And, you might actually be able to reduce their pay in some circumstances if they have opted out and then choose to cancel it. Such accessibility can help cut down on instances when employees don’t show up for work and can help prevent the need to bring in a substitute who might have to work overtime. A powerful way to reduce the impact that overtime has on your budget is to monitor labor costs in real time. In most cases, that means keeping an eye on your labor budget as you schedule. If you look back at the previous section (Total Hours), you’ll see that both methods yield the same gross pay. However, beware that excessive overtime can cause burnout, safety issues, and possibly lower production for some employees if they are overworked.

Once you have a list of items that you could do during overtime hours, meet with your boss to discuss them. If you can make your boss’s life easier, they are more likely to allow you to work overtime hours. You can also convert an hourly wage to an annual salary using our hourly to salary calculator. For example, let’s say that a worker normally works 40 hours per week. Note that certain states do not permit the fluctuating workweek calculation method. Though overtime is limited and it may also be inevitable sometimes, it is a part of the job that can impact your employee’s work-life balance and performance.

HR Tips for Documenting Legally-Worked Overtime

You should also track the employee’s regular pay rate and overtime hourly rate (time and a half). Employees paid by the day are also only eligible for overtime if they are not exempt employees. A salary is intended to cover straight-time pay for a predetermined number of hours worked https://www.vizaca.com/bookkeeping-for-startups-financial-planning-to-push-your-business/ during the workweek. Under federal law, to calculate a nonexempt employee’s regular rate of pay, divide the weekly salary by the total number of hours worked. Calculating the overtime pay for a salaried employee is also different if their salary covers more than 40 hours per week.

These legislative changes came about after more than a century of workers’ rights activists and labor union groups calling for better working conditions. Workers in the 19th century regularly worked roughly 100 hours per week. It wasn’t until Henry Ford adopted five-day, 40-hour workweeks in his Ford Motor plants that the idea of “less work equals more productivity” took hold.

How to Calculate Overtime Pay

As SmallBusiness.co.uk explains, “This contrasts markedly with other labor markets in the west. For example in Germany, employees accrue overtime as time in lieu. In the United States, employees working more than 40 hours must receive overtime payments in line with the Fair Labour Standards Act”. During major U.S. holidays (e.g., Christmas, Thanksgiving, and New Year’s Day), some businesses pay “double time” (or twice the regular rate) for any overtime hours worked. Businesses that pay their employees a salary (as opposed to an hourly rate) typically classify those employees as exempt — meaning that they’re not eligible for overtime. The federal government established this as law in the Fair Labor Standards Act (FLSA) of 1940.

An important distinction is that the travel from an employee’s home to the train station or airport is not considered work time, as it’s not so different from a regular commute. When sending an employee to a remote location for work, you must count the hours they traveled as part of their 40-hour workweek. Laws regarding exempt versus nonexempt status vary slightly from state to state, so check your state’s specific requirements. However, there are some basic federal overtime rules to which you must adhere when classifying your employees.