1. Implementing Project Financial Management and Grants Management
  2. How Overtime Calculation Components Work Together

How Overtime Calculation Components Work Together

If you charge overtime costs to a project, you can record the cost premium that you pay for overtime. Your business can then recover overtime costs with higher bill rates or overhead rates.

You can manually enter time card transactions to calculate overtime hours and charge them to a project.

Other components of overtime cost calculations are:

  • Rates Costing Method

  • Overtime Expenditure Types

  • Labor Costing Multipliers

  • Labor Costing Rules

  • Overtime Projects and Tasks

Rates Costing Method

If you enter overtime hours manually, you can assign labor cost multipliers to overtime expenditure types. The rates costing method applies labor costing multipliers to transactions charged to an expenditure type assigned with labor cost multipliers. To calculate rates for overtime expenditure items, you must define first an expenditure type with the Overtime expenditure type class, then define labor costing rules.

When you charge overtime to the project on which overtime was worked, you can track all overtime costs on one expenditure item. The application uses the following formula to calculate the overtime premium cost:

The overtime premium cost equals the product of overtime hours, hourly cost rate, and labor cost multiplier.

overtime premium cost = overtime hours * hourly cost rate * labor cost multiplier

Overtime Expenditure Types

You must set up at least one overtime expenditure type that is classified by the Overtime expenditure type class. The following table lists examples of overtime premium expenditure types and the corresponding expenditure type class:

Expenditure Type

Expenditure Type Class

Double Time Premium

Overtime

Time and Half Premium

Overtime

Labor Costing Multipliers

Labor costing multipliers are values by which labor cost rates are multiplied to calculate overtime premiums. You define a labor cost multiplier for each type of overtime your business uses, such as double time or time and a half.

For example, if you pay a person double time for all overtime hours, then define a labor cost multiplier of 2.0. The person's labor cost rate is multiplied by 2.0 to calculate the person's overtime premium labor cost rate. If you pay a person time and a half for all overtime hours, then define a labor cost multiplier of 1.5 to calculate the person's overtime premium labor cost rate.

The following formulas calculate the overtime premium cost rate:

  • The overtime premium labor cost rate equals the product of the labor cost rate and labor cost multiplier.

    overtime premium labor cost rate = labor cost rate * labor cost multiplier

  • The overtime premium cost equals the product of the overtime premium labor cost rate and overtime hours.

    overtime premium cost = overtime premium labor cost rate * overtime hours

  • The total labor cost equals the sum of the overtime premium cost and the product of the straight time hours and labor cost rate.

    total labor cost = overtime premium cost +(straight time hours * labor cost rate)

The total labor cost of a person is calculated as shown below:

  • The total labor cost equals the sum of the overtime premium cost and the product of the straight time hours and labor cost rate.

    total labor cost = overtime premium cost +(straight time hours * labor cost rate)

For example, assume that a person worked for the usual 8 hours and then 10 hours of overtime at a rate of time and a half. The labor cost multiplier is 1.5 and the person's labor cost rate is $40.00 per hour. The total labor cost of the person is calculated as shown below:

$40.00 * 1.5 = $60.00 per hour = overtime premium labor cost rate

$60.00 * 10 hours = $600.00 = overtime premium cost

$600.00 + (8 * $40) = $920 = total labor cost

Labor Costing Rules

Labor costing rules associate overtime expenditure types with labor costing multipliers and determine how straight time and overtime costs are calculated. When a person charges time to a project, the application calculates the labor hours according to the person's labor costing rule. You specify the default overtime project and overtime task in the labor costing rule to be used for the overtime expenditure items.

Overtime Projects and Tasks

You can define one project to hold all overtime costs, or you can define a separate project for each group or office in your company. For example, create an overtime project for each office. You then charge each employee's overtime hours to the overtime project for the office.

For each overtime project, you must define a task for each type of overtime your business uses. Examples of task names are Time and Half, Double Time, and Uncompensated Overtime.

You must include the logic to charge the appropriate overtime project or task, when you are:

  • Using more than one project to hold overtime costs

  • Charging overtime hours to an overtime task

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