How to Calculate Overtime Pay – A Short Guide

  • December 24, 2018
  • by Kate Borucka
  • No comments
Calculating overtime pay

Overtime Pay – How It Works

Gallup’s report shows interesting information about overtime, “adults employed full time in the U.S. report working an average of 47 hours per week, almost a full workday longer than what a standard five-day, 9-to-5 schedule entails.” More and more people spend extra hours at work. This happens because of the work overload, distractions or even because of the willingness to be promoted. But overtime work, as regular work hours, has to be paid.

Overtime is additional work hours of an employee and these hours are paid at a higher rate. Overtime pay is established by the FLSA (the Fair Labor Standards Act). The rate of overtime pay is not less than one and one-half times the regular rate of pay and it is required after 40 hours of work in a workweek.

You have to follow the requirements especially if you work in a private sector and in Federal, State, or local governments. Otherwise, you will have to pay a penalty of more than $1.000.

Salaried employees might be exempted from overtime pay, if they hold a particular position with specific duties or their weekly income exceeds a specific amount. These employees are called HCE – highly compensated employees.

No matter which sector you operate your business in when it comes to overtime pay, you should always follow the rules. Not only to conform to the law regulations but also to treat your employees respectfully.

How to Calculate Work Hours and Overtime?

Overtime pay may depend on the state you live. The law might differ so it’s important to check the rules. And you can pay your employees more for their extra work but never less than it’s specified by the law.

If your employees are paid a specific salary, you need to make an easy calculation. For example:

Your employee earns $10/hour and he/she worked 50 hours during a workweek → $10 x 1.5 = $15 x 10 overtime hours → $150

And you shouldn’t have a problem with determining overtime for hourly employees because their rates are fixed from the moment they start working for you. All you need to do is define how much you have to pay them for extra time spent on work.

And if you’re not sure, you can always use special tools, either work hours and overtime calculator or time tracking software.

How Can Time Tracking Help?

If the simple calculation of hourly rate and overtime pay solves your problems, it’s fantastic! However, for some organizations, contractors, and businesses it’s not enough. Sometimes more information may be necessary to make sure that all aspects of overtime are under properly determined.

This is why implementing a good time tracking software is necessary. Here’s a short guide on the most common matters regarding overtime and work hours and how you can address them with TimeCamp – time tracking software.

1. Work Hours and Hourly Rate

Keeping transparent and detailed reports on work hours of employees is often one of the biggest challenges companies face. Inaccurate reports, errors in timesheets or wrong log of work hours are only just a few of the most common problems. If not approached properly, they may contribute to more serious problems. Without clearly defined hourly rate and an overview of work hours, it is hard to define overtime pay.

TimeCamp tracks employees’ work and shows all their activities in the form of comprehensible reports. It is helpful in defining an hourly rate and overtime because you can see the exact time at which they logged in and out. Additionally, you can see what they spent most of their work time on and whether their work was efficient.

2. Powerful Data Factory

TimeCamp works not only as a time tracking software. You can use it as a project management tool. It will help you keep all the data in one place without the necessity of using two separate tools:

  • Manage projects and tasks
  • Have a complete history of your project portfolio and actual vs. estimated time
  • Invoice your clients with just one click based on reports
  • Manage all activities related to timesheets, including timesheet approval
  • Integrate it with other tools for more details on work

All the information on employees’ work is necessary to keep financial stability but also to have insight into the information about your employees, their work, and everything your staff is working on. All visible with just one click whenever and wherever you need.

3. TimeCamp Will Have Your Back During Audits

No matter which sector you work in, it may happen that an audit will be carried out in your company. This is particularly important if you’re a government contractor. You will need all the data about your business activity, financial statements, timesheets, reports, etc.

Thanks to TimeCamp you can always access all the information and present it during audits. You and your team can quickly access timesheets, reports or any data necessary.

Have the overtime automatically tracked for you.
 Sign up for TimeCamp today!

To Wrap It Up

Of course, you may consider time tracking software unnecessary to calculate overtime pay. And you may be right. But tracking extra hours of all your employees, especially if you own a large company, will not be easy.

Calculating overtime pay is one thing, but balancing all the books and making sure all numbers add up without a system for data collection and management may be extremely challenging. That’s why you should invest in implementing the right tools.

Kate Borucka

Kate is a freelance translator, copywriter, and a content writer specializing in time tracking software, time management, and productivity. When not researching new software, she's reading books, or spending time outdoors.

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