Computing overtime is an important task for fixing the compensation for employees. Overtime must be paid as per stated in law and given to those employees who work above forty hours per week in the United States. Overtime pay generally applies to non-exempt workers, that is, those workers who are not exempt from policy set forth in the Fair Labor Standards Act. Calculating overtime pay is neither tough nor that easy. In this article you will learn to calculate overtime pay in simple steps.
Steps for calculation:
- Calculate the total number of hours worked:
Compute the total number of hours an employee worked in a week. If the number, which has been obtained, is less than forty hours then multiply that number of hours worked by the hourly rate of pay and you will get the weekly pay of that employee. If that total number of hours worked is more than forty hours then do the calculation given in next step.
- Deduct forty hours from the total number of hours worked to obtain the number of hours worked as overtime. These hours will be paid at the overtime rate. The overtime rate is usually 1.5 times of the normal hourly rate. Multiply the number of hours worked as overtime by the overtime rate of pay to reach at overtime pay.
- Compute total weekly pay. Sum up regular pay and overtime pay.
- The amount you obtain as the result, will be the total payment, you have to pay to the employee.
- For example, let’s take an employee named James who is a non-exempt employee. He worked for 50 hours in a specific week, and he is paid $10 per hour.
Now, His basic pay will be 40 x $10 = $400.
He worked for 10 hours more than his regular 40 hours so he worked for 10 hours as overtime.
Let us assume, if overtime pay is 1.5 times of regular pay then his overtime rate will be $15 per hour. Therefore, his overtime pay will be
10 x $15 = $150.
To calculate his total pay for the week, sum up the basic pay and the overtime pay.
$400 + $150 = $550.
In this simple way, you can find the overtime pay that you have to pay your employees.
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