Are Overtime Audits Overdue?

Original Photo
Original Photo

The U.S. Department of Labor (DOL) has undergone several  compliance enforcement developments that have encompassed wage and hour regulations. One area the DOL has targeted addresses overtime issues. The federal Fair Labor Standards Act requires overtime pay to be paid to most employees at the rate of one and one-half times their regular rate of pay when employees work more than 40 hours in a week.

Unfortunately, many employers violate the overtime pay laws often by:

Inconsistently calculating the rate at which overtime should be paid,

Failing to count “off-the-clock” work activities as work time, and

Incorrectly claiming that certain employees are exempt from overtime laws.

Calculate overtime correctly. While this sounds elementary, many employers continue to be confused even with the basic formula. Overtime is paid based upon an employee’s regular hourly rate of pay. The regular rate of pay is calculated by adding up all the pay and dividing it by the total number of hours worked. In turn, the following illustrates an example step by step:

Employee X works in his / her regular job at $10 per hour for 40 hours and then works in another department at $8.00 per hour for an additional 10 hours for the week.

  1. Multiply the appropriate hourly rate by the hours worked.
    $10 per hour X 40 regular hours = $400
    $8 per hour X 10 overtime hours = $80
  2. Sum up each subtotal of pay to determine the total base pay.
    $400 + $80 = $480
  3. Sum up each subtotal of hours to determine the total hours worked.
    40 regular hours + 10 overtime hours = 50 hours
  4. Divide the total base pay by the total hours worked to determine the regular rate.
    $480 / 50 hours = $9.60 per hour
  5. Multiply the regular rate by 1.5 to determine the overtime pay rate.
    $9.60 per hour x 1.5 = $14.40 overtime pay per hour
  6. Multiply the overtime pay rate by the overtime hours to determine the overtime pay.
    $14.40 overtime pay per hour x 10 overtime hours = $144 overtime pay (which is added to the $400 to calculate the pay for the week at $544)

Wage and hour laws can be very complicated and confusing. A good starting point is how your company pays (or not) your employees for any overtime work. By conducting regular audits, employers can take a close look at their practices and policies to spot and correct potential problems…well before ever receiving a letter from the DOL.


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