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How is overtime pay regulated?

As an employer, understanding the law when it comes to minimum wage, overtime and the classification of workers is vital. Wage and hour laws determine how much employers must legally pay their workers for hourly work. Employers run the risk of being subject to expensive lawsuits if they underpay their employees or deny them of overtime benefits when they are entitled to them. As employers, therefore, it is important to always stay updated.

When it comes to overtime pay, the Fair Labor Standards Act (FLSA) has set certain rules. If an employee has worked more than 40 hours in a week, then any hours worked after this is overtime. Overtime must be 150 percent of the employee's standard pay.

However, many workers are exempt from this rule. In most cases, an employee is exempt from the overtime rule when he or she is considered a "white-collar" employee, who receives a set salary every period regardless of how many hours he or she works. Overtime regulations are in place to protect employees who may not have stable work, and work varying hours from week to week.

For those who are entitled to overtime pay, certain practices are illegal, such as comp-time. However, comp-time is still acceptable for employees who receive a regular salaried income.

As an employer, one of the most important things to do is to correctly classify employees. This means establishing which employees are exempt from overtime pay. It is important that you know which employees are entitled to overtime pay so that you can avoid making mistakes and being involved in pay conflicts in the future.

Source: HR Hero, "Wage and Hour Employment Law," accessed Dec. 29, 2017

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