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Overtime Pay Facts

January 19, 2016 | posted by Abacus Payroll
Overtime Image Abacus Payroll

Overtime is easily one of the biggest logistical nightmares that employers face. Between tax ramifications, employee classifications, and payroll balancing, you have a lot on your plate when you sit down to calculate overtime. Amidst the chaos of an altered workweek, it can be hard to keep track of the factors involved.
Here are some overtime guidelines to keep you in the game.

Exempt vs. Nonexempt Employees: Know the Difference

Even if you’re new to the business world, you’ve probably heard the terms “exempt” and “nonexempt” used to modify employees’ status—if not, you’ve definitely heard the terms “white collar” and “blue collar,” which often mean the same thing. An employee undergoes a classification as either exempt—wherein they usually receive no overtime pay—or nonexempt based on factors such as their income and job qualifications.  

Feel free to double check, but it’s more likely than not that the Fair Labor Standards Act applies to your business. According to the FLSA, you have to pay your nonexempt employees an overtime compensation of 1.5 times their normal pay rate for every hour they work over their allotted 40 per week.  

Note: New DOL Overtime Laws Effective December 2016

Exempt employees, on the other hand, do not require overtime pay. To qualify as exempt, these employees must receive compensation on a salary basis of at least $455 per week, regardless of the number of hours they work. They must also adhere to certain job duties, often performing managerial or task-specific roles. These employees most frequently fall under the designation of administrative, executive, or professional, and their jobs include tasks directly related to the function of the businesses for which they work.  

Other examples of exempt employees include the following:

  • Independent contractors
  • Seasonal or recreational businesses
  • Outside salespeople
  • Farmers or agricultural workers
  • Criminal investigators


Overtime Laws and Regulations


While most states adhere to the FLSA’s 40-hour work week rule, some states, such as California, require a daily overtime policy. This means that if your nonexempt employees work more than eight hours in a day, they qualify for time and a half. Be sure to confirm your state’s overtime legislature prior to attempting the payroll.
You should also be aware that, while most administrative, executive, or professional employees don’t qualify for overtime pay, their salaries don’t always add up to the required $455 per week. Don’t make the mistake of assuming they’re exempt based on their job title or duties alone.
Between trying to calculate variable salaries and keeping track of your workforce’s various designations, we understand that the overtime process can be a handful. If you find yourself falling behind, don’t wait until it’s too late—give Abacus Payroll a call at 856-667-6225 or send us an email today!

About the Author: Abacus Payroll

Abacus Payroll, Inc. is a leading provider of payroll solutions for businesses of all sizes. Whether yours is a family-owned small business or a national corporation, we provide payroll, tax and other financial services on time and at an affordable price. Unlike other payroll providers, Abacus Payroll will assign your very own payroll specialist who will understand your payroll needs inside and out. So no more speaking to a different person each time, no more sitting on hold for hours and most importantly no more missed deadlines! Contact us today to see how we can help your business. You can count on us.