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HOW TO CALCULATE OVERTIME PAY FOR NONEXEMPT

EMPLOYEES PAID BY THE SQUARE OR SALARY

Under the Fair Labor Standards Act (FLSA), employees are entitled to be paid the federal

minimum wage and overtime pay for all hours worked in excess of 40 hours within a single

workweek unless they are subject to FLSA’s exemption provisions. FLSA provides exemptions

from overtime pay in certain situations, most notably the following employee groups: bona fide

executives; administrative employees; professionals; computer employees; outside sales employees;

and certain highly compensated employees. To qualify as an exempt employee under FLSA, an

individual, regardless of his or her occupation, must also be paid a minimum of $455 per week (or

$23,660 per year) unless the individual is employed in the field of medicine, law or teaching.

Employees who do not qualify for any of the exemptions are nonexempt employees who are entitled

to the federal minimum wage and overtime pay.

REGULAR RATE OF PAY

The “regular rate” of pay determines the amount of overtime pay owed to nonexempt employees

for hours worked in excess of 40 hours during a workweek. Employees are entitled to time and one-

half their regular pay rate for each hour worked in excess of 40 hours during a workweek.

The regular rate of pay for a nonexempt employee is equal to the total compensation paid to an

employee (with the exception of certain payments excluded by FLSA) divided by the total number

of hours worked by the employee during a single workweek. When an employee is paid an hourly

rate, the hourly rate is the employee’s regular rate of pay.

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For example, if an employer pays an employee $10 per hour and the employee works 40

hours during a week, earning $400, the employee’s regular rate of pay is $10 per hour. Assuming

the employee earning $10 per hour works 45 hours during a single workweek, for each hour in

excess of 40 hours worked, the employee is entitled to compensation at a rate of time and one-half

their regular pay rate. Therefore, if a nonexempt employee whose rate of time is $10 per hour works

five overtime hours during a workweek (45 hours total), he or she will be compensated for five

additional hours at a rate of $15 per hour, or time and one-half the regular pay rate of $10 per hour.

PIECE-MEAL WORK AND BY THE SQUARE

Piece-meal work is work for which an employer agrees to pay a certain sum based on the

completion of a certain task, production of a certain item or repair of a particular item. The purpose

of paying employees a piece-meal rate is to compensate those employees for their productive and

nonproductive time. Many roofing contracting companies that perform shingle installation pay their

employees a mutually agreed upon piece-meal rate, such as a specified dollar amount per square.

To determine the regular rate for employees paid by the square, the total wages earned by the

employee for the workweek is divided by the total number of hours worked during that week,

including productive and nonproductive hours. For each hour worked over 40 hours in a week, the

piece-meal worker must be compensated at the rate of time and one-half the regular rate of pay for

that week.

For example, Roofs-4-U has been contracted to install a roof system on an elementary school.

Roofs-4-U has agreed to pay its employee, Johnny Smith, $10 for each roofing square he installs.

During a workweek, Johnny installs 800 roofing squares and earns $8,000. It took Johnny 60 hours

to install the 800 roofing squares. To calculate Johnny’s regular rate of pay, his total compensation

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for the week ($8,000) is divided by the total number of hours he worked (60), which gives him a

regular rate of $133.33 per hour. Now, to determine how much additional compensation Johnny is

owed, his employer must take Johnny’s regular rate of $133.33 per hour and divide it in half

($66.67). The employer then must multiply the half-rate ($66.67) by the total number of hours

Johnny worked in excess of 40 hours (20 additional hours in this example) to determine Johnny’s

additional compensation: $66.67 x 20 = $1,333.40 Now, add the additional compensation

($1,333.40) to the regular pay for the week ($8,000) for a total of $9,333.40 for the workweek.

Alternatively, FLSA allows an employee paid on a piece-meal basis, such as being paid by the

square, to reach an agreement with the employer in advance that he or she will be paid at a rate of

no less than time and one-half the regular pay rate for each piece produced during overtime hours.

The rate must comply with FLSA minimum wage requirements, if applicable. In cases when such

an agreement is made, the employer need not provide further overtime compensation. Such

agreements may only be made if the piece rate is a bona fide rate, meaning it is the rate actually

paid for work performed during regular (not overtime) hours and is above the minimum wage; the

hours for which overtime compensation is being claimed are in excess of 40 hours for the

workweek; and the compensation paid for the overtime hours is at least equal to time and one-half

the regular pay rate applicable to minimum wage standards (depending on whether FLSA

provisions are applicable).

For example, Damon Jones is employed to install shingles for Roofers Plus at a piece rate of

$100 for every 10 feet of shingling laid and has agreed in advance to paid $150 for every 10 feet of

shingling laid during hours worked in excess of 40 hours during a single workweek. Damon lays

800 feet of shingling during his first 40 hours that week, earning $8,000 ($100 x 800/10). He then

works an additional 10 hours that week, laying an additional 100 feet of shingling. Damon now is

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entitled to $1,500 for his overtime work ($150 x 100/10), for a total of $9,500 for the workweek.

This is an acceptable overtime arrangement because the rate of compensation is a bona fide piece

rate; the overtime compensation is for time in excess of 40 hours for the workweek; and the rate of

pay is at least equal to the applicable FLSA minimum wage standard.

SALARY

Some roofing contractors may choose to pay their nonexempt employees a salary rather than an

hourly wage or by the square. In instances where nonexempt employees are paid a salary, it is

important to know how many hours of work the salary is intended to cover in order to determine the

regular rate of pay.

For example, if the arrangement between the roofing contractor and the nonexempt employee is

for the employee to be paid a weekly salary of $810 for a 45-hour workweek, the regular rate of pay

is determined by dividing the $810 straight-time salary by 45 hours, resulting in a regular rate of

pay of $18 an hour. In this example, the nonexempt employee who works 45 hours is due additional

overtime computed by multiplying the five hours of overtime by one-half the regular rate of pay

($9). In this example, this amounts to an additional $45 ($9 x 5).

If the salary paid to the nonexempt employee covers a period longer than one workweek, such

as a month, it must be reduced to its workweek equivalent. A monthly salary, for example, is

subject to translation to its equivalent weekly wage by multiplying by 12 (the number of months)

and dividing by 52 (the number of weeks). Alternatively, the parities may provide the regular rates

are to be determined by dividing the monthly salary by the number of working days in the month

and then by the number of hours of the normal or regular workday (keep in mind, however, the

regular rate must not be less than the minimum wage).

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Given the increase in the number of wage and hour audits under the Obama administration, be

sure to follow FLSA rules to avoid liability for back wages or unpaid overtime pay.

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