Overtime sounds simple… until you start actually running your business.
Holiday weeks, bonuses, remote employees, and mismatched pay periods can turn a “quick payroll run” into a compliance risk you never saw coming.
And these are exactly the issues the Department of Labor focuses on during an audit.
Below are four of the most common overtime mistakes we see every week — all pulled from real conversations with business owners — and how to avoid them.
This one surprises a lot of people.
An owner recently asked us:
“My employee worked 37 hours and also got 8 hours of holiday pay. Does that mean 45 hours?”
No — it doesn’t.
Overtime is based on hours actually worked, not paid hours.
Holiday pay, vacation time, and sick time don’t count toward the 40-hour threshold in weekly overtime states.
Example:
37 hours worked
8 paid holiday hours
= Still 37 hours for overtime purposes
Once you understand this rule, confusing holiday weeks become much easier — and much safer — to handle.
This is one of the biggest overtime errors the DOL looks for.
Here’s a conversation we had last week:
“My employee worked 50 hours and got a bonus. I calculated overtime like normal — is that ok?”
Not quite.
Any extra pay — a bonus, on-call pay, incentives — must be included when calculating the regular rate of pay for overtime.
Example:
$10/hr employee
50 hours worked
$250 bonus
You can’t use $10/hr to calculate overtime anymore.
You must recalculate using the blended rate, which increases the overtime rate.
In this case, the overtime rate jumps to $22.50 instead of $15.
Miss this step, and you’ve created a DOL red flag.
Many business owners assume overtime follows their pay cycle.
It doesn’t — unless your state has specific daily overtime rules.
If your state uses the 40-hour weekly rule, overtime must be calculated on a fixed seven-day workweek, no matter how your pay periods are structured.
Example:
Week 1: 60 hours
Week 2: 20 hours
Pay period: semi-monthly
You still owe 20 hours of overtime from Week 1 — even if that week falls across two different payroll runs.
Semi-monthly payrolls make this especially tricky because workweeks often overlap pay periods. If you don’t look at both runs, you will miss overtime.
And that’s something the DOL doesn’t overlook.
With remote work so common, this rule catches employers off guard:
You must follow the overtime laws of the state where the employee performs the work, not where your company is located.
Some states require overtime after:
40 hours in a week
8 hours in a day
Or both
If you have a team spread across multiple states, you may be juggling multiple sets of overtime rules at once.
If you apply your own state’s rules by mistake, you could be underpaying overtime without realizing it.
These are exactly the issues that stack up during a wage-and-hour audit.
They’re common. They’re easy to overlook. And they’re expensive.
The good news? With the right system and the right guidance, staying compliant isn’t complicated — it’s just a matter of using the right rules every week.
If you want to simplify your payroll, protect your business, and avoid DOL headaches, we can help.
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