If you manage a payroll department, it's important you calculate overtime payments for nonexempt salaried employees correctly. A variety of criteria are used to determine if a salaried employee is exempt or nonexempt. Payroll managers must be careful when calculating these payments to ensure employees are compensated correctly.
Here are the 4 steps to calculate overtime pay for salaried employees:
Here are the 4 steps to calculate overtime pay for salaried employees:
- Determine the normal hourly wage. You do this by dividing the employee's weekly salary by the number of hours they are expected to work. For example if the employee's salary is $1200 a week, divide $1200 by 40 to arrive at an hourly rate of $30 an hour.
- Calculate the overtime wage. Usually overtime pay is time-and-half. To calculate the payment, take the hourly rate of $30 and multiply it by 1.5 to arrive at $45 an hour in overtime.
- Multiply the overtime wage by the number of overtime hours the employee worked. Overtime is generally all hours worked over 40. If the employee worked 50 hours in a week, multiply the overtime wage by 10 hours. So in the example above, you would multiply $45 by 10 to arrive at a total overtime payment of $450.
- Determine the total wage: Add the regular wage to the overtime wage. In the example above, you would add the regular wage of $1200 to the overtime wage of $450 to arrive at a total wage of $1650 for the week.
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