Is Your Organization Calculating Overtime Correctly?

Organizations paying employees multiple pay rates or with employees working in multiple cost centers need to calculate overtime in compliance with the Department of Labor, minimize payroll liability, and streamline the payroll process.

Multiple Pay Rates

Organizations paying employees multiple pay rates are required to calculate overtime based on the highest pay rate or a blend of all pay rates.

Minimize Payroll Liability

Agencies using paper timesheets or performing manual pre-payroll overtime calculation with an ineffective timekeeping system, often choose to use the highest rate or the rate for the hours the employee went over 40 hours. This exposes the agency to unnecessary payroll costs and/or violating Department of Labor overtime rules. Using an effective time and attendance solution, minimizes payroll costs and ensures compliance by automatically calculating overtime using a weighted pay rate formula.

Multiple Cost Centers

Organizations with employees working in multiple cost centers are often required to allocate the overtime by cost center. Using paper timesheets or performing manual pre-payroll overtime calculations with an ineffective timekeeping system may cause the agency to make manual adjustments each payroll, taking time and risking mistakes. Using an effective time and attendance solution eliminates edits and ensures accuracy by automatically allocating overtime to the appropriate cost center.

Example

An employee working 40 hours in ‘Location A’ may pick up an extra shift in the middle of the week at ‘Location B’ at a higher, different pay rate. Using a manual or ineffective system, the organization would need to manually ensure the overtime was allocated to ‘Location B’ , not the ‘Location A’. Manually overtime may then be calculated on the higher rate incurred at the ‘Location A’ when using a blending or weighted rate would be fully compliant and reduce  payroll liability. If this scenario is replicated consistently across the organization, there is a significant risk of excessive payroll cost and/or lack of compliance.