Overtime can be confusing, but ignoring the rules isn’t an option. Not understanding overtime laws can lead to costly mistakes and some pretty unhappy employees. Here’s what employers should know to keep things smooth and compliant.

First, who qualifies for overtime? Not every employee does, which is where some confusion comes in. Generally, employees paid hourly and working over 40 hours a week must be paid overtime, typically at 1.5 times their regular rate. However, some salaried workers qualify too, depending on their duties and earnings. Make sure to classify employees correctly as either “exempt” or “non-exempt”—getting it wrong can lead to fines or even lawsuits.

Another key point? Overtime laws vary by state. While federal law provides the baseline, some states have stricter requirements, like paying overtime after 8 hours in a single day rather than 40 hours in a week. Knowing your state’s specific rules is essential.

Finally, record-keeping matters. Track hours accurately and be transparent with employees about how their overtime is calculated. With the right approach, you can keep your business compliant and your team satisfied—because when overtime is managed right, everyone wins.