FLSA and Overtime Calculations Terry Meggitt, CPP Instructor

FLSA and Overtime Calculations 1. Federal Wage-Hour Law (Fair Labor Standards Act) 2. Federal vs State Relationship 3. Exempt vs Nonexempt Employees. 4. White Collar Exemption 5. Minimum Wage 6. Overtime Pay Requirements/Regular Rate of Pay 7. New FLSA Rules Effective December 1, 2016

Federal Wage-Hour Law (FLSA) Mandates equal pay for equal work. Places restrictions of what type of job duties children can do and the hours they can work. Sets minimum wage and minimum amount to be paid for overtime when an employee works more then 40 hours; Requires recordkeeping by employers. Wages must be paid by your paydate.

State Wage-Hour Law (FLSA) Lunch breaks and coffee breaks. Regulates how often employees must be paid. Regulates when terminated employees must be paid. Restrict the hours children over 16 may work.

States Deceased Employees wages Direct Deposit or Paycards Pay Frequency Requirements Pay Statements Provided to Employees Unclaimed Paychecks

Exempt vs NonExempt Exempt Employee that are exempt are exempt from minimum wage and overtime payments. White Collar Exemption Administrative employees Executive employees Professional employees Computer-related professional employees Outside salespersons

Exempt vs NonExempt NonExempt Must be paid at least the minimum wage for all hours worked and must be paid an overtime premium for all hours worked over 40 in a workweek. Hourly: Paid by the hour and receives additional premium pay for hours worked over 40 in a workweek. Salaried: Receives a salary for hours worked up to 40 per workweek. Overtime is still due when working more than 40 hours in a workweek.

White Collar Exemption Administrative Employees: A. $455 per week, annual amount $23,660 B. Primary duties is directly related to management of the business operations. C. Exercise of discretion and independent judgment with respect to matters of significance.

White Collar Exemption Administrative Employees Possible Titles: accounting insurance advertising labor relations auditing legal & regulatory compliance budgeting marketing computer admin procurement employee benefits public relations finance research government Relations safety and health human resources tax

White Collar Exemption Executive Employees: A. $455 per week, annual amount $23,660 B. Primary duties is management of the business operations. C. Customarily directs the work of at least two employees. D. Suggestions and recommendations on hiring, firing, advancement etc…

White Collar Exemption Executive Employees: Management activities such as: Directing the work of employees. Disciplining employees. Employee’s complaints and grievances. Interviewing, selecting and training employees. Planning employees work. Planning and controlling the budget. Safety and security of the employees or the property.

White Collar Exemption Professional Employees: A. $455 per week, annual amount $23,660 B. Work requiring advance knowledge and also exercise of discretion and independent judgment in their field. C. Work requiring invention, imagination, originality or talent in a recognized field.

White Collar Exemption Professional Employees Possible Titles: Learned professionals: accountants athletic trainers chefs dental hygienists nurses paralegals physician assistants registered or certified medical technologists

White Collar Exemption Professional Employees Possible Titles: Creative professionals: actorslawyers cartoonistmusicians chefsnovelists composersphysicians conductorsscreenplay writers essayistsshort story writers journaliststeachers

White Collar Exemption Computer Employees: A. $455 per week, annual amount $23,660 B. Primary duties application of systems analysis techniques and procedures including consulting. C. Design, development, documentation, analysis, creation, testing or modification of systems or machine operating systems. Note: if an employee has an hourly rate of $27.63 they too could be exempt just need to check their duties.

White Collar Exemption Outside Sales Employees: a. No salary test required. b. Primary duty must be obtaining order or contracts; making sales of tangible or intangible items. c. Must work away from the employer’s office. Highly Compensated Employees: $100,000; catch-up payment must be made within one month after the last payment of the year.

White Collar Exemption Blue collar workers & first responders can not be exempt: Possible job titles: ambulance personnelhighway patrol officers correctional officersinspectors deputy sheriffsinvestigators detectivesparamedics EMT’spark rangers firefighterspolice officers hazardous material workersprobation officers

White Collar Exemption Deductions from exempt’s weekly salary: Absences for personal reasons (not including sickness or disability), Full Days. Absences for sickness or disability if employee is receiving pay from employer’s sick or disability plan. Jury duty, witnesses or military leaved can not make deductions unless no work was done in that week. FMLA leave can go as low as 15 minutes.

Regular Rate of Pay Workweek Each employer is responsible for establishing its workweek and they may be different for facilities or groups of employees as long as it remains fixed once it has been established. A regular recurring period of 7 consecutive 24 hour periods (168 consecutive hours) Exemption for hospital and nursing homes: 14 consecutive 24 hour periods (336 consecutive hours) 8/80 rule: overtime is based on either hours over 8 in a day or 80 in a 14 day period which ever is greater.

Regular Rate of Pay Hours Worked FLSA only requires an overtime premium to be paid for hours physically worked over 40 in a workweek. Paid time off, holidays, sick pay, jury duty pay etc… does not have to be included when determining if the 40 hour threshold has been met. Hours not worked can not be used to offset any overtime obligation. FLSA does not set a maximum hour limitation in a workweek but state laws may.

Regular Rate of Pay Regular Rate of Pay is the rate you use in calculating overtime premium pay, the ½ time piece. To get the Regular Rate of Pay you must add up all dollars based on worked time, then divide all worked hours into the dollars. Remember if an employee has not worked more then 40 this calculation is not needed. Worked Dollars divided by Worked Hours = Regular Rate of Pay

Regular Rate of Pay What is included in the regular rate? Base pay – employee base rate of pay without adding any additional pays like lead pay, shift, etc… Nondiscretionary bonuses – contractual or agreed upon payment related to performance (production, efficiency, attendance, quality etc…). On-call pay – the greater the restrictions the more likely it should be compensable work time. Payments in a form other than cash – the fair market value of the goods or services. Shift differentials – additional amount for working shifts Retroactive pay and Supplemental disability payments

Regular Rate of Pay What is not included in the regular rate? Benefit plan contributions – Employer contributions to profit sharing, thrift or saving (including 401k, 403b etc…) Discretionary bonuses – discretion whether to pay and to be able to determine the amount. Gifts – at Christmas or other special occasions, Paid time off – vacation, pto, holiday, sick etc… Reimbursed expense – business related expenses

Regular Rate of Pay What is not included in the regular rate? Cont Overtime compensation – other than required (more than 8 hours in a day or hours before 40) Premium pay for extra days worked – Saturday, Sunday or holiday but not for working more than 40 hours in workweek. Premium pay under a union contract for extra hours – established by a valid collective bargaining agreement. These additional pays can be used to offset any overtime pay due the employee for the same workweek.

Regular Rate of Pay Calculating Regular Rate of Pay: All pay based on worked hours All hours worked

Regular Rate of Pay Calculating Regular Rate of Pay: Example 1 An employee works 50 hours at $11 per hour: 50 x 11 = $ x 11 = $ x 11 x.5 = $ x 11 x 1.5 = $ $ $55.00 = $605.00$ $ = $ Note: Because there is no additional amounts (shift pay, bonus, etc…) either way you calculate, their gross is the same.

Regular Rate of Pay Calculating Regular Rate of Pay: Example 2 An employee works 50 hours at $11 per hour and receives 20 hours of shift pay at $2.50 per hour: 50 x $11 = $550.00Hours x Rate 20 x $2.50 = $50.00Shift Pay $600.00All straight time pay $600 / 50 = $12.00Regular Rate of Pay for Overtime 10 x $12 x.5 = $60.00Overtime Premium $ $ $60.00 = $660.00Gross Pay

Regular Rate of Pay Calculating Regular Rate of Pay: Example 3 An employee works 50 hours at $11 per hour and receives 20 hours of shift pay at $2.50 per hour and receives a $100 bonus for work on Saturday: 50 x $11 = $550.00Hours x Rate 20 x $2.50 = $50.00Shift Pay $ Bonus $700.00All straight time pay $700 / 50 = $14.00Regular Rate of Pay for overtime 10 x $14 x.5 = $70.00Overtime Premium $ $ $ $70.00 = $770.00Gross Pay

Regular Rate of Pay Calculating Regular Rate of Pay: Example 4 An employee works 34 hours and has 16 hours of vacation at $11 per hour: 50 x $11 = $ Note: Because there is only 34 hours worked no overtime is due. But your company may have a policy that states this employee is to receive OT pay because of total hours are over 40. That’s ok but you would not have to do the FLSA calculation.

Regular Rate of Pay Calculating Regular Rate of Pay: Example 5 An employee works 50 hours at $11 per hour and receives a $100 discretionary bonus: 50 x $11 = $ x $11 x.5 = $55.00 $100 discretionary bonus $ $ $100 = $ Note: Because the bonus is at the employer discretion this bonus does not have to be included in the calculation of the regular rate of pay.

Regular Rate of Pay Calculating Regular Rate of Pay: Example 6 An employee works 50 hours at $11 per hour (5 of these hours are paid at double time) and receives 20 hours of shift pay at $2.50 per hour:50 x $11 = $ x $2.50 = $50.00 $600 / 50 = $ x $11 = $ x $12 x.5 = $ x $11 x.5 = $27.50 $ $ $60.00 = $660.00Gross $ Because the double time pays more than the employer is required too no additional calculation is needed.

Regular Rate of Pay Special Problems in Regular Rate Determinations Employees working at more than one rate: Example 7 22 hours at $11 per hour = $ hours at $12.10 per hour = $ Total $ $ / 42 hours = $ $11.52 x 2 x.5 = $11.52 Total Pay $ = $495.52

Regular Rate of Pay Special Problems in Regular Rate Determinations Salaried nonexempt employees: Example 8 A nonexempt employee is paid an annual salary of $27,300 for working 35 hours per week. 35 x 52 = 1820$27,300 / 1820 = $15 per hour This employee must be paid $15 per hour worked between 36 – 40 and at least $22.50 per hour (1.5 x 15) for all hours over 40.

Regular Rate of Pay Special Problems in Regular Rate Determinations Salaried nonexempt employees: Example 9 A nonexempt employee is paid an annual salary of $27,300 for working hours per week x 52 = 1950$27,300 / 1950 = $14 per hour This employee must be paid $14 per hour worked between – 40 and at least $21.00 per hour (1.5 x $14) for all hours over 40.

Regular Rate of Pay Special Problems in Regular Rate Determinations Salaried nonexempt employees working a fluctuating workweek: Example 10 Employee hours vary from workweek to workweek so employer enter into an agreement with employees to pay them a fixed salary even if they work only 35 hours. But if they go over 40 they must be paid ½ time for hours over 40. Fixed salary = $400 Workweek one worked 45 hours Gross = $ $400 / 45 = $ x $8.89 x.5 = $22.23 Workweek two worked 50 hours Gross = $ $400 / 50 = $ x $8.00 x.5 = $40.00

Regular Rate of Pay Special Problems in Regular Rate Determinations Salaried nonexempt employees receiving additional pay late: Example 11 When payroll receives additional pay late that needs to be addition to a prior pay period, you do not have to recal the whole check because to know these pieces of the puzzle: 1. Total hours worked 2. Total OT hours 3. Additional amount Divide 1 into 3 * result by 2 *.5 and pay result + 3 (see examples)

Regular Rate of Pay Special Problems in Regular Rate Determinations Daylight saving time issues: Second Sunday in March clocks are moved forward by one hour. Employer does not have to pay this hour, but if they do they can not use this pay to offset any overtime due. First Sunday in November clocks are set back by one hour. Employer must pay this hour and count this hour for overtime.

Questions

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