What is Overtime Pay? Definition and How to Calculate It

The calculation of overtime pay is something that the corporation should not overlook since it impacts employees’ salaries and the working relationship between company and employees. Appropriate overtime compensation would make workers feel more comfortable working for the company.

Not only should the company be aware of the following overtime regulations, but so should you as an employee because overtime calculation is incorporated in the employee’s rights. Below is the Clockster full review.

What is Overtime Pay?

First of all, you need to know what overtime work is. Overtime occurs when an employee works more than 40 hours in a given week, on weekends, national holidays, or regular days of rest. Overtime hours are compensated at a steeper rate than normal hours.]

Overtime pay is the extra pay provided by a company to employees who work above a certain total hours each week at a rate not less than time and one-half their regular rates of pay:

For instance, an hourly employee earning $10 per hour and doing 45 hours per week is paid $10 for 40 hours and $15 per hour for the 5 hours of overtime.

Non-hourly employees are often free from overtime if their weekly earnings exceed a specific amount. Employees who are paid less than $684 per week are required to get overtime compensation under the new laws, which has been effective since January 1, 2020.

Overtime and other payments are regulated by the Wage and Hour Division of the U.S. Department of Labor through the Fair Labor Standards Act. However, each state may have different regulations and calculations.

How to Calculate

Overtime compensation is paid to each employee who has worked over 40 hours a week. The calculation of overtime compensation is:

= 1.5 x hourly pay rate x overtime hours worked

Here’s an example of remuneration for a worker who works 42 hours per week and earns $15 per hour.

= 1.5 x hourly pay rate x overtime hours worked
= 1.5 x $15 x 2
= $45, His total pay for the week would be ($15 x 40) + $45 = $645.

Who is Exempt from Overtime Pay?

Some employees are not included on the list of workers who obtain overtime compensation because of the nature of their employment. An employee must have particular sorts of work obligations in order to be categorized as exempt.

Executive, administrative, professional, outside sales, and some computer workers are excluded from the list of employees who receive overtime pay under the Fair Labor Standards Act (FLSA). Exempt classification is determined on a case-by-case basis and is not dependent on the employee’s job title.

That’s all about overtime compensation that you need to know. This is a sensitive topic to both the company and employee. Therefore, each party should understand the regulation to prevent misunderstanding.