Who Gets Overtime Pay?
Find out whether you should be paid for overtime work.
Laura Adams, MBA
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Who Gets Overtime Pay?
Over the years I’ve seen a lot of confusion in the workplace about who’s entitled to receive overtime pay and who isn’t. It can be a pretty confusing topic, but in this article I’ll try to clear up any questions that you may have about overtime.
What is Overtime Pay?
The rules for overtime pay are part of the Fair Labor Standards Act or FLSA. It’s a federal law that’s enforced by the Wage and Hour Division of the U.S. Department of Labor. Overtime pay is compensation for certain employees who work more than 40 hours in a given work week. It must be paid at a minimum of one and one-half times the worker’s normal rate of pay for any hours that exceed 40.
For example, let’s say you qualify for overtime pay, earn $20 per hour, and work 42 hours in a week. Your minimum overtime rate would be $30 an hour for the two hours that you worked over 40. (That’s $20 times 1.5). So your weekly pay would total $860—$800 for your regular pay plus $60 for your overtime pay.Â
There are two ways to qualify for overtime. One has to do with requirements concerning your employer and the other has to do with the type of work you do. Let’s talk about the employer requirements first.
Which Employers Must Pay Overtime?
All employers with at least two employees must pay overtime wages to qualified workers—unless the business earns less than $500,000 in annual revenue. But there are some exceptions to that rule. If a business or organization earns less than $500,000, they still have to pay overtime if they’re a(n):
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School
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Hospital
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Government agency
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Institution that cares for residents who are sick, disabled, or mentally ill
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Enterprise that has employees who perform work involved in interstate commerce
Which Employees are Entitled to Overtime Pay?
When it comes to overtime pay, there are two categories of employees—those who are “exempt” and those who are “non-exempt”. Employers are required to pay non-exempt employees overtime, but they don’t have to pay overtime to exempt employees. If the exempt and non-exempt wording confuses you as much as it does me, I’ve got a handy memory trick that may help you keep it straight:
Think about the words “non-exempt” and “covered”. They both have an “O” as their second letter. So non-exempt workers are covered. A non-exempt worker is covered by the law to receive overtime. Got it?
Employees are generally considered non-exempt and entitled to receive payment for their overtime work unless their job falls under an exemption category. Here are six common categories of workers who are not entitled to be paid for overtime work:
- Executive employees have responsibility for managing a business or one of its major departments. They have the authority to hire and fire employees and to direct the work of at least two other employees.
- Administrative employees have responsibility for managing general business operations and exercising independent judgment regarding significant office matters.
- Professional employees perform work that requires advanced knowledge, such as a doctor or lawyer. Or they do work that requires invention, imagination, or originality in some artistic or creative endeavor, such as a musician or writer.
- Outside sales employees must work away from their employer’s office and have responsibility for obtaining orders or completing contracts for services to be paid by a customer.
- Computer employees have responsibilities that require specialized education and skill such as analyzing systems, consulting with users, programming, and designing software.
- Highly compensated employees who perform some type of executive, administrative, or professional work and earn annual compensation of $100,000 or more.
So if you have a job that falls under one of the categories that I just mentioned and you earn at least $455 per week, you’re considered an exempt employee and not eligible to be paid for overtime. In addition to those categories of employees, there many other kinds of workers who are also considered exempt and don’t qualify for overtime, such as:
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Commissioned sales employees
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Farm workers
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Taxi drivers and certain transportation employees
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Mechanics at auto dealerships
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News editors and announcers
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Domestic workers who live with their employer
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Police officers
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Paramedics
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Fire fighters
Employees who perform manual or repetitive labor, such as factory workers, warehousemen, and construction workers, however, are not exempt—they must be paid overtime no matter how much they earn.
Are Independent Contractors Eligible for Overtime Pay?
What about overtime for independent contractors? An independent contractor is not considered an employee and therefore is not entitled to receive overtime pay. But be aware that simply having an employment agreement that says you’re an independent contractor doesn’t necessarily mean that you’re not an employee according to the law. At the bottom of this article is a link for more information.
Can Overtime Pay be Waived?
The requirement for an employer to pay overtime can’t be waived by an agreement between an employer and a worker. If you qualify for overtime and work over 40 hours, you’re entitled to receive it even if an employer tells you that overtime work isn’t permitted. And having a fancy job title doesn’t mean you aren’t entitled to overtime—your specific job duties are what matter for determining your exemption status. If you’re still not sure, I’ve included some online tools below to help you determine if you’re eligible for overtime pay.
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More Resources:
Independent Contractor (Self-Employed) or Employee?
Handy Reference Guide to the FLSA
Questions and Answers about the FLSA
Coverage and Employment Status Advisor identifies who is covered by the FLSA
Overtime Security Advisor identifies who is not covered by the FLSA
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Businesswoman image courtesy of Shutterstock
About the Author
Laura Adams received an MBA from the University of Florida. She’s an award-winning personal finance author, speaker, and consumer advocate who is a frequent, trusted source for the national media. Money-Smart Solopreneur: A Personal Finance System for Freelancers, Entrepreneurs, and Side-Hustlers is her newest title. Laura’s previous book, Debt-Free Blueprint: How to Get Out of Debt and Build a Financial Life You Love, was an Amazon #1 New Release. Do you have a money question? Call the Money Girl listener line at 302-364-0308. Your question could be featured on the show.