How New Alabama Overtime Pay Exemption Affects Employer Reporting

Beginning with the January 2024 filing of withholding tax, employers must report with the employer’s Alabama monthly (Form A-6) or quarterly (Form A-1) withholding tax return:

1. The total aggregate amount of exempt overtime wages for the period.

2. The total number of employees who received the exempt overtime wages during the period.

3. The total amount of exempt overtime wages (the actual overtime wages exempt from Alabama taxable income whether paid at the regular, time and a half, or other hourly wage).

4. The exempt overtime wages (included in Box 14 of the employee’s annual Form W-2 should correspond to the total reported with the monthly/quarterly filings throughout the year).

What are exempt overtime wages?

Paid time off (PTO) and holiday pay are not considered when calculating hours worked. Exclude PTO and holiday when calculating overtime pay.

For example, an employee is paid for 48 hours in a week, but 16 are for a holiday. The actual number of hours that the employee worked that week is 32 hours. There would be no overtime pay to record for that week because it is solely based on hours worked in excess of 40 hours in a work week.

What are hours worked?

Hours worked includes all the time during which an employee is required to be on the employer’s premises, on duty, or at a prescribed workplace.

For example, an employee is paid 60 hours in a work week. Of the 60 hours, 8 of the hours are for PTO. Only the 52 hours worked will count towards calculating hours worked in excess of 40. This means only 12 hours will be considered exempt under the overtime exemption.

If you have any questions or need any assistance on your withholding tax returns, let us know.

Sources:

https://www.revenue.alabama.gov/individual-corporate/overtime-exemption/