Accurately calculating your employees' hours is essential for running a business and directly affects your organization's payroll accuracy. Determining overtime hours and accounting for special pay, such as holidays, night shifts, or weekends, can be complex. Therefore, setting up clear overtime and pay rules is crucial to ensure employees will be paid correctly for their work and to comply with regional labor laws, protecting your business from potential legal issues.
What is the Difference Between Overtime & Pay Rules?
Before we begin setting things up, let's go over the difference between overtime and pay rules:
Overtime -increases pay for hours beyond the standard limit. For example, an employee worked for more than 8 hours a day.
Pay Rules - Add extra pay for specific hours. For example, an Employee might work on Christmas or a night shift.
If both overtime and pay rules apply to your organization, you can set up both. In cases such as these, the pay rule supplements the overtime rate.
How to Set Up Overtime & Pay Rule Policies
To enable and set up new Overtime or Pay Rule policies, follow these steps:
Access the Users page on the left sidebar and enter the Company Policies tab on the top right of the screen.
Access the Overtime & Pay rules tab and click Add policy.
Give the policy a name, for example 'full time employees', and decide if it should be a default policy or not. Default policies will be automatically assigned to all new employees who join the company app.
Next, Add Rules. A separate modal will open, allowing you to set up all the necessary details. We will learn more about creating new overtime or pay rules in the next section.
Assign the users that this policy will apply to; you will also be able to set custom overtime & pay rules per user separately. To apply the policy to a smart group, use the filter at the top in order to filter by the relevant group, and select all users.
Next, choose the effective dates for the new policy. The policy will take effect on the date you select at this step. To set an effective date for all users in bulk, click on Select all, click on the blue Actions tab and set the effective date.
In the Summary stage, go over all the details to ensure everything is correct, and click Save!
How to Create Overtime & Pay Rules
To create a new pay rule, follow these steps:
Navigate to the Users tab found in the left sidebar, and access the Company Policies tab on the top right.
Enter the Overtime and Pay Rules tab, and switch to the Manage pay rules tab.
Here, you will see a default rule called Regular, for regular working hours. Click on Add Rule to create a new rule.
Give the rule a name, and if needed add a code such as WKND, x1.5, etc.
Next, set the rule type, either Regular, overtime or an additional hourly rate.For Regular, this acts as the base wage (you can define different base wages for different categories).
For overtime, set the multiplier that the employee's base wage should be multiplied by. For Additional Rates, you can set it as either a fixed amount (Add a specific dollar amount per hour worked) or a multiplier (Apply a percentage-based increase on top of regular or overtime wages).
As an example, if your business needs to separate holiday pay from overtime, and users get paid 1.5X for holiday hours, you should set the Multiplier to 0.5 as the system calculates additional pay separately and adds it to the regular hourly rate. This would appear in a separate column in their timesheet, allowing for flexible hours classification, meeting specific payroll requirements and ensuring compliance with diverse labor policies.
Now, add the condition for when the overtime or pay rules apply. For example weekly, after 40 hours, and save the changes.
You also have the ability to choose an And/Or condition when setting up a rule.
For example, you can configure weekly rules specifically for weekends—allowing employers to apply higher pay rates if employees exceed their weekly hours during the weekend, or to offer increased overtime rates during holidays.
Please note: This applies to daily rules only!
When done, click on Save rule.
Examples of Company Wide Overtime or Pay Rules
Below are a few examples of company wide overtime or pay rule policies to guide you!
Weekday Overtime: any hours worked beyond the standard workweek.
Saturday or Sunday: hours worked during the weekend.
Holiday: hours worked on company-recognized holidays.
Night Shift: hours worked throughout the night.
Emergency Overtime: overtime required due to urgent business needs.
Voluntary Overtime Incentives: employees who voluntarily work overtime on weekends or holidays may receive bonus pay.
Peak Season Overtime: during peak business periods (e.g., end-of-quarter, holiday rush).
On-Call Overtime: employees required to be on call during weekends or holidays.
Overtime Conditions & Examples
Now that you know how to set up overtime and pay rules, let's go over all the different conditions that can be set and an example of each one.
The different conditions that can be set are:
Daily - applies when an employee works more than a specific number of hours per day. For example 1.5x after 8 hours per day on Monday- Friday. Note that you can create more than one daily rule therefore in addition to having 1.5x after 8 hours, you could also have 2x after 10 hours on all days. Another example of a daily condition is paying employees 1.5x if they work on Sunday.
Weekly - applies when an employee works more than a certain number of hours per week. For example +$20 per hour after 40+ hours per week.
Pay period - This applies when employees work a certain number of hours per payroll period. For example, 60 hours per pay period.
Partial day - applies when employees work specific hours of the day, such as Monday through Friday between 21:00 and 1:00.
Consecutive days - applies when employees work more than a certain number of days in a row, for example, after 8 hours on the 5th consecutive day.
Holiday - this applies to certain days of the year that are set in advance. For example, x2 for working on New Year's Eve (December 31st). When creating this policy you can choose to have it repeated every year.
Note that the pay period overtime is calculated based on the payroll period previously set in your time clock setting. To learn about setting your payroll period click here.
You will also have the option to limit the pay rule to certain Time Clocks, so that the pay rule will only be applied within these Time Clocks.
How to Edit & Manage Overtime & Pay Rule Policies
To manage your overtime and pay rule policies, access the Users tab from the left sidebar, click on Company policies and enter the Overtime & Pay rules tab. Next to the relevant policy, click on the three dots. Here you'll be able to select the relevant option and proceed.
In the Overtime & Pay rules tab, you can click on the user icons next to the relevant policy. Here you will be able to see a list of all employees assigned to that policy.
You can also see which policies are assigned to a specific employee in their user profile. To do so, head to the Users Tab, enter the relevant user, and select the Employment tab.
How to Set Overtime & Pay Rules per Employee
After you set up your overtime and pay rules in the company policies tab, you can now assign them to each user individually through their user profile! Simply follow these steps:
Enter the Users tab from the left sidebar, and access the relevant user's profile.
In the Employment tab, locate the Overtime & Pay Rules section.
Click on the three dots next to the policy that the user is already assigned to, and select update.
Here, you can select whether to assign the user to a company wide policy or to a specific rule. To learn more about setting up company-wide policies, make sure to check out this article!
To assign the user to a pay rule you created, select the option Assign specific rules, and click on Add rule.
Select the relevant rule, and click Continue.
Next, choose the effective dates for the new policy. The rule will take effect on the date you select at this step. Select a custom date or the employee's start date. Note, that this will replace the existing pay rules effective on this date.
When done, click Confirm!
To assign the pay rule to multiple users, you can assign it to the relevant employees in bulk from the policies page.
Viewing Overtime & Pay Rules on Employee Timesheets
Overtime can be viewed in the timesheet by both managers and employees allowing for transparency and accuracy when it comes to how much extra an employee is working or if a specific employee is working on days where additional rates are applied. Below we go over how overtime looks on the timesheets for both admins and employees.
For Admins
As an admin when preparing for payroll, you are likely reviewing employee timesheets and checking how much overtime versus regular time was worked by employees. To view a breakdown of the hours worked, navigate to the timesheets tab and enter an employee timesheet. You'll be able to see the different overtime policies and different Regular policies you have set up to the right. By hovering over an employee overtime you can see exactly which conditions caused the employee to enter overtime.
💡Tip: For better accuracy have employees submit their timesheets at the end of the payroll period. This ensures that have reviewed their hours, including overtime, and made sure they are correct. To learn more about this capability click here
For Users
As an employee, you can stay on top of the amount you have been working by checking your timesheets, found in the Time Clock. Here you can see that overtime appears under the column OT.
Exporting Overtime Hours & Pay Rules
When exporting payroll totals, you can now choose to present the pay rules as rows instead of columns! This organizes hours by pay rule and each pay rule is displayed in its own row, to fit payroll providers data structure. Note that the current payroll export was not changed, and is still available under the “Columns” format option.
This capability simplifies data transfer for payroll, aligning with payroll providers format, and eliminates manual intervention, saving you significant time and reducing errors!
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