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California Compliance Training: Understanding Overtime for HR and Payroll Teams

Bryan Driscoll Avatar


California has unique overtime laws you must understand to ensure you’re calculating and paying employee overtime correctly. Learn more here.

Why it matters: Without proper training, you could run afoul of California overtime laws, leading to costly litigation and fines.

If you’re an HR or payroll professional in California, it’s important to understand the state’s overtime rules. In this post, we’ll provide an overview of California overtime law, and highlight some key things to keep in mind when calculating overtime pay. 

Need more info on California compliance laws? Read more here.

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California Overtime Essentials

In California, employees are entitled to overtime pay for any hours worked over eight in a single workday or 40 in a single workweek. Employers must pay overtime at 1.5 times the employee’s regular rate of pay. If an employee works seven days in a row, they must receive double pay for any hours over eight on the seventh working day. If an employee works over 12 hours in a single workday, they’re also entitled to double pay.

Some employees are exempt from overtime pay, including certain administrative, executive, and professional workers.  If you haven’t classified your employees as exempt or nonexempt yet, you must do that first—overtime rules only apply to nonexempt employees, and to those in the next paragraph.

California employees who are working on commission or piece rate basis are also entitled to overtime pay. Overtime pay for piece rate workers is calculated by taking the total number of pieces produced during the workweek and dividing it by the number of hours worked. The resulting figure is then multiplied by 1.5 to determine the overtime rate.

Calculating California Overtime Pay

Now that we’ve gone over the basics of overtime pay, let’s talk about how to actually calculate it. First, you need to determine the employee’s regular rate of pay. This is usually the employee’s hourly rate, but it may be different if the employee is paid on a salary basis or if they receive commissions or bonuses. 

Once you’ve determined the regular rate of pay, calculating overtime is simply a matter of multiplying that rate by 1.5 for every hour worked over eight in one workday and over 40 in one workweek. It’s important to note that workers may get both daily and weekly overtime in the same paycheck.

For example, let’s say an employee has an hourly rate of $20 and works 43 hours in one workweek. They record hours worked during the week as 8.5 hours on Monday, 10 on Tuesday, 8 on Wednesday, 10 on Thursday, and 9.5 on Friday for a total of 46 hours that week.

We see this employee has worked 46 hours this workweek and they’ve worked over eight hours on three workdays. To determine this employee’s overtime pay rate, we multiply their regular hourly rate ($20) by 1.5 which gives us $30.

So, for each day we multiply the overtime by this new rate. 

 MondayTuesdayWednesdayThursdayFridayTotal Hours
Hours Worked8.5108109.546
Regular Pay Rate$160 (8 * $20)$160 (8 * $20)$160 (8 * $20)$160 (8 * $20)$160 (8 * $20)$800 (40 * $20)
Overtime Pay Rate$15 (0.5 * $30)$60 (2 * $30) $60 (2 * $30)$45 (1.5 * $30)$180 (6 * $30)

Now, let’s review the final column. Totaling the regular pay rate and overtime pay rate, we see the employee should be paid a total of $980 for this workweek. Don’t stop here.

Let’s throw a wrinkle in here and say the employee works two hours on Saturday, too. They’re under eight hours for that day so they won’t get any daily overtime. But they will be entitled to weekly overtime for both hours. Because the employee has already worked 40 regular hours in the workweek, working two hours on Saturday makes for 42 hours and they’re entitled to overtime pay for the two hours on Saturday. This would bring their total overtime pay to $240 (8 * $30) making their pay for the workweek $1040. 

Complicated? We know. That’s why eloomi are working to make compliance training simple, so you have more time to support your teams with the HR tasks that matter.

Common California Payroll Mistakes

If you’re responsible for payroll in California, you know that the rules and regulations surrounding California overtime can be complex. Although you may think you have everything under control, there’s always a chance that you’re making a mistake—and even a minor mistake can have big consequences. To help you avoid trouble, here are four common California payroll mistakes and how to avoid them.

Not Tracking Employee Hours Correctly

Perhaps the most common payroll mistake is failing to track employees’ hours accurately. This can result in serious consequences, such as having to pay back wages or fines from the state labor board. To avoid this mistake, make sure you have a good time tracking system in place and that all employees understand how to use it correctly.

Miscalculating Hourly Rates

Another common mistake is miscalculating hourly rates, which can lead to incorrect overtime calculations. To avoid this, be sure to review the hourly rates for all employees regularly and update them as necessary. You should also make sure that any time-tracking software you’re using is configured correctly so that it captures all relevant information, including correctly identifying daily and weekly overtime hours.

Failing to Pay Employees for All Hours Worked

In addition to tracking hours accurately, you also need to make sure you’re paying employees for all hours worked. This includes any time spent on mandatory training or attending company meetings outside of normal working hours. If you’re unsure whether something should be considered compensable time, err on the side of caution and include it in your calculations. 

Not Keeping Accurate Records

Finally, it’s important to keep accurate records of all hours worked and all compensation paid out. This will not only help you avoid mistakes, but it will also come in handy if you ever need to defend your practices in front of a government agency or court of law. Make sure to keep detailed records of everything related to employee compensation, including time sheets, pay stubs, and any correspondence with employees about their hours or pay rates. 

How California Employers Should Handle Overtime Violations

If you think there has been a violation of California overtime laws, the first step is to sit down with the employee and discuss the situation. It’s possible that there was simply a misunderstanding or that the employee is exempt from overtime pay. If the employee brings the issue to you, discuss it with them right away and work to find a suitable resolution.

If you determine that there has indeed been a violation, the next step is to take corrective action. This may involve retroactively paying the employee for any overtime hours worked, changing their schedule so that they don’t work over eight hours in a day or 40 hours in a week going forward, or putting them on salary if they meet the criteria for being exempt from overtime pay. 

No matter what, don’t ignore any mistakes. Whether an employee addresses the issue with you or you’ve caught a mistake during a routine payroll audit, take action to fix the problem before it becomes a legal issue. Employees in California have a protected right to file a claim against an employer who miscalculates their overtime, even innocently. Working with the employee to fix the issue is the best, most cost-effective way to resolve the issue.

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Your Next Steps to Stay On Top of Overtime

As you can see, there are a lot of things to consider with overtime in California. And, as we mentioned earlier, mistakes can be costly. That’s why it’s so important for your HR and payroll teams to be properly trained on how to handle overtime payments

At eloomi, we offer comprehensive training programs that cover all aspects of US compliance, including California requirements. So if you’re not sure where to start or need help setting up California compliance training, get in touch today.

Bryan Driscoll Avatar

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