May 18, 2023
Businesses in Indiana must ensure that they properly track and payout for overtime, in order to avoid non-compliance and hefty penalties. When it comes to managing Indiana Overtime Laws, businesses must understand due compensation, as well as who is eligible to receive overtime pay.
Under Indiana Overtime Laws, employers must not only manage compliance with overtime requirements under the Fair Labor Standards Act (FLSA), but Indiana Wage and Hour Laws as well.
According to Indiana Labor Laws, and a crucial component in properly processing payroll in Indiana, businesses must ensure they pay out overtime when required.
Generally, Indiana employees are entitled to overtime pay for all hours worked over 40 in a particular work week. Any overtime hours worked are to be compensated at 1.5 times the normal hourly rate of the employee.
Employees in Indiana who are covered under the state or federal overtime requirements are typically entitled to 1.5 times their regular rate of pay for all hours worked over 40.
Here is an example of Indiana Overtime Pay:
40 Regular Rate Hours
X $15 Per Hour Regular Rate
$15 Per Hour Regular rate
+ 1 1/2 Overtime Premium
$22.50 Per Hour Overtime Rate
10 Overtime hours
$600 Regular Rate Time or "Straight Time"
+ 225 Overtime
$825 Total Pay
An employee’s regular rate of pay is their normal hourly wage. Employers who run into an instance where an employee’s rate of pay differs at times should use the employee's average as the regular rate of pay.
Under Indiana Overtime Laws and Indiana Minimum Wage law, the regular rate of pay also includes:
Sums paid as gifts (the amounts of which are not measured by or dependent on hours worked, production, or efficiency)
Payments made for occasional periods when no work is performed due to vacation, holiday, illness, failure of the employer to provide sufficient work or other similar cause
Sums paid in recognition of services performed during a given period if:
Both the fact that payment is to be made and the amount of the payment are determined at the sole discretion of the employer at or near the end of the period and not pursuant to any prior contract, agreement, or promise causing the employee to expect the payments regularly
The payments are made pursuant to a bona fide profit-sharing plan or trust or bona fide thrift or savings plan
The payments are talent fees paid to performers, including announcers, on radio and television programs
Contributions that are irrevocably made by an employer to a trustee or third person pursuant to a bona fide plan for providing old age, retirement, life, accident, or health insurance or similar benefits for employees.
Extra compensation is provided by a premium rate paid for work by the employee on Saturdays, Sundays, holidays, or regular days of rest, or on the sixth or seventh day of the workweek
Extra compensation is provided by a premium rate paid for work by the employee during specific hours of the day (any of these specific hours must also be considered normal overtime hours for that shift)
Extra compensation provided by a premium rate paid to the employee, in pursuance of an applicable employment contract or collective bargaining agreement
Generally, any workers in the state who meet the definition of employee under Indiana Wage and Hour laws are eligible to receive overtime pay.
The definition of an employee means any person employed or permitted to work in the state of Indiana, with the following exceptions:
Workers less than sixteen (16) years of age
Workers engaged in an independently established trade, occupation, profession, or business who, in performing the services in question, is free from control or direction both under a contract of service and in fact.
Workers performing services not in the course of the employing unit's trade or business.
Workers are paid on a commission basis.
Workers employed by their own parent, spouse, or child.
Members of any religious order performing any service for that order, any ordained, commissioned, or licensed minister, priest, rabbi, sexton, or Christian Science reader, and volunteers performing services for any religious or charitable organization.
Workers performing services as student nurses in the employ of a hospital or nurses training school while enrolled and regularly attending classes in a nurses training school chartered or approved under the law
Students performing services in the employ of persons licensed as both funeral directors and embalmers as a part of their requirements for apprenticeship to secure an embalmer's license or a funeral director's license from the state, or during their attendance at any schools required by law for securing an embalmer's or funeral director's license.
Workers who have completed a four (4) year course in a medical school approved by law when employed as interns or resident physicians by any accredited hospital.
Students performing services for any school, college, or university in which they are enrolled and are regularly attending classes.
Workers with physical or mental disabilities performing services for nonprofit organizations organized primarily for the purpose of providing employment for persons with disabilities or for assisting in their therapy and rehabilitation.
Workers employed as insurance producers, insurance solicitors, and outside salesmen, if all their services are performed for remuneration solely by commission.
Workers performing services for any camping, recreational, or guidance facilities operated by a charitable, religious, or educational nonprofit organization.
Workers engaged in agricultural labor (in regard to specific services)
Workers who have not been employed for more than four weeks in any four consecutive three-month periods.
Employees with respect to whom the Interstate Commerce Commission has power to establish qualifications and maximum hours of service under the federal Motor Carrier Act of 1935 (49 U.S.C. 304(3)) or any employee of a carrier subject to IC 8-2.1
Workers engaged in services as a direct seller (in regard to specific services)
In addition to any Indiana workers who don't fall under the definition of employee, the following other occupations are also exempt from overtime:
Motion picture theatre employees
Employees of seasonal amusement or recreational establishments, organized camps, or religious or nonprofit educational conference centers
Employees of air carriers subject to Title II of the federal Railway Labor Act (45 U.S.C. 181 et seq.)
Overtime hours must not be required by the air carrier but rather are arranged through a voluntary agreement between employees to trade or reassign their scheduled work hours.
Workers who are defined as administrative, executive, or professional employees under FLSA, and meet certain other requirements
Executive, administrative, and professional employees are exempt from overtime requirements under Indiana Overtime laws.
In addition to the employee classification standards under FLSA, in order to qualify as exempt from Overtime pay in Indiana under one of these three exemption statuses, the employee must:
Have the authority to employ or discharge other employees
Earn $150 or more a week
Important to note is that outside salesmen do not need to meet the above two requirements.
Executive exempt employees have a primary duty of either managing a business or managing a customarily recognized department or subdivision of a business.
Executive exempt employees must alsoregularly direct the work of at least two or more other full-time employees.
Administrative exempt employees have a primary duty of office or non-manual work that is directly related to the management, or general business operations of either the employer or the employer’s customer, or a primary duty that includes the exercise of discretion and independent judgment in regard to important matters.
Professional exempt employees have a primary duty of work requiring advanced knowledge. This work is defined as predominantly intellectual and requires the consistent exercise of discretion and judgment.
The advanced knowledge must also be in a field of science or learning and must be obtained by a prolonged course of specialized intellectual instruction such as a University.
Alternatively, professional exempt employees may also have a primary duty that requires invention, imagination, originality, or talent in a recognized field of artistic or creative endeavor. Examples include, musicians and engineers.
To learn more about processing payroll in Indiana or tracking and paying out overtime under Indiana overtime requirements, contact an Indiana Payroll Company.
By leveraging solutions such as payroll and timekeeping, employers can quickly and easily track and payout overtime, without having to track the requirements of Indiana Overtime laws. Contact TruPay today to learn how we are already making Overtime management simple for companies across the state and beyond.