How does overtime work

This article is for small business owners, HR professionals and payroll specialists who need more information on what overtime pay is and when employees are entitled to it. What is overtime pay? How does overtime work? How do you calculate overtime pay?

Are salaried workers covered by overtime rules? Frequently asked questions about overtime pay Can an employer require an employee to work overtime?

Yes, an employer can require employees to work overtime. Business News Daily Staff. Andrew Martins has written more than articles for business.

Andrew writes about office hardware such as digital copiers, multifunctional printers and wide format printers, as well as critical technology services like live chat and online fax. Andrew has a long history in publishing, having been named a four-time New Jersey Press Award winner. Grow Your Business. What Is Retro Pay? Retro pay is the difference between what you paid employees last Minimum Wage by State.

You must pay your employees the greater of your state's hourly How to Calculate a Prorated Salary for Employees. You might need to prorate an employee's salary for multiple No, they cannot. Are the TOIL rules all the same? In a modern award, they are similar but not always the same. Most have the following features: Taking TOIL is by agreement with the employee concerned often in writing.

The time off usually needs to be taken within a set period often six months. The time off needs to be taken at a mutually agreed time.

The employee can elect to be paid the overtime as pay at any time. If there is a time period in the modern award and time off has not been taken during that period, the employer must pay the employee for the overtime worked. An employer cannot put an employee under pressure to take TOIL. How is TOIL calculated? In this example, some modern awards will say that if the employee wants TOIL: they can have two hours off because they worked two hours of overtime , while others could say they can have three hours off because they were owed three hours pay.

Many but not all modern awards provide for time off in lieu of overtime. Industries covered by modern awards that include time off in lieu include: retail restaurants, cafes hospitality transport general manufacturing.

Payroll Tax Employment contracts. Free Workplace Advice line Get free phone advice about leave entitlements or correct procedures for termination, redundancies and stand down. Find out more.

Skilled migrants and international students to return. In the examples and explanations below, Straight Time is the amount of hours the employee worked up to 40 hours for which he is paid his Regular Rate—an employee does not get one and half times the Regular Rate for Straight Time. The Regular Rate is the hourly payment for Straight Time—non-overtime hours. Overtime Hours are hours worked past 40 per week. The easiest calculation for overtime pay involves hourly employees.

He has worked 40 hours of Straight Time and 10 hours of Overtime 50 hours minus 40 hours. Salaried employees are also entitled to overtime pay under the FLSA. The first step in calculating overtime pay for these employees is to determine the Regular Rate by diving the weekly salary by the number of hours it is intended to compensate.

However, the next step differs depending on whether the salary is for a fixed workweek of 40 hours, a fixed workweek of more than 40 hours, or a fixed workweek of less than 40 hours. The first step is to calculate his Regular Rate. The calculation is different here because any overtime hours are already partially compensated for by the weekly salary.

All you need to do is complete some basic multiplication to determine an overtime wage. The minimum overtime pay mandated by the federal government is time and a half. Further, calculating the total amount of overtime pay owed to an employee is simple. All you have to do is multiply the overtime hourly wage by the number of overtime hours worked. This means they worked 40 hours of straight time and ten hours of overtime. Their total compensation can be calculated by adding up their regular hourly wages and overtime wages:.

Keep in mind that calculating overtime by hand is time-consuming and prone to inaccuracies. This is especially true if you run a company that employs many workers. Specialized payroll software and overtime pay calculators can help you stay on top of the wages you owe employees. If your employees are on different pay period schedules, calculating overtime can be a bit more complex, but no matter the pay frequency, overtime is always always based on a seven-day workweek.

For example, an employee who works a biweekly pay period may work 50 hours in the first week of the pay period, and 30 hours in the second pay period. While that may equal 80 hours in total for the pay period, you still owe 10 hours of overtime for the first week. A semi-monthly pay period can be even more complicated. While most employers process payroll on the 1st and 15th, sometimes there are not an even amount of workweeks in a month.

You must first determine where the workweek starts and ends, then calculate the number of hours worked within each, just as you would with the above biweekly example.

If the work week ends during the pay period in which the employee has worked in excess of 40 hours, you are required by federal law to pay overtime for that pay period. Not everyone is eligible to receive overtime benefits. The federal government only mandates overtime pay for certain groups of workers. While the latter is eligible for overtime pay, the former is not. There are several exemptions that may prevent a particular employee from receiving overtime pay.

These exemptions are outlined in FLSA and are generally based on employee job duties. The following job duties typically call for an exemption under federal law :.

One more important thing to note is that exempt employees must be compensated in a specific way. Besides computer and outside sales employees, who can be paid hourly, these exempt professionals must be salaried employees or paid on a fee basis. However, many nonexempt employees earn more than the salary threshold required by federal law.