Federal law states that overtime applies to any employee who works more than Bookstime 40 hours in any work week as defined within the pay period. Learn to calculate work hours accurately with our guide on time tracking, overtime, breaks, and small business software for seamless payroll… 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.

An Important Change in Overtime Regulations for Exempt Employees

Armed with that information, you can tweak the schedule — who works when — so that each shift is covered without anyone having to work overtime. That prevents absenteeism from getting out of hand and reduces the risk that trial balance you’ll have to ask someone to work overtime to cover someone else’s shift. We’ll discuss these calculations in more detail in the sections below. Sign up to receive more well-researched small business articles and topics in your inbox, personalized for you. Computer duties involve highly skilled work in computer systems analysis, programming, or software engineering. The role requires theoretical and practical application of highly specialized knowledge in computer work.

How to Calculate Overtime Pay?

The following is an example of how to calculate overtime pay for hourly workers with multiple pay rates. Overtime is defined as any additional time your employees work outside of their regular work hours. Any business owner with employees must know how to calculate overtime pay.

Can an employer refuse to pay overtime?

For instance, if an employee’s regular hourly wage is $15, they must receive $22.50 per hour for overtime work. The federal Fair Labor Standards Act (FLSA) requires employers to pay nonexempt employees 1.5 times their „regular rate of pay” for all hours worked over 40 in a workweek. Some states, such as California, require overtime pay in additional circumstances and at different rates. Recall that the FLSA overtime calculation factor is 1.5 times the regular rate of pay for nonexempt employees who work more than 40 hours per workweek. Employers can reduce their risk by adhering to each state’s overtime requirements. A salary is intended to cover straight-time pay for a predetermined number of hours worked during the workweek.

Points to consider when calculating overtime

State laws may also provide additional state-based rules companies must follow. Generally, employees who work more than 40 hours per week are eligible for overtime pay, but there are exceptions to this rule. By understanding the rules and regulations surrounding overtime pay, you can ensure that you are appropriately compensating your employees.

• Links to information regarding individual state labor laws can be found on the DOL website.
• In general, bonuses and commissions are not included in regular rate calculations for overtime pay.
• These might mandate double pay for exceeding a specific number of daily or weekly overtime hours, or for working on specific holidays.
• The second step for calculating your overtime pay for a given period is multiplying this overtime rate (time and a half) by the number of hours you have worked in a pay period.
• With the power of the cloud, employees no longer have to physically be at their place of work to view the schedule.
• This regular rate forms the foundation to calculate the overtime rate per hour, which is typically 1.5 times this regular rate for hours worked over 40 in a week.

From the example above, an employee earning $25 an hour would have a base weekly pay of $800 ($25 an hour x 40 hours). One that’s easy to miss—but can be costly—is failing to pay overtime correctly. Figuring out how to calculate overtime pay all boils down to the state you’re in. Certain types of other compensation, such as the following, must be included in overtime calculations.

• Certain types of other compensation, such as the following, must be included in overtime calculations.
• By law, employers are not allowed to waive overtime pay, and no other agreement or arrangement between an employer and their employees negates this duty.
• Some salaried employees are exempt from overtime, while others are non-exempt.
• However, certain categories of employees may be exempt from overtime requirements based on their job duties and salary.
• Even if you have nonexempt salaried employees or you pay your workers by the piece, you still have to add overtime to their total pay.
• Encourage them to track key metrics like labour cost percentage and productivity levels.
• For example, you may have hourly employees who also get nondiscretionary bonuses that you need to pay overtime on or a nonexempt salaried employee who works over 40 hours in a week.

Exempt classification is on a case-by-case basis and is not based on the job title of the employee. Sierra Campbell is the lead small business editor for USA TODAY Blueprint. She has experience with many B2B and B2C categories.Sierra previously worked as an editor for U.S. News & World Report, where she focused on subjects such as credit card processing, business phone systems, web hosting, home security systems and moving companies. She also worked as a digital content producer and show producer at several local TV stations across the nation.In her free time, Sierra runs her book editing business, Editing by Sierra, LLC.

Step 2: Check Overtime Rate

Check out our guide on the best payroll software to how much is overtime pay find one that works for your small business. It’s important to understand and follow overtime rules for both the federal and state governments. If you do not pay accurately over time, you will need to pay it in back pay and may be subject to penalties.

An employer can continue to include non-discretionary bonuses and incentive payments (including commissions) to satisfy up to 10% of the salary threshold. Overtime pay for remote employees follows the same rules as in-office workers. Remember, you need to pay overtime rates per the law where your employees do the work, so if they’re working remotely, it’s their home state’s laws that apply. Dealing with overtime pay calculations can be an intricate process, especially when it involves a diverse workforce with varying hours and rates.