Overview and Background
The federal Fair Labor Standards Act (FLSA) requires employers to pay workers one-and-a-half times the employee's regular rate of pay for all hours worked over 40 hours per week.
It is important to calculate overtime pay properly, particularly for your employees who receive tips: Incorrect calculations could mean some pretty hefty bills and fines if you ever go through a wage-and-hour audit. Here's some help on how to calculate overtime for your tipped employees. Aloha POS has the ability to calculate overtime Daily, Extended Daily, or Weekly. The overtime rate can also be calculated based on an average shift rate based on multiple Job codes or per a specific Job code pay rate. Calculating Overtime
Use a single workweek as the standard
Employers must use a single workweek as the standard when calculating an employee's overtime pay. Generally, a workweek is defined as a fixed and regularly recurring period of 168 hours-seven consecutive 24-hour periods. A workweek may begin on any day and at any hour of that day.
Employers may not average an employee's hours over two or more weeks. For example, if an employee works 30 hours one week and 50 hours the next, no overtime is due in that first week. However, overtime must be paid for 10 hours in the second week, regardless of how often the employee is paid (i.e., daily, weekly, biweekly, monthly).
The FLSA does not generally require that an employee receive overtime compensation for working more than eight hours per day, or working on weekends or holidays unless 40 hours per week is exceeded. Some states require overtime pay for exceeding daily maximum limits (e.g., eight hours) even if the total weekly hours the employee worked was 40 hours or less. Contact your state restaurant association for details.
After defining your workweek, the next step is to determine an employee's regular rate of pay.
Base it on the employee's regular rate of pay
Since overtime compensation is based on an employee's regular rate of pay, restaurant operators must compute what exactly is each worker's hourly pay. Regular rate of pay includes all remuneration for employment, except certain payments like:
reimbursement of expenses incurred on the employee's behalf, e.g., for uniform purchase
discretionary bonuses where the exact amount and time bonus given is not discussed in advance payments of special gifts on certain occasions, e.g., turkeys at Thanksgiving
payments for those occasional periods when no work is performed because of a vacation, holiday or illness. For tipped employees, restaurateurs should keep in mind that the law requires that an employee's regular rate of pay can never be less than the applicable minimum-wage rate. For example, an employer pays his or her tipped employees the current federal minimum wage of $5.15 per hour, which is broken down into a cash wage of $2.13 per hour and a tip credit of $3.02 per hour. The restaurant operator should calculate tipped employees' overtime rate NOT by multiplying the cash wage of $2.13 by 1.5 but by multiplying $5.15 (employee's regular rate of pay) by 1.5 and then subtracting the hourly tip credit of $3.02.
Important Note: The following information is intended only to inform and not to be a substitute for the reader's seeking legal or accounting counsel. Any information given here should be examined by the reader's attorneys or accountants as to such information's applicability. |
