Your Step-by-Step Guide to Calculating Overtime Pay

In Texas, the Fair Labor Standards Act sets out the rules regarding overtime pay for employees. This federal law requires employers to compensate employees at a rate of one and half times their regular rate for hours worked over 40 during a workweek.

For example, if one how to calculate overtime pay is out sick, another can step in and pick up the slack. This might seem like an obvious solution, but it’s often overlooked. If you’re constantly struggling to get everything done, it might be time to consider adding a few more bodies to the team. Add $720 and $135, which equals $855 — the amount you owe them for all hours worked. That calculation may seem very basic , and you may be wondering why we included it. Here are the numbers you get when you use this formula (using the same $12 per hour example from the previous section). The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles.

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If you do decide to make your employees work extra hours, just be sure to do it in a way that’s fair and beneficial for both sides. Let’s examine a scenario in which you might need to pay a salaried worker overtime. You have a traveling sales rep who earns commissions for each sale they make, and commission can count as salary. But for whatever reason, the sales rep doesn’t meet the DOL’s requirements for exempt employees who earn a commission.

The Inch software won’t crunch the numbers for you — you have to learn how to calculate overtime for yourself. Overtime is defined as any time an employee exceeds 40 hours of work in a seven-day period. Knowing how to calculate overtime correctly can have a significant impact on your business’s work schedule and budget. This web site offers general information about our practice and information on relevant Colorado state laws and federal laws. Its content is not intended to be, and should not be construed as, legal advice.

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Note that certain states have their own methods for calculating the regular rate of pay for nonexempt employees who are paid a flat sum bonus. Note that certain states have different methods for calculating the regular rate of pay for nonexempt employees who are paid on a salary basis. It’s calculated by dividing the total pay for employment in any workweek by the total number of hours actually worked. Let’s dive into some key factors to remember when calculating overtime pay for your employees. Keeping in mind that these are only federal guidelines, your state may have different rules (and you’ll definitely want to check with your local labor laws before instituting any changes). To understand which employees are entitled to overtime pay, business owners must determine whether they’re categorized as exempt or nonexempt employees.

• Straight time is the number of hours an employee worked, up to 40 hours, for which they are paid their regular rate.
• The federal government established this as law in the Fair Labor Standards Act of 1940.
• If you need help in understanding how much is overtime pay and how it will affect you or your business, you can post your legal need on the UpCounsel’s marketplace.
• The regular rate of pay is an hourly rate, minimum wage for example, and overtime must be computed on an hourly basis.
• An employer is actually breaking the law when they just use the cash wage figure.