Calculating Overtime Pay

Overtime hours are hours worked for which there is an increase in the rate of pay for work on any day or in any work period in excess of the number of hours normally worked. In the United States, overtime compensation is governed by the Fair Labor Standards Act (FLSA), as well as applicable state laws and collective bargaining agreements.

Snap Schedule 365 provides a very flexible scheme to handle practically all types of overtime pay through the use of daily overtime rules and work period overtime rules. The resulting overtime pay is the sum of the components derived from all rules that are enabled.

Daily Overtime Rules

Daily overtime rules specify how overtime pay is computed for work hours in excess of certain hours per day. Up to three rules (for three overtime thresholds) are provided. You can enable each rule by specifying the pay rate multipliers to be used. For example, if you pay one and one-half times the employee's regular rate of pay for hours worked beyond 8 hours per day, and double the employee's hourly pay rate for hours worked beyond 12 hours per day, then you should set the Daily Overtime Rules as follows:

Work Period Overtime Rules

Work period overtime rules specify how overtime pay is computed for work hours in excess of certain hours per work period. Similar to daily overtime rules, up to three rules (for three overtime thresholds) are provided. For example, if your work period is One Week and you pay one and one-half times the employee's regular rate of pay for hours worked beyond 40 hours per week, and double the employee's regular rate of pay for hours worked beyond 60 hours per week, you should set the Work Period Overtime Rules as follows:

The terms used in overtime calculations by Snap Schedule 365 are defined below.

Work Period A work period is a time duration, typically a week, two weeks, or a month, within which the worker's wage and overtime compensation are determined. The work period may begin on any day of the week, and it needs not coincide with the calendar week.
Number of Hours Worked The number of hours worked is the total shift hours an employee is scheduled to be working during the work period, not including hours that are paid but not actually worked (on-call hours, paid holidays, sick leaves, etc).
Regular Hourly Rate The regular hourly rate is an average derived by dividing total remuneration (the sum of all monies paid to, or on behalf of, the employee) in a work period by the total number of hours actually worked by the employee during the work period. It is typically the employee's basic hourly cost as defined for each employee, unless you elected to include the shift premium and/or on-call pay in the overtime calculations.

Using the Daily Overtime rules and Work Period Overtime rules example above and assuming your work period starts on a Monday, if some employee Joe works 8 hours per day from Monday through Thursday and then 10 hours on Friday, his total number of hours worked for this week will be 42 hours (4 days * 8 hours ) + (1 day * 10 hours). Therefore, there are 2 daily overtime hours on Friday, but the period overtime hours will be zero, even though the total number of hours worked for the week exceeds the 40 hour threshold by 2 hours. Exclusion of daily overtime hours in the work period overtime calculations is necessary to prevent the same overtime hours from being compensated twice. The work period overtime hours from this example are computed below:

0 = 42 total hours worked - 40 hours per work period - 2 daily overtime hours already counted

Effects of Shift Premium Pay and On Call Pay on Overtime Pay Calculations

If you have shift premium pay policies or on-call pay policies in place and you select the option to have these pays included in the employee overtime calculations, Snap Schedule 365 will adjust the way it computes overtime pay by using an adjusted hourly rate as described below.

Pay for overtime hours = Pay at regular hourly cost + Overtime premium pay at adjusted hourly rate

  1. Pay at regular hourly cost = Overtime hours * hourly cost
  2. Overtime premium at adjusted hourly rate = Overtime hours * (Overtime pay rate multiplier - 1) * Adjusted hourly rate

The first component is the regular pay for the hours worked computed at the hourly cost you defined for the employee. In the second component, the Overtime pay rate multiplier is defined in your Daily Overtime rules or Work Period Overtime rules based on the overtime thresholds. The Adjusted hourly rate is calculated as follows:

Adjusted hourly rate = Hourly cost + (Shift premium pay + On call pay) / Number of hours worked in the work period

Snap Schedule 365 uses the same Adjusted hourly rate to compute pay for overtime hours resulting from either the daily overtime rules or work period overtime rules.

Example calculating overtime, shift premium, and on-call pays

In this example, some employee Joe normally works the 8 hour per day shift, Monday through Friday, and is paid $10.00 per hour. For next week, in addition to his regular work schedule, Joe is scheduled to work 4 extra hours on Wednesday and 8 hours on a Saturday for a total of 52 work hours. Also, he will be on-call for the 4 hour swing shift on Sunday. Your company pay policies are:

Snap Schedule 365 will compute Joe's total pay (labor cost) for next week as follows:

  1. Regular/Overtime Hours:
  2. Regular Pay = Total Regular Work Hours * Regular Hourly Cost = 40 hours * $10.00 / hour = $400.00

  3. Shift Premium Pay (for the 8 hours on Saturday) = 8 hours * $10.00 / hour * 20% = $16.00

  4. On-Call Pay (for the 4-hour on-call swing shift on Sunday) = 4 hours * $5.00 / hour = $20.00

  5. Overtime Pay:
  6. Total Pay = Regular Pay + Shift Premium Pay + On Call Pay + Overtime Pay = $400.00 + $16.00 + $20.00 + 184.15 = $620.15