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OVERTIME PAY, SALARY AND COMP TIME

 

An employer must pay its employees at least the minimum wage for all hours worked, and time and one-half overtime pay based on an employee's regular rate of pay for all hours worked in excess of 40 in a workweek unless the employee is exempt for some reason.  Currently the minimum wage in North Carolina is $7.25 an hour. The minimum wage and overtime pay are based on the hours worked each workweek and not by the number of hours worked each day or the number of days worked. Each workweek stands on its own regardless of the length of the pay periods.

For purposes of overtime pay, employers of tipped employees must calculate the time and one-half overtime pay based on the employee’s regular rate of pay, which includes both the cash wage paid to the employee and the tip credit counted as wages for the employee (for a more thorough discussion on the tip credit, please see the North Carolina Minimum Wage fact sheet) to equal at least $7.25 per hour, which becomes the regular rate of pay for a tipped employee.  The following is an example of how to calculate the wages owed to a tipped employee during an overtime week:

 

Facts:  Tipped employee is paid at the minimum cash wage rate of $2.13 an hour and earns $15.00 an hour in tips for the week. If employee works 60 hours during the work week, how much should they be paid?

 

Answer (1):  The total compensation (straight time and overtime pay) for employee should be calculated as follows:  $435.00 [60 hours X $7.25 an hour] + $72.60 [20 hours X $3.63 an hour (one-half rate for $7.25)] = $507.60.  However, since employee earned $15 an hour in tips, the employer is allowed to take a credit of $5.12 an hour for the full 60 hours of work (60 hours X $5.12 per hour = $307.20).  As a result, employer should pay employee $200.40 in wages for the workweek ($507.60 - $307.20 = $200.40).  Another way of computing overtime pay shown below will produce the same results:

 

Answer (2):  $290.00 (40 hours X $7.25 per hour) + $217.60 (20 hours X $10.88 per hour) = $507.60 gross wages

$507.60 gross wages – $307.20 (60 hours X $5.12 per hour tip credit) = $200.40 cash wages


NOTE:  For illustrative purposes only, this example calculates the gross wages prior to taxes being withheld.  When calculating wages owed, employers should calculate the net wages after taxes prior to making the adjustment for the tip credit allowed under the Wage and Hour Act.


A private sector employer cannot give comp time to its nonexempt employees instead of paying time and one-half overtime pay based on an employee's regular rate of pay. Merely being paid a salary in itself does not exempt an employee from the minimum wage and/or overtime pay requirements. If an employee is paid a guaranteed salary of at least $455 a workweek and is not paid time and one-half overtime pay for hours worked in excess of 40 in a workweek, then the employer must determine to if the employee is a salaried-exempt employee. To make this determination, please review Code of Federal Regulation (CFR) 541 at
http://www.dol.gov/dol/cfr/Title_29/Chapter_V.htm, which covers exemptions for executive (supervisors/managers), administrative, professional and outside sales employees.  NCDOL has adopted CFR 541.

NOTE: Only governmental (public) agencies are allowed to give comp time based on one and one-half times the number of hours worked in excess of 40 in a workweek under certain conditions to its employees pursuant to the federal Fair Labor Standards Act (FLSA). Please note that this has to be "time and one-half" comp time to nonexempt employees. Each workweek stands on its own regardless of the length of the pay periods. There are certain requirements that governmental employers must meet to give "time and one-half" comp time to its nonexempt employees. A governmental employer may still elect to actually pay time and one-half overtime pay based on an employee's regular rate of pay for all hours worked in excess of 40 in a workweek to employees who are not otherwise exempt for some reason.

To review CFR 553, Application of the FLSA to Employees of State and Local Government, visit the Web site at http://www.dol.gov/whd/overtime_pay.htm (Note: The federal wage and hour rules on overtime pay for emergency type employees of public employers are also found in CFR 553. Refer to Subpart C - Fire Protection and Law Enforcement Employees of Public Agencies found in CFR 553.200 through CFR 553.233).

For further questions involving the minimum wage and/or overtime pay including workweeks, or if you cannot determine if an employee is exempt or nonexempt, use the following guidance:

 

1) If the private employer's gross sales or receipts for a year are equal to or greater than $500,000; if it is a part of a chain operation with three or more units or there are 30 or more employees; if the employer is a hospital, school, nursing home, group home for the mentally or physically disabled, or day care center; or the employer is a domestic, agricultural or governmental employer; contact the U.S. Department of Labor Wage and Hour Division office in either Charlotte at (704) 749-3360, Raleigh at (919) 790-2741, or visit the Web site at http://www.dol.gov.

 

2) If the private employer's gross sales or receipts for a year are less than $500,000, if you do not know the gross sales, or the employer is a private nonprofit organization, call NCDOL at (919) 807-2796 in Raleigh or toll-free in North Carolina at 1-800-NC-LABOR (1-800-625-2267). Our call center is open from 8 a.m. to 5 p.m., Monday through Friday.


NCDOL can assist citizens with concerns about wage payment, which has to do with promised wages such as hourly pay at more than the minimum wage, a promised salary or shift differential pay, and promised wage benefits such as vacation pay, sick leave, severance pay, jury duty pay and holiday pay. Only governmental employers are exempt from the wage payment provisions.

N.C. Department of Labor
Wage and Hour Bureau
1101
Mail Service Center
Raleigh, NC 27699-1101
(919) 807-2796 or (toll-free NC only) 1-800-NC-LABOR
Web site: http://www.nclabor.com

 


 

 

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