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.
In this article we will go over:
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 works 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 Rules
Overtime and Pay Rules are set in the Time Clock Settings. To get set up follow these steps:
Navigate to the Time Clock, enter Settings, and click on Overtime & Pay Rules
Select Add Rule
Give the rule a name, and if needed add a code such as WKND, x1.5, etc.
Next, set the rule type, either overtime or an additional hourly rate
For overtime set the multiplier that the employee's base wage should be multiplied by.
For additional hours, add the amount per hour that should be added to the employee's base wage.
Now, add the condition for when the overtime or pay rules apply. For example weekly, after 40 hours, and save the changes. Note that we go over all the different conditions in the next section of this article.
In the example below you can see I set up a weekly overtime policy where my employees earn 1.5 when exceeding 40 hours of work per week.
Note that multiple conditions can be applied to the same policy, and when creating a rule for multiple or additional rates, for example, x1.5 you will not be able to apply that rate to multiple rules. You will receive a message indicating that the multiplier was already used in a rule and that you can edit the conditions of that rule or add another multiplier to the rule you are creating.
To optimally set things up you need to add all the conditions where the x1.5 rate applies. For example, if my employees receive x1.5 after 8 hours on Monday to Friday, after 40 hours per week, and on Sunday. I will not be able to create individual rules with the rate of x1.5 for each of those conditions. I will create rules for Overtime x1.5 and add all these conditions to that policy. Take a look at how this looks below.
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 x1.5 after 8 hours per day on Monday- Friday. Note that you can create more than one daily rule therefore in addition to having x1.5 after 8 hours, you could also have x2 after 10 hours on all days. Another example of a daily condition is paying employees x1.5 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.
Viewing Overtime 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 was worked by employees. To view overtime, navigate to the timesheets tab and enter an employee timesheet. You'll be able to see the different overtime 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.
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