How do I properly calculate and pay overtime for a non-exempt employee according to California law?

To properly calculate and pay overtime in California, you must determine the employee's "regular rate of pay" for the workweek, apply the correct overtime multiplier (1.5x or 2x), and include the payment in the employee's next regular paycheck. Here is how to calculate and pay overtime for a non-exempt employee: Step 1: Calculate the "Regular Rate of Pay" The regular rate of pay is not always the employee’s hourly wage. You must include all forms of compensation the employee earned during the workweek (e.g., hourly wages, non-discretionary bonuses, commissions) and divide that total by the number of hours worked. Keep accurate records of all compensation. Step 2: Identify All Overtime Hours You must track the employee’s hours worked on a daily and weekly basis. California law requires overtime pay in three situations: - Time-and-a-half (1.5x the regular rate) for all hours worked over 8 in a single workday. - Time-and-a-half (1.5x the regular rate) for all hours worked over 40 in a single workweek. - Time-and-a-half (1.5x the regular rate) for the first 8 hours worked on the seventh consecutive day of a workweek. Step 3: Identify Double-Time Hours California also requires double-time pay (2x the regular rate) in two situations: - For all hours worked over 12 in a single workday. - For all hours worked over 8 on the seventh consecutive day of a workweek. When calculating, the employee is paid the higher of their daily or weekly overtime; they are not cumulative. Step 4: Pay the Overtime in the Correct Pay Period You must pay all overtime wages on the regular payday for the pay period in which the overtime hours were worked, as required by California Labor Code Section 204. Failure to do so can result in waiting time penalties. Important details and nuances: You must use the workweek, a fixed and regularly recurring period of 168 hours, as the basis for your calculation. You cannot average an employee's hours over two or more workweeks. The regular rate of pay must be calculated for each workweek individually, especially if the employee receives variable compensation like a bonus. Check the applicable Industrial Welfare Commission (IWC) Wage Order for your industry, as some have special rules. Warnings and limitations: Misclassifying an employee as exempt from overtime is a common and costly error. Failing to include non-discretionary bonuses or other compensation in the regular rate calculation will result in underpayment and potential liability. This guidance does not apply to employees with a valid alternative workweek schedule. This is general information and does not constitute legal advice. For complex situations, such as calculating overtime with commissions or for employees with alternative workweek schedules, consult with a qualified California attorney.