How Overtime Rates Are Calculated for the US
The payroll process doesn't calculate overtime hours. It calculates only the overtime rate. The actual overtime hours are determined by either your time card entry system or through manual calculation. These hours, combined with the rates, determine your employees' pay.
What the Process Uses for Its Calculations
To calculate the overtime rates, the payroll process needs the following.
|
What affects the calculation |
How you set it |
|---|---|
|
Identify your jobs as either exempt or nonexempt |
The jobs you assign your employees determine their overtime eligibility. Overtime Status on the job definition determines whether a job is exempt or nonexempt. For further info, see Set Job Overtime Eligibility for the US in the Help Center. |
|
Configure elements for rate calculation |
For the payroll process to calculate overtime pay, you use the Elements task to define two elements that calculate these rates.
The combined results of these elements determine the overtime pay per hour. As you're defining these elements, if you select Yes for the overtime-related prompts, the element template establishes feeds to the predefined Overtime Hours, Total Overtime Hours, Overtime Earnings, and Total Overtime Earnings balances. For further info, see Configure Overtime Rate Elements for the US in the Help Center. |
|
Overtime hours |
The person's overtime hours are determined by your time card entry system or through manual calculation. |
|
Base hourly rate |
The person' base hourly rate is determined by the hourly rate you have assigned to your employee. |
|
Premium rate |
The person's premium rate is determined by how you have configured your premium overtime element. The premium rate is defined as: (Overtime Earnings) / (Overtime Hours) Note: Premium rate is also known as the blended rate.
Flat sum bonuses earned in California require special overtime configuration. For further info, see California Flat Sum Bonuses in the Help Center. |
|
Multiple |
The multiple is the factor used to calculate your premium rate. |
How the Rates Are Calculated
The payroll process uses these rules to calculate overtime rates.
-
Standard overtime = (Overtime Hours) * (Base Hourly Rate)
-
Premium overtime = (Overtime Hours) * (Premium Rate) * (Multiple)
For further info, see the following in the Help Center.
-
California Flat Sum Bonuses
-
Overview of Overtime Configuration
Example: Premium Overtime Rate Calculation for a Bonus
In this example, an employee earns $10 per hour on a weekly payroll, works 40 hours, 10 hours overtime, and earns a $200 bonus that impacts their premium rate.
When you run the payroll, this is how the process calculates the amounts.
| Element type | Start date | End date | Hours worked | Rate ($/hr) | Amount calculated |
|---|---|---|---|---|---|
| Regular salary | 01-JAN-2010 | 07-JAN-2010 | 40 | 10 | $400 |
| Overtime | 03-JAN-2010 | 03-JAN-2010 | 10 | 10 | $100 |
| Bonus | 07-JAN-2010 | 07-JAN-2010 | n/a | n/a | $200 |
| Premium Overtime | 03-JAN-2010 | 03-JAN-2010 | 10 | 7 | $70 |
This is how the process calculates the premium overtime rate, based on the overtime period.
|
Overtime period |
Elements used |
Start date |
End date |
Hours worked |
Rate ($/hr) |
Value |
Premium rate |
|---|---|---|---|---|---|---|---|
|
1 |
|
01-JAN-2010 |
07-JAN-2010 |
40 + 10 = 50 |
10 |
400 + 100 + 200 = $700 |
700 / 50 = 14 14 * 0.5 = 7.00 $/hr |
-
Their straight time and straight time overtime calculation would be:
(40 hours * 10 $/hr) + (10 hours * 10 $/hr) = $500
-
Their premium rate would be:
[(50 hours worked * 10 $/hr) + $200 bonus] / 50 hours = 14 $/hr * 0.5 = 7 $/hr
-
Their premium amount would be:
7 $/hr * 10 hours overtime = $70
-
Their total amount would be:
$500 (Straight Time + Straight Time Overtime) + $200 (Bonus) + $70 (Premium) = $770
Example: Premium Overtime Rate Calculation for a Bonus and with an Earned Date
In this example, an employee earns $10 per hour on a semimonthly payroll, works 120 hours, 30 hours overtime, and earns a $1500 bonus that impacts premium rate.
When you run the payroll, this is how the process calculates the amounts.
|
Element name |
Start date |
End date |
Hours worked |
Rate ($/hr) |
Pay Value |
|---|---|---|---|---|---|
|
Regular Salary |
01-JAN-2010 |
07-JAN-2010 |
56 |
10 |
$560 |
|
Regular Salary |
08-JAN-2010 |
14-JAN-2010 |
56 |
10 |
$560 |
|
Regular Salary |
15-JAN-2010 |
15-JAN-2010 |
8 |
10 |
$80 |
|
Overtime |
03-JAN-2010 |
03-JAN-2010 |
10 |
10 |
$100 |
|
Overtime |
10-JAN-2010 |
10-JAN-2010 |
10 |
10 |
$100 |
|
Overtime |
13-JAN-2010 |
13-JAN-2010 |
8 |
10 |
$80 |
|
Overtime |
15-JAN-2010 |
15-JAN-2010 |
2 |
10 |
$20 |
|
Bonus |
14-JAN-2010 |
14-JAN-2010 |
n/a |
n/a |
$1500 |
|
Premium Overtime |
01-JAN-2010 |
07-JAN-2010 |
10 |
5 |
$50 |
|
Premium Overtime |
10-JAN-2010 |
10-JAN-2010 |
10 |
15.135 |
$151.35 |
|
Premium Overtime |
13-JAN-2010 |
13-JAN-2010 |
8 |
15.135 |
$121.08 |
|
Premium Overtime |
15-JAN-2010 |
15-JAN-2010 |
2 |
5 |
$10 |
This is how the process calculates the premium overtime rate, based on the overtime period.
|
Overtime period |
Elements used |
Start date |
End date |
Hours worked |
Rate ($/hr) |
Value |
Premium rate |
|---|---|---|---|---|---|---|---|
|
1 |
|
01-JAN-2010 |
07-JAN-2010 |
56 + 10 = 66 |
10 |
560 + 100 = $660 |
660 / 66 = 10 10 * 0.5 = 5 $/hr |
| 2 |
|
08-JAN-2010 | 14-JAN-2010 | 56 + 10 + 8 = 74 | 10 | 560 + 100 + 80 + 1500 = $2240 | 2240 / 74 = 30.27 30.27 * 0.5 = 15.135 $/hr |
| 3 |
|
15-JAN-2010 | 15-JAN-2010 | 8 + 2 = 10 | 10 | 80 + 20 = $100 |
100 / 10 = 10 10 * 0.5 = 5 $/hr |
-
Their straight time and straight time overtime calculation would be:
(120 hours * 10 $/hr) + (30 hours * 10 $/hr) = $1500
-
Their premium amounts would be:
5 $/hr * 10 = $50
15.135 $/hr * 18 hours overtime = $272.43
5 $/hr * 2 = $10
-
Their total amount would be:
$1500 (Straight Time + Straight Time Overtime) + $1500 (Bonus) + $332.43 (Premium overtime) = $3332.43
Example: Premium Overtime Rate Calculation for a Commission-Only Employee with a Bonus and Without an Earned Date
In this example, an employee earns no salary on a weekly payroll, works 40 hours and 8 hours overtime, and earns a $2000 commission and $400 bonus that impacts premium rate.
-
Their pay would be calculated as:
Wages (Commission + Bonus) = $2400
-
Their premium rate would be:
2400 / 48 = 50 $/hr
-
Their premium amount would be:
8 * 50 * 0.5 = $200
-
Their total amount would be:
2400 + 200 = $2600
Example: Premium Overtime Rate Calculation with Augments
Augments are amounts paid to an employee that are:
-
In addition to their regular rate of pay
-
Considered nondiscretionary
For further info, see Augment Elements in the Help Center.
In this example, this table illustrates how the payroll process calculates overtime and premium pay when there are augments.
|
Element name |
Start date |
End date |
Hours worked |
Rate ($/hr) |
Multiple |
Amount calculated |
|---|---|---|---|---|---|---|
|
Regular Salary |
01-JAN-2010 |
07-JAN-2010 |
56 |
10 |
1 |
$560 |
|
Regular Salary |
08-JAN-2010 |
14-JAN-2010 |
56 |
10 |
1 |
$560 |
|
Regular Salary |
15-JAN-2010 |
15-JAN-2010 |
8 |
10 |
1 |
$80 |
|
Regular Overtime |
03-JAN-2010 |
03-JAN-2010 |
10 |
10 |
1 |
$100 |
|
Regular Overtime |
10-JAN-2010 |
10-JAN-2010 |
10 |
10 |
1 |
$100 |
|
Regular Overtime |
13-JAN-2010 |
13-JAN-2010 |
8 |
10 |
1 |
$80 |
|
Regular Overtime |
15-JAN-2010 |
15-JAN-2010 |
2 |
10 |
1 |
$20 |
|
Bonus |
14-JAN-2010 |
14-JAN-2010 |
n/a |
n/a |
n/a |
$1500 |
|
Premium Overtime |
03-JAN-2010 |
03-JAN-2010 |
10 |
10 |
0.5 |
$50 |
|
Premium Overtime |
10-JAN-2010 |
10-JAN-2010 |
10 |
30.27 |
0.5 |
$151.35 |
|
Premium Overtime* |
13-JAN-2010 |
13-JAN-2010 |
8 |
30.27 |
0.5 |
$121.08 |
|
Premium Overtime* |
15-JAN-2010 |
15-JAN-2010 |
2 |
10 |
0.5 |
$10 |
* Includes the bonus in the premium rate for premium calculation.