The Overtime Pay Equation That Trips Up Small Businesses

Overtime pay sounds straightforward. Work more than 40 hours in a week, and those extra hours get paid at time-and-a-half. Easy, right?

Not so fast.

Overtime is one of the most common payroll errors small businesses make — and it’s one of the fastest ways to get flagged by the Department of Labor. The problem isn’t the concept. The problem is the math.

Let’s break it down.

The Overtime Basics

Under the Fair Labor Standards Act (FLSA), non-exempt employees must receive 1.5x their regular hourly rate for any hours worked over 40 in a workweek.

If someone makes $20/hour and works 45 hours, their paycheck should look like this:

• 40 hours x $20 = $800

• 5 hours x $30 (time-and-a-half) = $150

• Total = $950

Simple enough. But in practice, business owners and managers make three big mistakes.

Mistake #1: Forgetting to Count All Hours

Overtime doesn’t just apply to scheduled hours. It covers all hours worked, including:

• Answering emails after hours

• Clocking in early

• Staying late to finish a task

Even if you didn’t “approve” the extra time, if the employee worked it, you must pay it.

Mistake #2: Using the Wrong Base Rate

Time-and-a-half is based on the regular rate of pay — not just the hourly wage. That means you must include:

• Shift differentials

• Nondiscretionary bonuses

• Commissions

If you pay a $2 shift premium or a $500 performance bonus, those amounts change the overtime rate. Many businesses skip this step, and it adds up fast in back pay when the DOL comes knocking.

Mistake #3: Ignoring State Rules

Some states go beyond federal law. For example, California requires:

• Overtime after 8 hours in a day (not just 40 in a week)

• Double-time after 12 hours in a day

That means a 13-hour day in California isn’t 5 hours of OT — it’s 4 hours of OT + 1 hour of double-time. Get that wrong, and your payroll math falls apart.

Why Overtime Mistakes Are So Costly

The Department of Labor doesn’t just correct the error. They can require you to pay:

• Back wages for unpaid overtime

• Liquidated damages (basically, doubling the payout)

• Civil penalties for willful violations

And once employees notice you’ve been underpaying overtime, expect word to spread fast. That’s how small errors turn into big claims.

The SafeLane Solution

SafeLane is designed to take the guesswork out of overtime math. Here’s how we keep you compliant:

• Automating overtime calculations across federal and state rules

• Including bonuses, commissions, and premiums in the base rate

• Flagging “off the clock” work so it doesn’t slip through the cracks

• Providing audit-ready records if you ever get challenged

With the right system, overtime math becomes a non-issue. You pay what’s owed, employees stay happy, and regulators stay away.

Overtime isn’t optional — and it isn’t negotiable. If your payroll system makes you question whether you’re paying it right, it’s time to put SafeLane to work. Taylored Lane keeps your overtime math compliant, so you can focus on running your business.