How to handle overtime for nonexempt employees on salary

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in Compensation and Benefits,Human Resources

Q. We pay our nonexempt employees weekly on a salary basis, no matter how many hours they work during the week. These employees have not worked overtime hours in the past. However, the company’s operations have changed, and we expect to require some overtime work in the near future. Will we have to pay the employees time-and-a-half for those overtime hours?

A. The situation you describe may qualify as a “fixed salary for fluctuating hours.” If so, under the wage-and-hour regulations, you would be allowed to pay only additional “half-time” instead of “time-and-a-half” for each of the overtime hours.

If you already have a clear and mutual understanding that has been communicated to these employees that the fixed salary is compensation (apart from overtime premiums or payments) for the hours worked each workweek (whether few or many), then you have met the first step in qualifying to pay only “half-time” for the overtime hours.

The second requirement is that the amount of the fixed salary must be sufficient to provide compensation to the employee at a rate not less than the applicable minimum wage rate for every hour worked in those workweeks in which the number of hours the employee works is greatest.

When those factors have been met, the employee can be deemed to be receiving a “fixed salary for fluctuating hours.” Since the employee has already received straight-time compensation on a salary basis for all hours worked, only additional half-time pay is due for the overtime hours.

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