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Payroll & Taxes

How to Calculate Employee Pay and Overtime

FrankCrum
by FrankCrum on December 30, 2013


overtime payAs referenced in my previous blog posts in this wage and hour series, regardless of the method(s) of pay, employers are required to keep track of the number of hours actually worked by each non-exempt employee in order to ensure they make at least minimum wage for all hours worked and to properly pay overtime when applicable. Overtime is always based on a 7-day workweek, regardless of the frequency of pay. If a non-exempt employee works more than 40 hours in any workweek, overtime is due.

Employers may choose to use different rates of pay (see my blog post on determining employee drive and travel time compensation) and they also may choose to use several different methods of pay for any given employee. In doing so, the same principles apply to the calculation to determine the rate for overtime purposes: total money earned divided by total hours worked.

EXAMPLE:
Larry the roofer worked 46 hours in one week. He earned $11/hr. and also received $15 per square and completed 3 squares. Additionally, since he finished the job in the allotted 4 days estimated for the job, he received a $200 bonus* (so here we have three methods - hourly, piece rate and a bonus).

11 x 46 = $506
15 x 3 = $45
506 + 45 + 200 = $751
751 divided by 46 = $16.33 (regular rate for this week)
The $751 covers the straight time pay for all 46 hours so now just the additional half time is due for the 6 hours of OT
16.33 x .05 = $8.17
8.17 x 6 = $49.02 (amount of OT due)
751 + 49.02 = $800.02 (total gross wages for the week)

NOTE: These are based on federal overtime laws. Several states have special overtime provisions as well.

* There are very limited circumstances that bonuses are not included in the rate for OT purposes.

If you have specific questions on calculating employee pay and overtime or are interested in ways that FrankCrum can help you with HR and wage and hour issues you’re currently facing, please contact us. We’re here for you! In the meantime, to learn more about this subject visit our overtime calculator page. 

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FrankCrum
ABOUT THE AUTHOR
FrankCrum

FrankCrum is a professional employer organization (PEO), founded in 1981 dedicated to helping business owners boost HR capabilities and broaden convenient services and benefits to employees. The origin of FrankCrum dates back to 1981, when Frank W. Crum, Jr. and his father, Frank Crum, Sr., founded the Great American Temporary Service. With a passion for helping small business owners succeed, the company has evolved and grown over several decades.