How should overtime pay be handled on payroll?

Handling Overtime Pay on Payroll in Arkansas

In Arkansas, managing overtime pay correctly is essential for payroll compliance and employee satisfaction. Here is practical guidance for handling overtime pay on your payroll system.

Overtime Pay Requirements

As of 2026, Arkansas follows the federal Fair Labor Standards Act (FLSA) rules for overtime. Employees covered by the FLSA must receive overtime pay at a rate of at least 1.5 times their regular hourly wage for all hours worked over 40 in a workweek.

Key Operational Steps

• Track hours accurately: Use reliable timekeeping systems to record all hours worked by employees each week, including start and end times.
• Calculate the regular rate of pay: Determine the employee’s regular hourly rate, including any non-discretionary bonuses or shift differentials, as this affects overtime calculations.
• Apply the 1.5x multiplier: For hours worked beyond 40 in a workweek, multiply the regular hourly rate by 1.5 to compute the overtime pay rate.
• Include overtime in payroll processing: Ensure your payroll software or system can separately identify and process overtime hours and payments for clear recordkeeping and reporting.
• Classify employees correctly: Confirm whether employees are exempt or non-exempt under FLSA, as exempt employees are generally not eligible for overtime pay.

Additional Considerations

• Recordkeeping: Maintain detailed records of hours worked and overtime paid for at least three years, as required by federal and state guidelines.
• Payroll taxes: Calculate and withhold appropriate federal and state payroll taxes on both regular and overtime wages.
• Compliance monitoring: Regularly review payroll processes to ensure adherence to overtime laws and avoid penalties.
• Automation: Consider payroll automation tools to reduce errors and streamline overtime calculations and tax withholdings.