Calculating Overtime Pay for Salaried Employees Steps & More

He’s paid $12/hour, and he works from 7am-3pm Monday through Friday, for a total of 40 hours a week. This week, a coworker called in sick and Johnny had to cover two of his shifts, from 3pm-11pm on Thursday and Friday. It is important to encourage employees to accurately report their time employees, even if the overtime was not approved. Businesses are generally required to compensate for all overtime worked by non-exempt regardless of whether the business approved an employee to work overtime. Divide the weekly salary by the total number of hours the employee worked. 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.

As SmallBusiness.co.uk explains, “This contrasts markedly with other labor markets in the west. For example in Germany, employees accrue overtime as time in lieu. In the United States, employees working more than 40 hours must receive overtime payments in line with the Fair Labour Standards Act”. It’s not rocket science, but to help you automate the accurate collection of hours and do proper overtime pay, consider using an online time management tool or a time tracker . The other solution may be paper time cards and timesheets, Excel files, or Google Spreadsheet forms. Becky’s total weekly earnings were $460, and she worked 45 hours this week.

Learn what overtime is and how you should dole it out to your employees.

Then, you can calculate the compensation for the hours worked at a higher pay rate. It is important to have hourly employees maintain accurate time and attendance records so that you can properly account for and compensate for any overtime worked. With easy-to-read time sheets and reports, invoice processing, and direct deposit capabilities, ensuring you’re compliant and paying your employees responsibly can be much simpler. Download QuickBooks today to see how our payroll and other business accounting solutions can help your business excel. Our guide will walk you through everything you need to know about overtime pay, how to calculate it, and critical mistakes to avoid. Divide the weekly salary by the number of hours you expect the employee to work.

Under the FLSA, any non-discretionary bonuses or commission earned by a nonexempt employee must be factored into their regular rate of pay. The calculation method varies depending on if the bonus or commission payment is allocated by the workweek or some other frequency, e.g., monthly, quarterly, annually. The term “exempt” refers to employees who do not qualify for overtime protections, while “non-exempt” refers to employees who are eligible for overtime. There are certain types of jobs that are explicitly exempt from FLSA guidelines, such as minimum wage requirements and child labor laws.

Calculating overtime for salaried employees

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. Under federal law, to calculate a nonexempt how to calculate overtime pay employee’s regular rate of pay, divide the weekly salary by the total number of hours worked. Often, employers may just accidentally pay the employee’s regular rate for their weekly salary, forgetting to account for overtime hours.

However, some states also require daily overtime pay if an employee works more than eight hours in a 24-hour period. Overtime pay is the hourly wage that employers owe to employees who work more than 40 hours in a workweek. So, for example, if you have an employee whose regular pay rate is $12 per hour, to find their overtime pay rate, you’d plug $12 into the formula above. You must pay at least the minimum for overtime, but you may decide to pay employees at a higher rate, and for overtime starting at lower hours per week. The Department of Labor does not require employers to pay overtime for night, holiday, or weekend work; these rates are determined by the employer or by union contracts. Except for certain states that require premium pay daily, overtime is calculated by the workweek. According to the FLSA, a workweek is a fixed and regularly recurring period of 168 hours or seven consecutive 24-hour periods.

How much is my overtime pay rate?

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. The DOL set the $684-per-week salary requirement for these employees on January 1, 2020. Before that, salaried employees who were exempt from earning overtime pay had to make at least $455 per week.