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How To Calculate Overtime Pay

The Fair Labor Standards Act (FLSA) and New Jersey Wage and Hour Laws require that covered, non-exempt employees be paid one and one-half times their regular rate of pay for all hours worked in excess of 40 hours per week. See U.S. DOL Fact Sheet #23 and N.J.S.A. 34:11-56a4.

Ordinarily, calculating overtime pay is not difficult. Here’s an easy example.

Question: An employee at Tasty Donuts works 42 hours in one week. How much overtime premium is the employee entitled to for that week?

Answer: The employee is entitled to 2 hours overtime premium. So, if an employee makes $10.00 per hour, the overtime premium due to the employee would be $30.00.

Here’s a harder example.

Question: An employee at Caffe Latte works 50 hours in Week 1 and 30 hours in Week 2. How much overtime premium is the employee entitled to?

Answer: The employee is entitled to 10 hours of overtime premium for Week 1. If an employee makes $10.00 per hour and worked 50 hours in Week 1, she would be entitled to $400 straight pay plus $150.00 overtime premium, a total of $550.00. Thus, her take home pay would be $550.00 for Week 1 and $300 for Week 2, a total of $850.00.

Some employers and employees get into the trap of thinking that “It all averages out. Even though the employee worked 50 hours in Week 1 and 30 hours in Week 2, the employee still worked 80 hours between the two weeks. So, 80 hours divided by two weeks is 40 hours. Thus, the Caffe Latte employee is not entitled to overtime pay.”

But that is not how it works.

Remember: covered, non-exempt employees must be paid time and one-half for all hours worked over 40 hours in any given week. No ifs, ands, or buts.

Here’s a much harder example.

Question: An employee at Pizza Parlor works 50 hours a week doing two jobs: she is a waitress for $10.00 per hour 20 hours each week, and she is also a pizza chef for $15.00 per hour for 30 hours each week. How much overtime premium is the employee entitled to?

Answer: The employee is entitled to 10 hours of overtime pay in a given week, regardless of her job duties. To calculate overtime premium in this case, we need to calculate the average hourly rate and multiply that by one and one-half. Here’s how it works out:

Base straight time for Waitress: $10.00 per hour X 20 hours = $200.00.
Base straight time for Pizza chef: $15.00 per hour X 30 hours = $450.00.
Total gross = $650.00.

Average hourly rate: $650.00 / 50 hours = $13.00 per hour.
Time and one-half: $13.00 + $6.50 = $19.50 per hour.

10 overtime hours X $19.50 = $195.00

Take home pay = $650.00 straight time pay + $195.00 overtime pay = $845.00.

Some employers and employees also get into the trap of thinking that all “salaried employees” are exempt from overtime premium. Just because an employee is paid a “salary” does not mean that she is not entitled to time and one-half.

Before closing, it is important to note that employers in the health-care industry may use the “8 and 80″ exception, which permit employers to pay time and one-half the regular rate for all hours worked over 8 hours in any workday and 80 hours in the fourteen-day period. For more information about the “8 and 80″ exception, see Fact Sheet #54.

It is critical that employers and employees ensure that good time records are kept, so that overtime premium can be properly calculated.

Employees who believe that they have not been paid for overtime work have the right to consult with an attorney to file a private lawsuit or file a complaint with the Department of Labor. Employers who face litigation or a Wage and Hour complaint should consult with an attorney to investigate the complainant’s allegations and  help negotiate a favorable outcome.

 

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