How to Calculate Overtime?

Murtuza Topiwalla
Mar 02

When a person works more than specified hours for the job, the additional hours will be known as overtime. A company/person needs to learn how to calculate overtime to pay the employees right.

The company has to pay extra charges for extra hours, and the hourly will be higher than regular hours. The minimum hourly rate will be double or at least one and a half than the standard paying rate. For example, a worker is working 40 hours per week at an hourly rate of $10. If he works 45 a week, the worker will be paid $400 for 40 hours and $75($15 hourly rate) for extra 5 hours. In this way, an employee can earn more by working overtime.

However, some employers are also paying ‘double time’ for the holidays and special occasions. Those employees who are getting an income rate over the mentioned amount will not be entertained for overtime by the company. But, a few companies are paying overtime to every kind of their employers. However, there is no government interference, especially the Department of Labor, for asking the companies to pay overtime to employees for overtime on weekends and holidays.

The employers and union contracts fix the rates of overtime for employees. But, the government is being involved through labor laws and regulations. Let’s learn some basic rules to make it clear how to calculate overtime.

Labor Laws:

Most countries include labor laws so no one can force a worker to work extra hours against his desire. These laws will be concerned with the preservation of worker’s health. So, they will be able to work in a productive environment. Moreover, healthy workers will be able to boost the economy of the respective company or organization. According to the law, companies and organizations will have to pay the extra payment for overtime. Otherwise, they can face lawful actions.

Moreover, workers can strike for their rights if the company does pay the revenue of overtime to the respective workers. The pay rate of overtime will urge the workers to work the extra hours because they will get a handsome amount compared to their salaries. By managing overtime, an organization or company will get a flexible workforce for production. The overtime working will help the particular company or organization come over the busy working period, shortage of production, the cover of workers’ absence, and bottlenecks.

This will also enable the workers to earn extra money. Working in a company providing overtime opportunity will prevent the workers from working in other working places. The workers will use the earned money of overtime in maintenance, which cannot be done in their fixed salary.

USA Law for overtime calculation:

In 1938, the USA established the Fair Labor Standards Act to secure workers' rights to boost commerce production. According to FLSA, there standard 40 hours of working for various kinds of workers, and companies have to pay one-half times more than the standard paying rate or extra working hours over 40 hours. This law has also divided the workers into ‘exempt’ and ‘non-exempt’ from the regulation.

The companies do not need to pay the overtime charges to the exempt workers, but they have to pay the non-exempt workers. According to FLSA, the independent contractors will not get the benefits of the overtime. The nature of the job will decide whether a worker is eligible for overtime pay or not. The exempt workers eligible for overtime include professional, executive, and administrative workers. After that, a worker must pass three necessary tests of duties, salary, and salary levels.

However, specific agricultural workers, outside salespeople, particular workers, and live-in workers are exempt workers. So, every company and organization which is working in the country has to follow the FLSA.

Overtime Calculation in European Union:

European Union has issued directives that have issued limited working hours. The orders need a working week of 48 hours for 17-weeks and a resting period of eleven hours in twenty-four hours of working. The breaks are necessary when a worker is working more than six hours a day. A weekly holiday is compulsory for every worker who is working day to day in a week. The directives are also facilitating the workers with one month of paid leave yearly.

Moreover, the workers who are working at night cannot work more than 8 hours a day. We can calculate the overtime easily. Regular salary will be equal to standard pay rate multiplied by 40 hours of working. Simultaneously, overtime payment will be similar to the regular wage multiplied by one-half of the extra work hours. For example, a worker has worked 50 hours a week. The standard hourly pay rate is $15. He will be paid $600 and $225 for the extra 10 hours. So, the worker will get a total of $825. This formula (pay rate x 1.5 x additional hours) will be applied for overtime calculation.

Overtime is just an option if you want to do so you can. If you don't, nobody can pressurize you to take overtime. It's a free hand opportunity for needy employees. They would be capable of getting extra salaries when they take over time.

So, most of the employees opt for overtime, and the companies pay them for that. Companies must learn first how to calculate overtime and then review and update the pay practices to ensure that they calculate and pay overtime in compliance with state and federal laws.

scroll top