Employer Laws About Hourly Employees
The Fair Labor Standards Act federally protects hourly workers. This federal law outlines the requirements for paying hourly workers, including a minimum wage rate and regulations pertaining to overtime pay. Each state is also free to amend the act, which includes raising the minimum hourly rate and expanding the requirements for overtime pay.
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Minimum Wage Rates
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You legally must pay an employee at least the federal minimum wage rate or the state minimum wage rate where your business is located -- whichever is higher. As of the date of publication, the federal minimum wage rate is $7.25 per hour. An exception to this rule occurs when an employee receives at least $30 per week in customer gratuities. You may claim a tip credit towards the employee's minimum wage based on the employee's gratuities. Some states, including California, do not allow you to claim this tip credit. Check with your state's department of labor before claiming a tip credit.
Overtime Pay Requirements
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The Fair Labor Standards Act requires you to pay an employee an overtime pay rate for every hour over 40 worked in a standard seven-day week. This rate is 150 percent of the employee's base hourly rate. For example, an employee earning $10 per hour earns $15 per hour during overtime hours. It is illegal for you to withhold overtime hours owed to an employee. Failure to pay wages owed to an employee could result in fines and a civil lawsuit for lost wages and punitive damages.
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Youth/Training Wages
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Federal law allows you to pay a worker who is under 20 years old a youth minimum wage above $4.25 per hour. This wage rate may only remain in place for the first 90 days of employment. After this time, the youth employee's minimum wage rate is subject to all normal federal and state requirements. You can also pay a lower minimum wage to a student-learner or worker whose production capacity is diminished due to a physical or mental disability. The 90-day training period does not apply to a worker in either of these categories.
Record Keeping
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As an employer you are responsible for keeping information records for your hourly workers under the Fair Labor Standards Act. These records include social security numbers, full names of employees, date of birth if younger than 19, gender, occupation, hours worked each week and regular hourly rates. You must also keep full records detailing each worker's earnings for each week, including any overtime hours. You must disburse an IRS Form W-2 to each employee for federal tax purposes.
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