Financial Advisory Blog

Armanino’s Financial Advisory blog is your source for thought leadership around cloud ERP and accounting solutions and integrations. Supported by the Cloud Accounting Institute and numerous experts in cloud, finance, reporting, integration, compliance, and technology, Armanino’s Financial Advisory blog features must-read content on what’s happening in the finance industry, case studies, white papers, and much more.

October 26, 2018

Paying Overtime: Face the Facts

Posted by Jenn McCabe

Overtime is perhaps the most misunderstood area of payroll statutes, simply because it’s not as straightforward as a rational person would assume.  The requirements are, to any sane business owner, seemingly insane.

Noncompliance can cost you. And just because you’re a cool, casual and flexible boss doesn’t mean you’re not at risk. Here are some fast facts to help you stay out of trouble:

  1. overtimeJust because someone makes a certain wage or “too much” or “a lot of money,” it doesn’t mean they don’t qualify for overtime pay. As a rule of thumb―although not the ultimate test―to be considered exempt from overtime, a person must make at least 2x the minimum wage. But keep in mind that:
    • Minimum wage varies by city, not just state.
    • The minimum wage changes, sometimes more than once a year.


  1. Don’t assume your worker only gets overtime pay if they put in more than 40 hours in a week. In some states, workers get overtime on a daily basis if they work more than eight hours. This means, for example, you can’t have someone work 10 hours another day to make up for a six-hour day. If they did, you’d have to pay them for 14 regular hours and two overtime hours.


  1. If an employee works more than five hours without a meal break, they are entitled to “penalty pay” in many jurisdictions. The rules further specify that:
    • They can’t volunteer to give up their meal break.
    • The break has to be at least 30 minutes long.
    • Breaks are unpaid.


  1. Don’t make the mistake of assuming that the government agrees with industry standards when it comes to paying overtime. Make your own decisions based on the rules, and don’t just do what your friends do.


  1. Paying a “day rate” is paying someone for eight regular hours. Day-rate workers are eligible for overtime.


  1. Without timesheets (which are admittedly hideous), an employer has a weak, or no, argument for any wage and hour claim, no matter how ridiculous. Even if you don’t have a timesheet, you have to figure out how to pay an hourly worker for all hours worked.  (I know this makes no sense.) The safe bet is to use timesheets that are compliant with the wage and hour rules in your city.

The overtime laws were written for uncool, inflexible bosses. But any disgruntled person can take advantage of them, and it can be mighty expensive when they do. So protect yourself and follow the rules, even if they do seem crazy.


Need help deciphering your overtime requirements? Contact our payroll experts.

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