With the U.S. unemployment rate at record lows, there is downward pressure on the labor market and overtime hours are increasing. According to the Bureau of Labor Statistics, the average U.S. worker logged 3.5 hours per week in overtime in late 2018. It is all the more important to know what you can and can’t do with regard to paying employee overtime.
Here are a few do's and don’ts to keep the smart employer out of hot water and to avoid potential fines.
Comp time or compensatory time is often offered in place of overtime. It is assumed that instead of the employer paying for the extra hours the employee worked, the employee may be able to take an equal amount of time off during normal working hours.
The private sector, however, would be wrong in this assumption. “Comp time” is not allowed in the private sector unless it is taken in the same work week. It’s only allowed in the public sector and under specific conditions
Do rest breaks count toward hours worked when calculating overtime? Simply put, yes. The Department of Labor (DOL) says rest breaks are considered 20 minutes or less away from work, and must be included in compensated hours when calculating overtime. Meal time (30 minutes or more) is not included in calculating overtime hours.
It would seem logical that a salaried employee wouldn’t, by definition, be eligible for overtime. The criteria for “exempt” status is very specific. If the employee is salaried, but does not meet the specific criteria of exemption, he or she may indeed be eligible for overtime and should be required to track all hours worked.
If a non-exempt employee has worked overtime, he or she must be paid overtime, regardless of whether the overtime was pre-authorized. Even if an employer has a policy that overtime must be pre-authorized, any overtime worked must be paid an overtime premium.
The employer may take disciplinary action for the unauthorized overtime, but again, the time must be paid accordingly.
RELATED: Exempt vs Non-Exempt - What's the Difference? >>
Travel that keeps an employee away from home overnight, when it takes place during the employee’s regular work hours, can be considered hours worked in the calculation of overtime. For example, if an employee normally works 8:00 a.m. to 5:00 p.m., Monday through Friday, and is traveling from 1:00 to 3:00 p.m. on a Sunday – even though it’s not a normal work day – should be factored into overtime pay.
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Under the Fair Standards and Labor Act (FLSA), a single workweek must be considered when calculating overtime. If an employee normally works 40 hours per week, and works 30 hours then 50 hours in consecutive weeks, he must be paid overtime for the second week. The two weeks cannot be combined to avoid paying overtime.
Wage and hour compliance can be complex—but mistakes aren’t just costly, they’re risky. At Axcet HR Solutions, our certified PEO payroll services help small and mid-sized businesses navigate FLSA regulations, avoid overtime missteps and ensure accurate, compliant payroll every time.
Whether you need help auditing your current practices or are ready to offload payroll entirely, Axcet provides trusted, expert support tailored to your business.
Let’s simplify compliance and protect your bottom line. Talk to Axcet about payroll support »
Written by
Herman McDaniel is a Payroll Administrator at Axcet HR Solutions, where he partners closely with clients to ensure payroll is processed accurately, efficiently, and in compliance with ever-changing regulations. With more than 19 years of experience in this role, Herman brings deep expertise and a steady, reliable presence to the businesses he supports.
Herman serves as the dedicated payroll contact for his clients, managing the full payroll process from data review and verification to posting and delivery. He works directly with both employers and employees to answer questions, resolve issues related to payroll taxes, deductions, and compliance, and ensure every detail is handled with precision.
In addition to processing payroll, Herman plays a key role in onboarding new clients, conducting payroll training, and supporting ongoing client relationships through regular communication and proactive service. He also assists with benefits administration, paid time off tracking, and system updates—helping ensure payroll and HR data remain accurate and aligned across platforms.
Known for his attention to detail and commitment to client service, Herman focuses on creating consistent, dependable payroll processes while identifying opportunities to improve efficiency and accuracy. His long tenure gives him a unique understanding of client needs and the ability to anticipate challenges before they arise. Through his writing, Herman shares practical insights on payroll processes, compliance considerations, and best practices—helping employers feel confident in one of the most critical functions of their business.
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