Overtime Pay: How to Calculate
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U.S. federal law requires employers to pay their employees at a higher rate for all overtime hours. The calculation of overtime varies based on the terms of employment between the employer and the employee. Employers who short their employees on overtime pay, even accidentally, face civil liability. Intentional underpayment can result in criminal liability. Keep reading to learn more about overtime pay and how it is calculated.
Generally, the number of overtime hours equals the employee’s total number of hours in a workweek minus 40. Overtime pay is calculated weekly, and it must be calculated separately for each week. An employer cannot average an employee’s working hours over a longer period, such as a month, and pay employees overtime only for the number of hours that exceed the average.
For example, if an employee works 65 hours one week (25 hours overtime) and only 22 hours the next week (18 hours under a 40-hour workweek), the employer cannot subtract the 18 hours “under time” from the 25 hours overtime to arrive at only 7 hours of overtime. Instead, he or she must pay the full 25 hours of overtime pay.
Calculating overtime pay for employees paid by the hour is fairly straightforward.
- Determine the employee’s regular pay — $12.00 per hour, for example.
- Determine the overtime rate by multiplying the regular pay by 1.5 — $18.00 per hour in this example.
- Determine the employee’s gross overtime wages by multiplying the employee’s overtime hours by the overtime pay. If the employee worked 50 hours in a particular week, for example, his number of overtime hours is 50-40=10, and his overtime wages are 10 x $18 = $180. Remember that $120 of this represents the employee’s regular pay for overtime hours, and the remaining $60 represents extra wages for overtime.
The calculation method for salaried employees depends on how many hours per week the employee’s salary was designed to compensate for. In a regular workweek, the employee’s salary is designed to compensate for 40 hours per week.
- The employee’s regular pay equals the salary divided by 40 hours per week, which can get a little tricky if salary is paid monthly instead of weekly.
- The overtime pay is 1.5 times the regular rate of pay.
- Overtime wages are calculated as (number of hours worked – 40) x overtime pay for any given week.
- For example, suppose the employee’s salary is $400 per week, his regular pay is $10 per hour and his overtime pay rate is $15 per hour. If the employee works 48 hours in a particular week, overtime pay is $15/hour x 8 hours = $120.
The calculation gets more complex if the employee’s salary is designed to compensate for a non-standard workweek – more or less than 40 hours per week, for example, or fluctuating from week to week (please see our article Overtime Pay: Non-Standard Workweeks for details).
Contact the Law Firm of Zinda Law Group Now
If you are involved in a dispute over overtime pay, it is imperative that you retain a lawyer who understands the system of overtime pay as soon as possible. In fact, your choice of attorney could end up deciding the outcome of the case. Zinda Law Group enjoy an unusually strong local reputation and unlike many law firms, it has been approved by the Better Business Bureau®. Our no win no fee attorneys are always ready for action, and they will fight tirelessly to see that you receive a fair resolution to your dispute. If your dispute arose in the Austin area, or if the defendant is a person or company located in Austin, call us immediately at 800-863-5312 for a free initial consultation where we will discuss your rights and possible strategies for victory.