Overtime doesn’t have to be overly complex. If you have an hourly or nonexempt employee, you may have to pay them a little extra when they work more than 40 hours a week. Here’s how to calculate overtime for your team.
|How to calculate someone’s gross wages with overtime||Example|
|1. First, multiply the regular hours worked by your employee’s pay rate to get their regular pay. Don’t include overtime hours in this calculation.
2. Next, calculate the overtime rate by multiplying the employee’s regular pay rate by 1.5 for regular overtime (or by 2 for double overtime). Multiply this rate by the number of overtime hours to get their overtime pay.
3. Finally, add the overtime pay to your regular pay to get your employee’s total gross wages for the pay period.
|40 regular hours x $20 regular pay rate = $800 regular pay
10 regular OT hours x ($20 regular pay rate x 1.5) = $300 OT pay
$800 regular pay + $300 regular OT pay = $1,100 total gross wages
Remember that your employees should receive their overtime in the pay period it was earned—and each state has its own laws governing overtime, so it’s always smart to read up! You can also leave behind the number-crunching and automate overtime calculations with time tracking software.Updated August 18, 2017
This article provides general information and shouldn’t be construed as tax advice. Since tax rules may change over time and can vary by location and industry, please consult a CPA or tax advisor for advice specific to your business.