Time & Attendance
Prevent Call Outs
Implementation & Launch
By Gustav Anderson
Feb. 9, 2023
Ah, yes, overtime. You probably loved it back in high school working your summer lifeguarding job at the local pool. But flash forward to the present, and it has probably lost some of its luster, becoming more of a necessary evil in your day-to-day business operations.
While it is undoubtedly convenient to have employees stay late or work extra days while short-staffed, this convenience comes at the price of higher labor costs and sensitive calculations.
Luckily, we have a solution for you: the trusty overtime calculator.
But wait, let’s back up for a second and clearly define the concept of overtime.
Overtime refers to any and all hours worked beyond the 40-hour standard work week. According to the DOL, employees “must receive overtime pay for hours worked over 40 in a workweek at a rate not less than time and one-half their regular rates of pay.”
In other words, employees must receive 1.5x their regular hourly wage for working overtime, at minimum. Overtime pay rates vary, however – and herein lies the key difference between overtime and another common term: time and half.
While overtime is a blanket term referring to the time worked beyond 40 hours in a week, “time and a half” is a specific rate at which overtime pay is calculated. Time and a half is the legal minimum for overtime.
Overtime pay can also be calculated at higher rates, like double or triple time. Many businesses do this once overtime hours reach a certain threshold, or if the overtime shift occurs during a critical period of the day.
Typically, hourly workers who make less than $684 a week, or $35,568 a year, are entitled to minimum wage and overtime protections under the Fair Labor Standard Act. Specifically, they have the right to overtime pay at 1.5x their regular hourly rate. However, the FLSA also deems workers who have limited artistic, scientific, executive, or administrative responsibilities as eligible for overtime as well, regardless of their weekly earnings.
Examples of employees who receive overtime include:
People who primarily do non-manual work and earn more than $684 a week are generally deemed “exempt” from the FLSA right to overtime. While exempt employees typically hold salaried, white-collar jobs, this is not always the case.
Read More: Exempt vs. Non-Exempt Employees
In its most basic form, calculating overtime pay is really quite simple. Just take the employee’s regular hourly rate and multiply it by the overtime rate. Then, take the resulting number and multiply it by the number of overtime hours worked.
For a more in-depth example of how this works, check out our detailed guide to how to calculate time and a half.
For many businesses, computing overtime isn’t always this simple. To get overtime pay right, you first need to determine the regular rate – this becomes much more difficult when dealing with variables like shift differentials, commissions, bonuses, and holidays. One miscalculated bonus or forgotten holiday could throw off an entire overtime computation, landing you in hot water with not only your employee but the U.S. Department of Labor.
Whether intentional or not, miscalculating overtime pay can lead to underpaying your workers – which eventually leads to legal action.
In 2022, a district court judge in Alabama upheld a $13.2 million lawsuit in favor of some steelworkers. Their employer had not been paying overtime correctly due to the use of a suspect rounding policy that rounded clock-ins and clock-outs down by 30 minutes.
While the employer of course claimed to be unaware of the mistake, blaming it on their previous lawyer, ignorance is not a valid excuse here. You see, it was found that they had acted in bad faith by not keeping accurate and complete work time records. If they had been keeping complete records, it would have shown they had every intention of following FLSA standards.
The last thing you want is a $13.2 million lawsuit on your hands for making simple computation mistakes. Routine timekeeping miscalculations can add up over the years and result in a significant amount of unpaid overtime that you don’t want on your hands. Here are a couple of the best ways to safeguard against this happening:
Act in good faith and you’ll have nothing to hide. Keep daily records of hours worked and wages owed so you’ll always have a paper trail to fall back on if the DOL ever comes knocking.
Also, consider running routine overtime audits. If you catch a mistake, address it quickly before it snowballs into a larger issue. And of course, keep records of these audits to demonstrate a proper intention to abide by FLSA standards.
For more on this, check out our Q&A with Annette Idalski, a Labor and Employment Trial Attorney and Partner at Seyfarth Shaw LLP.
Q&A: Employers sued for wage and hour violations
Calculating overtime may be a breeze for one employee, but when you are dealing with hundreds, as well as things like bonuses, vacation hours, and shift differentials, things suddenly become much more tricky.
Overtime needs to be calculated accurately and on time, not just for the sake of your employees, but for the survival of your business. Sure, you can use spreadsheets and phone calculators to figure it all out. But the easier choice is to use dedicated time and attendance software to do the tedious admin work for you. Not only does it automatically track hours of work and compute overtime compensation for you, but it also accounts for any and all overtime laws unique to your region.
A time tracking platform like Workforce.com automatically recognizes when staff go into overtime, quickly flagging and recording these hours alongside regular hours on digital timecards. At the end of the pay period, all you have to do is quickly approve and export these timesheets with a few clicks. Yes, it’s true, paying your employees accurately is that easy.
If you are ready to get started calculating overtime pay, sign up for a free trial today, or, get in touch with our team.
Or, if you’d like to find out more about how to avoid overtime in the first place, check out our free webinar below:
federal law, minimum wage, pay rates, state law, wage law compliance
Staffing Management4 proven steps for tackling employee absenteeism
absence management, Employee scheduling software, predictive scheduling, shift bid, shift swapping
Time and Attendance8 ways to reduce overtime and labor costs
labor costs, overtime, scheduling, time tracking, work hours
Come see what we’re building in the world of predictive employee scheduling, superior labor insights and next-gen employee apps. We’re on a mission to automate workforce management for hourly employees and bring productivity, optimization and engagement to the frontline.