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 onehalf 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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