3 Steps to Calculate Overtime Pay Properly:
- Calculate the hours worked. Just as it sounds, this is the determination of how many hours the employee worked during the workweek. Where it gets complex, however, is understanding what is and what is not working time under the FLSA. This question alone is worthy of separate discussion – so be sure you understand what time you’re obligated to pay for before you even begin.
- Calculate the "regular rate" of pay. This is seemingly simple, but often is not because this rate often includes more than just the employee’s hourly rate. You must determine how much remuneration the employee received during the workweek, which requires you to understand what sorts of payments must be included in calculating the regular rate, such as bonuses (just to name one example).
- Finally, calculate the overtime rate. This will let you know how much overtime is owed. This is probably the simplest step, but don’t underestimate the importance of getting the first two steps correct before attempting the third.
Employees need to understand that not ALL hours in the workplace are going to be considered "compensable time" under the FLSA. What constitutes compensable time is often the issue and subject of much litigation so determining whether overtime pay is properly being paid will not always be cut-and-dry, so to speak. Always consult with an employment attorney who practices in the area of wage & hour law if you believe you may not be receiving proper overtime pay.