Economics · Employment · Finance · Philosophy · Uncategorized · Work

How to Earn More Money By Asking For a Lower Wage (Bypassing Overtime Pay)

(This post neither argues for nor argues against mandatory increased wages for overtime. This post assumes that calculating overtime pay is as simple as using the (40 * wage) + (Hours over 40 * 1.5 * wage) = Weekly pay equation. The workaround should still be able to work even if you are not able to increase the number of days you work so long as you increase your hours. )

The Fair Labor Standards Act, passed in 1938, requires most American employers to pay their employees “time-and-a-half” for every hour worked passed 40 hours in week. Simply put, if you work 40 hours or less, you get paid your normal wage for each hour. If you work more than 40 hours, you get paid (40 * wage) + (Hours over 40 * 1.5 * wage).

Overtime pay sometimes serves as an incentive for workers to work extra hours. However, sometimes it serves as an incentive for employers not to employ workers past 40 hours a week, even if an employee wants to work extra hours. This blog post serves as a workaround to the mandatory “time-and-a-half” overtime pay. Here is a story that illustrates this method of bypassing overtime pay.

Suppose Alice works full time for $30.00 an hour. She works 8 hour shifts for 5 days a week. Before taxes, she earns $1,200.00. She would like to take home a bit more per week. She realizes that if she were to work Saturday and Sunday in addition to her normal workdays, she could be taking home $1,680.

She then remembers that her employer Bob would have to pay her overtime to work on Saturday and Sunday. She suspects that Bob won’t let her due to having to pay her overtime.She asks anyway. Bob, as expected, does not want her to work over 40 hours due to not wanting to pay overtime. Alice is disappointed, but she has an idea.

Alice realizes that (40 * wage) + (Hours over 40 * 1.5 * wage) = Weekly pay. She also knows that her boss is willing to pay her the $1,680 for 56 hours that she would receive if overtime pay didn’t apply, and she knows that working Saturday and Sunday would be 16 hours over 40 hours.Using this information, she can simplify the equation to:

64 * wage = 1200

64 is there because working 56 hours with overtime is equivalent to working 64 hours without overtime pay. Using basic algebra, Alice figures out that here wage needs to be $26.25. Going from $30.00 to $26.25 sounds like a massive drawback, but remember that if she works overtime like she wants to, then she will have effectively worked 56 hours for $30.00 an hour.

 

So, the general equation for determining what your pay decrease should be to work overtime without your employer having to pay overtime is:

New Wage == (Total hours worked per week * Current wage) / ((hours worked overtime * 1.5) + 40)

To put this equation into context, we will use Alice’s example.

Alice’s New Wage == (56 * 30) / ((16 * 1.5) + 40) == 1680 / 64 == 26.25

To prove that this will work, let’s plug Alice’s result into the first equation that calculates typical overtime pay.

Weekly pay == (40 * 26.25) + (16 * 1.5 * 26.25) == 1050 + (16 * 39.375) == 1680

 

As you can see, by asking for a “pay decrease”, Alice (and you!) can work overtime while the employer *effectively* pays your current wage for each hour. Remember this little trick for when you want to work extra hours and the only thing stopping you is the requirement that you be paid 1.5 * your wage for overtime.

Follow me on Twitter @realKeeGeeK

 

 

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