It’s official: Gone are the days when employees promptly clock out at 5 p.m. Whether they’re burning the midnight oil during busy season or finishing up a project at home, many employees take their work beyond the traditional nine to five grind—and should be compensated properly.
Overtime pay is the logical solution, but what is overtime pay, and how does it work?
What is Overtime pay?
According to the Fair Labor Standards Act, which also places regulations on child labor and minimum wages, overtime pay is considered any hours that are worked over a 40-hour workweek. In the case of overtime, a workweek is defined as a recurring period of 168 hours, or seven 24-hour days. Employees can keep track of their overtime pay by physically clocking in and out of the office, writing their hours down, or keeping a digital time card.
Is Overtime Pay Required by the Law?
The short answer? Yes. The Fair Labor Standards Act, or FLSA for short, requires companies to pay their employees overtime once they exceed the 40-hour workweek; however, overtime laws can vary state by state. The state law in California, for example, says companies are required to pay double the employee’s regular rate when a workday exceeds 12 hours. However, some state laws (like in Texas) have overtime policies that are more aligned with FLSA.
Keep in mind the FLSA’s overtime policies are the bare minimum. While some companies will pay their employees double time on holidays, others will kick into overtime at 30 hours instead of 40.
But no matter where you live or what your company’s exact policies are, one thing's for sure: It’s important to comply with the law. According to the United States Department of Labor, employers who do ignore overtime requirements are subjected to civil money penalties for each violation.
What About Double Time?
If you started to do your overtime research, there’s a good chance you’ve at least heard of double time. As the phrase suggests, double time is twice the amount of a person’s hourly rate. Translation? If a person’s rate was $15 per hour, their double time wage would be $30 per hour.
But what gives? When do you up the ante to double time?
Well, it’s more complicated than that. While there is no federal law that requires employers to pay double time, some states have their regulations in place.The state law in California, for example, says companies are required to pay double the employee’s regular rate when a workday exceeds 12 hours.
More times than not, a double time rate is established between a company and their employees. While some businesses pay their employees double time when they work on weekends or during a national holiday, others might double an employee’s rate if they work more than seven days in a row.
Double time is not a one-size-fits-all situation. Before establishing a double time policy, think about the service your business offers. For example, some businesses might need to be open every day, so you might want to offer double time for holidays like Thanksgiving and New Year’s Day.
Who is Eligible for Overtime Pay?
So everyone’s entitled to overtime, right? Well, not so fast. There are a couple factors that play into whether or not your employees are eligible for overtime pay.
First things first: Where do your employees fall on the corporate ladder? The FLSA has a white-collar exemption, which applies to “any employee employed in a bona fide executive, administrative, or professional capacity.”
Employees can be exempt from overtime payments if they are paid on a salary basis, and make a salary of at least $684 per week.
While most salaried employees are exempt from overtime pay, if their salary is less than $684 per week—which works out to less than $35,568 per year—they are entitled to overtime payments.
Another thing to consider? Some industries and careers are not covered in the FLSA. For example, independent contractors are generally paid for the task at hand and are not eligible for overtime hours. Other jobs—such as farmworkers, movie theater attendants, railroad and air carrier employees—are exempt from overtime coverage.
How Do You Calculate Overtime Hours?
Figuring out whether your employees are eligible for overtime may not be a one-size-fits-all situation; however, calculating overtime is a lot easier than you think. The FLSA defines the overtime rate as “time and a half,” or 1.5 an employee’s hourly wage. When figuring out your employee’s overtime pay, break out your calculator and multiply their hourly rate by 1.5.
So what does that look like? Break out your calculator, let’s do the math:
- Hourly Rate x 40 = Weekly Wage
- Hourly Rate x 1.5 = Overtime Rate
- Overtime Rate x Number of Overtime Hours = Overtime Wage
- Weekly Wage + Overtime Wage = Total Pay
Clocking in some double time? Here’s what it’d look like:
- Hourly Rate x 40 = Weekly Wage
- Hourly Rate x 2 = Double Time Rate
- Double Time Rate x Number of Double Time Hours = Double Time Wage
- Weekly Wage + Overtime Wage = Total Pay
As for salaried workers? Divide their salary by 52 to get their weekly wage. From there, you can divide the weekly rage by the number of hours worked (in most cases, by 40) to find the hourly rate.
Speaking of paying your employees, the FLSA says any overtime rates must be paid in the same payment period that the wages were earned. Translation? Include any overtime pay in the same period as their regular pay—just like you would process a normal pay period.
3 Simple Rules for Paying Overtime
Let's not sugarcoat things: Overtime pay is not optional for non-exempt employees. If your employees are working overtime, they need to be compensated accordingly. That being said, overtime can cause friction between an employer and their employees. To help ease the relationship, check out these three cardinal rules to navigating overtime payments.
Set Expectations
Believe it or not, having employees submit proper timesheets is easier said than done. While some employees might feel guilty for exceeding their standard number of hours, Forbes found 89 percent of employees waste time at work, which can add to an employer’s bottom line.
Encourage your employees to record the number of hours they worked each day. Waiting until Friday to fill out a timesheet can lead to employees recording too little or too much overtime.
Employees should feel empowered to account for their overtime, but you might want to ask them to give you a heads up if they’re about to surpass their 40-hour workweek. Setting expectations and holding each other accountable for submitting accurate hours can help create a positive, efficient work environment.
Don’t Cut Corners
Between promoting employees to exempt managerial roles and averaging all the workweeks in a pay period to determine overtime pay, some companies cut corners to keep overtime wages at bay. Not only can overtime pay shortcuts put your employee’s trust in jeopardy, but it can also result in financial penalties. In a nutshell, stick to the overtime laws and handle overtime on a week by week basis.
Communication is Key
Let’s face it: Many employees will exceed a typical 40-hour work week. After all, busy season is inevitable. But if your employees are submitting too many weeks with overtime hours, it may be indicative of a larger issue. Maybe your employees’ bandwidths are hitting critical mass. Perhaps a project’s workflow isn’t running as smoothly as you’d like. If you’re noticing a pattern in an employee’s timesheets, schedule a meeting to get to the root of the issue. At the end of the day, happy, fulfilled employees are priceless.
Let’s Wrap it Up
Do you want to make your records 100% accurate and make navigating overtime pay a breeze? Sign up for Hourly, which tracks and automatically records your employee’s timecards. Hourly also lets employers create custom rules like enforcing 8 hour days, 30 minute lunches, and setting mandatory start times. That way, you can rest easy knowing you have more control over overtime pay before your employees clock in extra hours.
Have questions? Reach out at (844) 800-2211 to learn more!
1. Introducing Yourself
Your introductory email needs to pack a lot of information into a small package. Try something like this:
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Hello Jane,
My name is John Doe and I work for ABC Agency, where we provide business insurance policies to many of Dallas' rockstar small businesses.
Congratulations on your new business, Jane's Bakery. Are you wondering if you have all the insurance you need? Or if your policies will really cover you in a pinch?
At ABC Agency, we pride ourselves on providing robust, comprehensive coverage options to companies like yours with flexible, pay-as-you-go plans.
Are you available this week to talk more about how we can help? I can help you find the most affordable rates and the best policies out there.
I look forward to speaking with you soon.
Cheers,
John Doe
2. Presenting a Quote
Once you've met with your potential client, a quick reply with their quote will get the ball rolling.
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Hi Jane,
Thanks so much for meeting with me this morning. I loved touring Jane's Bakery–I can still smell those delicious chocolate chip cookies baking! You have a great location, and I'm sure you're going to do great on Front St.
After reviewing my notes, I've pulled together an insurance quote for you (attached). I recommend a business owner's policy. A BOP includes several insurance products in one: liability, property insurance, and business interruption insurance. It offers robust coverage at a competitive price.
I'll call you in a few days to see what you think about this insurance plan. In the meantime, if you have any questions, don't hesitate to email me or call me at [phone number].
Again, thank you for your time today. I look forward to working with you in the future.
Cheers,
John Doe
3. Thanks for Purchasing a Policy
Gratitude is important! It's never a bad idea to thank your clients for their business.
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Hi Jane,
Thank you for choosing a business owner's policy with ABC Agency. We know it's so important to get the right coverage for your business, and we are honoured you've placed your trust in us.
We're excited to work closely with you, and our no. 1 goal is to make sure you're business is always protected.
Do you have any questions? We are here to help. Reach out whenever something comes to mind.
Thank you again for choosing ABC Agency to insure Jane's Bakery.
Cheers,
John Doe
4. Welcome Email
A welcome email helps clients feel like you're there to help–and can softly pitch other insurance products you offer.
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Dear Jane,
Welcome to the ABC family! We are thrilled to have you as a new customer and can't wait to meet all of your insurance needs.
As an independent insurance agency, we work with multiple insurance providers to find the best coverage options for all our customers. If you need any other type of insurance–like [include additional offerings unique to your agency, like life insurance, health insurance, home insurance or anything else]–we can help you too.
Do you want to discuss any of these policies?
Cheers,
John Doe
5. Introducing a New Product
A happy client may want to expand their business with you.
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Hello Jane,
I hope all is well with you and Jane's Bakery. I stopped in yesterday for a blueberry muffin and coffee, and they were delicious. I loved the hint of cinnamon in the muffin! Was that your idea?
I wanted you to be the first to know we are now offering commercial vehicle insurance to our policyholders. Auto insurance for your catering vans is super important since your personal car insurance won't cover them.
We're offering this insurance coverage solely to our current business clients at the moment and have some very competitive rates.
Would you like me to work up a quote for you?
As always, thanks so much for being a part of the ABC family.
Cheers,
John Doe
6. Asking For Referrals
Once your relationship is established and comfortable, let your clients help you grow.
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Hi Jane,
You've been a valuable member of the ABC family for two years now, and we so appreciate your business–not to mention the muffins you supply for our monthly meetings!
Because you are a valued policyholder, I wanted to ask a quick favour. I know you are active in the local Chamber of Commerce, and I'm hoping you might know some colleagues who would benefit from working with our insurance company.
Referrals are one of the most effective ways to connect with our community since people really trust their friends, family and colleagues. Is there anyone you'd recommend I speak with?
Remember that in addition to business insurance products, we offer everything from life insurance policies to pet insurance.
As a thank you for your help, we will send you an Amazon gift card of $100 when your referrals buy insurance from us.
Thanks so much for your help!
Cheers,
John Doe
7. Policy Renewal
If your client needs to renew their policy with you, send an email like this:
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Hi Jane,
I hope you're doing well! What a year it's been—from being listed as one of the top 5 bakeries in Dallas to being an official vendor for the city—you have so much to be proud of.
Just a heads up that your business owner's policy is up for renewal soon and will expire on June 15, 2023.
If you're still happy with the coverage, we can easily renew it for you.
Do you have some time to chat this week?
Looking forward to serving you again!
Cheers,
John Doe