how to calculate overtime pay

One goal of resource management is to make employees’ workload transparent. From here, you can check the performance and workload of every employee with a given timeline to deliver projects without overloading them. Furthermore, it will help minimize underutilization, and maximize productivity. To address your company’s need for overtime, it’s important to get a proper resource management process in place. It will help business owners or project managers plan and control overtime while meeting deadlines. TOIL needs careful management and the ground rules should be set out clearly.

The workweek is considered any 168 hours in seven consecutive 24-hour periods that can begin on any day and at any time. It’s not necessary that all employees of a company have the same workweek, but once a workweek is established by the employer, it’s best to remain consistent to avoid paying overtime. The FLSA requires employers to keep records of payments to employees, including overtime pay. In the case of an audit, an employer must be able to prove payment of overtime that meets FLSA requirements.

Overtime pay calculation for nonexempt employees earning a salary

However, the first step is the same for all salaried employees一determine the regular rate. To do this, take the employee’s weekly salary and divide it by the number of hours the salary is meant to compensate. For example, an employee who earns $400 for a 40-hour workweek has a regular rate of $10/hour ($400/40 hours).

how to calculate overtime pay

Or, in other words – overtime refers to any hours that someone worked exceeding their typically scheduled work time. Moreover, the term overtime is often used to name the payment received for extra working hours. The most common exemptions include executive, administrative, professional, outside sales or computer-related jobs. Standby hours are not counted towards hours in excess of 8 since they are paid at an annual premium pay rate. In addition to FLSA requirements, each state has its own requirements for paying employees overtime. In Texas, for example, the Texas Workforce Commission offers guidelines and a calculator on its website.

Are You Being Denied Proper Overtime Pay?

To be considered exempt from overtime pay, an employee must meet all the criteria for an exempt employee. If your employee does not meet all the criteria to be exempt, you must pay them for extra hours worked even if you give them a salary. Per the FLSA, overtime pay may not be waived because an employer states no overtime is allowed or prior authorization of overtime is needed. Employees that are eligible for overtime pay and work more than 40 hours per week are still entitled to overtime pay compensation.

how to calculate overtime pay

An advanced scheduling platform like Sling makes it easy to do this. If you allow them to clock in fifteen minutes early — and you pay them for that time — they’ll amass an extra hour and fifteen minutes over the course of a five-day workweek. So if one employee makes $15 per hour, their overtime rate is $22.50 per hour ($15 x 1.5). If another employee makes $25 per hour, their overtime rate is $37.50 per hour ($25 x 1.5). That’s not to say that you can’t process your own payroll and calculate your own overtime. And for smaller businesses with fewer employees, that might make good business sense.

How to calculate overtime pay for hourly employees

The federal government established this as law in the Fair Labor Standards Act (FLSA) of 1940. Before that, employers could require their employees to work any number of hours at their regular pay rate. Exempt status means that a job doesn’t include overtime payment and/or that the law firm bookkeeping employer can pay less than the minimum wage. Many exempt jobs fall in the first category only, with managerial and executive positions often exempt from overtime. Other exempt jobs are hourly jobs, jobs in transportation and delivery, sales, investments, and computer-related jobs.