Calculate Hourly Employee Overtime Rates

The pay rate multiplier for time-and-a-half overtime pay can be established as 1.50, and for double time as 2.00, etc. In the following procedure, it is assumed that regular pay will be entered with only standard hours. Any overtime hours will be entered separately using the overtime earnings code.

To calculate hour employee overtime

Select Payroll Setup menu > Earnings Code Maintenance.
In the Earnings Code field, enter a code to be used for overtime. For more information, see Earnings Code Maintenance - Fields.
In the Type of Earnings field, select Overtime.
In the Pay Rate Multiplier field, type 1.500 to calculate overtime at a rate of time and a half, or type 2.00 to calculate overtime at double time.
Complete all remaining fields in the window.
Click Accept and exit Earnings Code Maintenance.
On the Payroll Main menu, click Employee Maintenance.
In the Pay Rate 1 or Pay Rate 2 field on the Wages tab, type the employee’s standard hourly rate. For more information, see Employee Maintenance - Fields.
Complete all remaining fields.
Click Accept and exit Employee Maintenance.

The amount entered in the Pay Rate 1 or Pay Rate 2 field is multiplied by the entry at the Pay Rate Multiplier field.

Examples - Hourly Employees

Example 1: If an employee with a standard hourly rate of $8.00 per hour worked 45 hours in a week, his regular pay is calculated as $8.00 multiplied by 40 hours ($320.00). His overtime rate is $8.00 multiplied by 1.50 ($12.00 per hour). His overtime pay is 5 hours multiplied by $12.00 ($60.00).

Example 2: An alternative method for recording overtime hours is to record all hours worked as regular pay and to enter the overtime portion of the hours worked as overtime pay. In this case, the pay rate multiplier for the overtime pay must be defined as 0.50 for time and a half, 1.00 for double time, etc.

If an employee with a standard hourly rate of $8.00 per hour worked 45 hours in a week, his regular pay is calculated as $8.00 multiplied by 45 hours ($360.00). His overtime rate is $8.00 multiplied by 0.50 ($4.00 per hour). His overtime pay is 5 hours (the portion of total hours worked that is overtime) multiplied by $4.00 ($20.00).

Note Regardless of the method used to enter the overtime hours, the employee's total wages add up to $380.00 for both examples. The method you use should be based on the method best suited to your normal payroll practices.

Example - Exempt Salaried Employees

The base hourly rate for an exempt salaried employee with a biweekly salary of $2,000.00 is determined by dividing $2,000.00 by 80 hours (the number of hours in the pay cycle). The resulting hourly rate of $25.00 is used to determine the amount of pay. If the employee is paid for 72 hours instead of the normal 80, his regular earnings are calculated by multiplying 72 by $25.00 per hour ($1,800.00). If the same employee is paid 5 hours of overtime, his overtime rate is determined by multiplying $25.00 by 1.5 ($37.50 per hour). His total overtime pay is calculated by multiplying 5 by $37.50 ($187.50).

Example - Nonexempt Salaried Employees

The employee is nonexempt and salaried at $400.00 per week and overtime pay is defined with the pay rate multiplier of 1.5. If the employee has worked 60 hours for the current week (40 hours regular, 20 hours overtime), his base rate of pay is determined by dividing $400.00 by 40 ($10.00 hour). The overtime rate is calculated by multiplying $10.00 by 1.5 ($15.00 per hour). The overtime pay calculated by multiplying $15.00 by 20 hours ($300.00).