Compensating your employees properly isn't only your moral obligation - as an employer, you have to comply with labor rules and regulations.
If you're running a business in Texas, you have to be aware of and familiar with both federal and state regulations. These laws are set to protect employees' rights and ensure that their work environment is safe and fair.
This refers to Texas overtime laws, too, as violating them could lead to costly penalties and legal disputes, not to mention the loss of reputation and a drop in productivity.
To help you prevent all these unpleasant scenarios, we've put together this guide in which you can find all the answers regarding overtime laws in Texas.
Since we're discussing laws and regulations, it's essential to prevent misunderstandings and define some legal terms related to Texas overtime laws.
A workday is defined as the period when an employee starts performing their principal activity or activities and the time on that same day when they stop performing that activity or activities.
When we're talking about a workday in terms of labor laws, we're talking about eight hours a day during which an employee works.
According to the U.S. Department of Labor, a workweek is defined as seven consecutive 24-hour periods. In other words, it's a fixed and regularly recurring period of 168 hours.
It's worth mentioning that a workweek doesn't have to coincide with a calendar week.
A workweek can begin on any day of the week.
It's the regular amount an employee makes for an hour of work.
Straight time is defined as the number of hours an employee works up to 40 hours for which they're paid their regular hourly rate.
A non-exempt employee is entitled to the federal minimum wage and overtime pay if they work more than 40 hours a week.
According to the Fair Labor Standards Act (FLSA), a law that regulates minimum wage, overtime pay, child labor, and recordkeeping in Texas, employers are required to compensate non-exempt employees in case they work:
This law also stipulates that every overtime hour should be paid no less than 1.5 times employees' regular pay rate.
Let's say your employee's regular rate is $12.50 per hour, and they worked one hour of overtime.
The formula is: $12.50 X 1.5 = $18.75
So, for that hour, you'd have to pay them at least $18.75. However, this is the minimum your employees are entitled to, and you can offer them more than one and a half times their regular hourly rate.
Unlike some other states that limit how many hours an employee can work in a single day to be paid overtime, Texas doesn't impose any such limit.
Given that the overtime pay in Texas is 1.5 times an employee's regular hourly rate, while the minimum wage in Texas is $7.25 per hour, the minimum overtime wage in this state is $10.88 per hour.
Weekends and holidays can be confusing when it comes to overtime.
Employers in Texas aren't required to observe any holidays or pay their employees additional wages for working during the weekends or holidays.
However, if an employee's workweek falls on weekends or holidays, and they work overtime, then make sure to compensate them adequately and give them their overtime pay.
That being said, many employers decide to incentivize their employees by paying them more than the minimum required wages for working on the weekends or holidays.
It's a common misconception that only hourly employees are eligible for overtime wages.
According to federal and Texas overtime laws, salaried employees should get overtime pay for every working hour exceeding their regular 40-hour workweek.
Public employers in Texas can give non-exempt employees paid time off, also known as compensatory time, instead of overtime pay.
It's important to emphasize that private-sector employers aren't allowed to do so, meaning non-exempt employees have to be paid in cash for their overtime hours. So, in a nutshell, if you're a small business owner and you try to give an employee comp time instead of overtime wages, you'll be violating Texas overtime laws.
On the other hand, the FLSA allows private-sector employees to offer exempt employees comp time, but whether they will do so is left at their sole discretion.
Some employees would like to get paid time off in exchange for their overtime pay. However, to avoid potential lawsuits and hefty penalties, make sure to stay compliant with Texas overtime laws and compensate non-exempt employees in cash when they work overtime.
There are several criteria based on which you can determine whether your employees are entitled to overtime pay.
The FLSA divides employees into two categories - exempt and non-exempt.
Exempt employees aren't entitled to overtime wages. To fall in this category, they have to earn more than $684 a week or $35,568 annually and perform one of the following duties that fit into the FLSA overtime exemptions.
Texas overtime laws don't protect employees whose jobs/positions are listed below:
Executive employees are defined as those who manage two or more full-time employees or a similar equivalent. So, if someone is responsible for managing one full-time and two half-time employees, their job can be classified as an executive position. In addition to that, executive employees shouldn't spend more than 20% of their time performing other activities - or no more than 40% in retail - and their job has to be salaried.
The responsibility of administrative employees is to provide non-manual office work such as dealing with business operations or management policies. Administrative employees shouldn't spend more than 20% of their time or 40% in a retail work environment performing other activities. Finally, this position has to be salaried.
For an employee to be considered a professional and fall within this category, they should have expert knowledge and extensive training in their field. Some examples of professional workers include artists, certified teachers, or skilled IT professionals. In this case, employees shouldn't spend more than 20% of their time on other activities, while the position has to be salaried.
This position refers to salespeople who make sales and work outside of their employer's workplace. Their salary is usually commission-based, but they can't spend more than 20% of their time on activities other than sales to fall under this category.
Employees in Texas who meet these criteria are exempt from overtime pay, which means they're expected to complete their tasks regardless of how much time they need for that. So, even if they work more than 40 hours a week, they won't get overtime pay.
Texas overtime laws are far from straightforward, meaning that there are some additional considerations you should be aware of.
For example, an exempt employee can still be eligible for overtime pay in one of the following situations:
It's worth mentioning that according to the FLSA, nurses in Texas can't be forced to work mandatory overtime hours in hospitals unless a state of emergency has been declared. In other words, under normal circumstances, nurses can work overtime if they want to, but they can decline the request.
Finally, non-exempt employees in Texas aren't salaried - they're hourly workers entitled to at least a minimum federal wage.
Be careful when you categorize your employees. If you treat non-exempt employees as exempt and fail to compensate them adequately for their overtime work, you are practically violating Texas overtime laws.
Regardless of these categorizations, it's essential to understand that even if you hire independent contractors, temporary workers, or commissioned employees, they're also entitled to overtime pay.
Texas overtime laws also stipulate that employees should be paid for the time they spend putting on protective gear or uniforms but only if that's vital for performing their principal activities.
In other words, if an employee works in a chemical plant and can't perform their duties without protective gear, then putting it on before their shift starts and taking it off after they clock out is considered an integral part of their principal activities. Therefore, this time should be paid.
However, this regulation doesn't apply to putting on a hard helmet, boots, or earplugs. This kind of gear isn't integral to performing principal activities, meaning that this doesn't constitute working hours.
Neither Texas nor federal labor laws require employers to provide meal or rest breaks. Still, many employers voluntarily offer breaks to their employers since they recognize the importance of having some time off during the workday and understand the positive impact on their employees' productivity and health.
We've already concluded that Texas overtime laws can be complex, which can complicate things when calculating overtime pay.
To help you calculate overtime correctly and avoid potential legal issues, we discussed several examples based on different employee classifications.
In this case, we'll use the following formula:
Hourly rate x 40 hours = regular pay
Hourly rate x 1.5 = overtime rate
Overtime rate x overtime hours = overtime pay
Regular pay + overtime pay = total weekly pay
If an employee worked 45 hours in a single week, and their regular rate is $13, then according to this formula, you should calculate their weekly pay like this:
$13 x 40 = $520 - regular pay
$13 x 1.5 = $19.5 - overtime rate
$19.5 x 5 = $97.5 - overtime pay
$520 + 97.5 = $617.5 - total weekly pay
Calculating their overtime pay isn't a complex task when you have one or two employees. But as your business grows and expands, it will be practically impossible to track your employees' time and calculate their pay accurately.
That's why Timeero can be a perfect solution because it allows you to streamline the time-tracking process for the entire organization and make sure that your employees don't forget to clock in or out. Besides helping you stay in the know when it comes to overtime, Timeero also automates the payroll process by integrating with popular payroll and accounting apps.
When calculating overtime pay for salaried employees, the first step is determining their regular rate. This is done by dividing the employee's weekly salary by the number of hours worked that week. So, the formula is:
Weekly pay ÷ 40 = regular rate
After that, the math is pretty much the same as that's the case with hourly employees.
For example, here's how you would calculate the regular rate if an employee is paid $600 for a 40-hour week and they worked 50 hours in a single week:
$600 ÷ 40 = $15 - regular rate
$15 x 1.5 = $22.5 - overtime rate
$22.5 x 10 = 225 - overtime pay
$600 + $225 = $825 - total weekly pay.
If you're a business owner in Texas, it's crucial to stay up to date with the latest laws and regulations regarding overtime. Understanding when an employee is entitled to overtime pay will help you keep your staff happy, productive, and motivated and prevent expensive lawsuits.
However, to do that, you need to make sure your employees' clock-in and clock-out times are correct. Using a robust time-tracking tool will facilitate the reporting and help you hold your employees accountable.
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