Minimum Wage and Overtime Pay in the US: A 5-Minute Guide

Minimum Wage and Overtime Pay in the US: A 5-Minute Guide

Checking where your company stands when it comes to overtime and minimum wage can ensure employees are kept happy and your business doesn't fall foul of the law.

Knowing where you stand in terms of minimum wage and overtime pay can ensure all staff are being paid correctly and in-line with the law. This is why it is important to understand how much workers are entitled to be paid and when this amount can change.

Basic minimum wage and standards of overtime pay are set by the Fair Labor Standards Act (FLSA), which is enforced by the Department of Labor's Wage and Hour Division. Although changes to both of these pay types were announced by the Obama Administration in 2016, these alterations were blocked, meaning wage rates have remained the same since 2009.

As such, the former regulations still stand, meaning you should check where your company stands and what extra overtime and wages you may need to provide to employees. Here is a quick guide to minimum wages and overtime in the US:

Minimum wage

The basic federal minimum wage currently stands at $7.25 per hour for workers who are covered by the FLSA. However, many states also have their own minimum wage laws, which can differ from those outlined in the FLSA. In this case, you must abide by both sets of regulations, which can mean you need to pay a higher rate if this is dictated by the state you are operating in. To ensure you are paying the correct minimum wage, you can check the regulations of each state.

Only those covered by the FLSA are entitled to the government-set minimum wage, which accounts for over 130 million workers in the US. This means that they are protected by the FLSA and can seek for enforcement of the rules by the Department of Labor if they are being underpaid. There are two types of coverage that an employee can fall under, enterprise coverage and individual coverage.

Enterprise coverage

This form of cover protects those who are employed by certain enterprises that are covered by the FLSA. This means that the business has to have a minimum of two employees who do annual business or have sales volume that reach at least $500,000 a year.

Alternatively, the company has to have two or more employees and be providing medical care for schools, government agencies, residents or pre-schools. This also covers hospitals as well as private healthcare providers.

Individual coverage

If workers do not fall under enterprise coverage, they could still fall under individual coverage, ensuring they have the same minimum wage rights as dictated in the FLSA. Individual coverage means employees are protected if their work means they are regularly involved with interstate commerce - commerce between different states.

Employees who are covered in this way are those who are involved in the manufacture of products for commerce, which can include the creation of goods in a factory or a secretary writing emails and letters. People who regularly make calls to those in other states, have to travel to other states as part of their role and those who perform janitorial roles in buildings that produce items for out-of-state shipment are also eligible to individual cover.

Usually, those in domestic roles - such as housekeepers - are also covered under FLSA as per individual coverage.

Youth minimum wage

Companies who employ those under the age of 20 need to adhere to the youth minimum wage, which is also dictated by the FLSA. This is set at $4.25 an hour for the first 90 consecutive calendar days after they are first employed. All youth employees are covered by the FLSA's minimum wage unless state or local law has a rate that is higher than $4.25, in which case you must pay this higher rate from the start of employment.

Otherwise, after this 90-day period has elapsed, no matter how much or little the employee has worked during this time, they are eligible to the higher rate of minimum wage. If someone turns 20 during this 90-day period, they must be paid the higher wage rate from their birthday.

Overtime

Overtime is also covered by the FLSA and is payable to those who work over 40 hours a week. In this instance, employees must be paid a premium for the extra work or at least one and a half times their standard hourly rate. This doesn't usually count for weekends, public holidays or regular days off unless an employee is working their overtime hours on these days, meaning they have already reached the 40-hour work limit before these days.

When bonus payments are being paid, they need to be included in regular pay rates in order to calculate how much overtime has been worked by employees. Other types of bonus payments, such as extra pay for nights, weekends or public holidays, are not covered under the FLSA and so need to be agreed on by the employer and employee. When a formal agreement is made, this must be paid but cannot be enforced by the FLSA.

However, not all employees are eligible for overtime, with those working on farms, as truck drivers, teachers, domestic live-in service workers and rail employees not being entitled to the higher rate of pay after 40 hours of work a week. Some employees are only partially exempt from overtime pay requirements.

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