Calculating overtime hours

Note: Overtime hours are the number of hours worked in excess of the daily or work period maximum defined on the payment schedule.

The Calculated Hours method calculates the number of overtime hours an employee works based on the payment schedule parameters and applies the weighted average rate to all overtime records.

If you choose to calculate overtime hours, Payroll calculates overtime in these steps:

  1. Payroll calculates gross pay for each time record in the work period.

    • For hourly employees, Payroll multiplies the number of hours on the time record by the pay rate to calculate the work period gross.

    • For salaried employees, Payroll divides the employee's annual salary from the employee record by the number of work periods in a year. For example, for 7-day work periods, annual salary is divided by 52 to get the work period gross. This might be different from the calculation of wages for a pay period.

      Note: You define eligible hours and wages on pay summary groups.
  2. Payroll calculates the weighted average rate of pay for the work period by dividing the total eligible wages by the total eligible hours.

    Payroll compares the weighted average rate with the minimum wage. If the weighted average rate is less than the minimum wage, the minimum wage replaces the weighted average rate used in the calculation of overtime.

    If you define the overtime payment schedule with a fixed number of hours in the work period, Payroll uses the fixed number of hours in the calculation instead of the hours worked. This is used when calculating overtime for salaried employees.

  3. Payroll calculates overtime hours for the work period.
  4. Payroll calculates overtime pay for the work period by multiplying the weighted average rate of pay by the overtime premium rate. The result is then multiplied by the number of overtime hours.

    Overtime credit is the sum of all premium wages paid (the additional "premium" portion of pay, such as a shift differential). This premium pay is only credited against the overtime calculation if the Premium Credit check box is selected on the pay summary group.

  5. Payroll calculates overtime credit for the work period.
  6. Payroll calculates the overtime adjustment pay-code amount for the work period by subtracting the overtime amount credited in step 5 from the required overtime amount in step 4.

    If the amount credited is more than the overtime adjustment amount, a time record is not created by the system.

  7. The overtime time records that are associated with the overtime pay class are updated to use the weighted average rate of pay calculated in step 2.