in overtime law.

What is Overtime Pay?

Overtime pay is either a legally mandated or employer-contracted agreement to increase an employee’s hourly rate after they’ve worked a certain number of hours in a day or week.

Federal law stipulates that non-exempt employees are entitled to one and a half times their regular hourly rate if they’ve worked more than 40 hours in a week or eight hours in a day.

That said, you and your employee may have a work contract that grants them a greater amount of overtime pay after a lower number of maximum work hours in a week. Also, according to Dieter Dammeier, many states have overtime laws that differ slightly from federal law.

According to federal law, the overtime rate (state or federal) that is most generous to employees overrides the other. This is also true of minimum wage law.

Which Employees Qualify for Overtime Pay?

When it comes to overtime pay, only non-exempt (usually non-salaried employees) qualify for overtime pay. They have a set number of hours when they must report to work.

Exempt employees (typically salaried) are not eligible for overtime pay, unless some agreement exists between the employee and their employer.

There are some industries that consider their hourly employees exempt, as well. To find out which employees are considered exempt or non-exempt, you should consult the Federal Department of Labor web page on overtime exemptions here.

Is Overtime Pay Different in California?

As a California attorney, Dieter Dammeier guides his clients on how overtime pay works differently in California than it does for the rest of the country.

One and a half times pay after eight hours in a day or after 40 hours in a week is the law in California as it is in federal law. However, California labor law also requires employers to pay their employees double pay if they worked more than 12 hours in a day or more than eight hours seven days in a row.

How to Calculate Your Overtime Pay

Examine an employee’s paycheck for a normal workweek of 40 hours or less, and then divide that employee’s total pay by the number of hours worked. That will give you their regular hourly rate. For example, $500 (total weekly pay) / 20 hours = $25/hour (regular hourly rate).

Don’t forget to take pay differentials into consideration. Dieter Dammeier says that some jobs in certain industries may increase an employee’s hourly rate for a single job or under unusual circumstances. For example, some jobs are considered hazardous and require the employer to issue hazard pay. Or, employees working a third shift may make a different hourly rate than if they worked a normal day shift.

If your employees are receiving a higher rate as a result of a shift differential for the bulk of their hours that week, you may need to base their overtime pay on that higher rate.

Multiply that rate by 1.5 times or two times to arrive at the overtime rate.

After determining your employees’ base or regular hourly rate, simply multiply that rate by one and a half to arrive at their overtime rate. For example, $25/hour (base rate) * 1.5 (overtime) = $37.50/hour (overtime rate).

Remember that if your employees work more than 12 hours in a day (or more than eight hours/day for a full week), California law requires you to pay your employees double their base hourly rate. For example, $25/hour (regular rate) * 2 = $50/hour (overtime rate)

Ideally, you would confirm these numbers with your business attorney or payroll provider. They will be able to make sure that you are abiding by state and federal labor laws.

Final Thoughts from Dieter Dammeier

As an employer, it can be difficult to keep track of the overtime rate for each employee and to ensure you are following proper overtime law since it differs on locations. Dieter Dammeier always says that if you are unsure of either, you should consider consulting a proper attorney.

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