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Overtime Pay - How is it calculated?

Overtime pay is generally paid to non-exempt employees for hours worked over 40 hours per week. If an employee works overtime, the employee will be compensated by overtime pay. The Fair Labor Standards Act sets an overtime pay rate that is calculated by multiplying the regular hourly rate by 1.5 by the number of hours worked over 40 hours. For example, Joe works an hourly job subject to overtime laws. His regular hourly pay is $12.00. The first week of the month he works 47 hours at the job. His pay for the week before taxes, including overtime, is $606. We get that by multiplying his regular hourly rate of $12.00 by 40 hours to get $480. Then, we multiply his regular rate of $12.00 by the statutory multiplier of 1.5 to get the overtime rate of $18.00 an hour. Then, we multiply the overtime rate of $18.00 an hour by the number of overtime hours - 7 – to get his overtime pay of $126. We then add the overtime pay of $126 to his regular pay of $480 to get $606.

There are other ways to compute overtime for employees that are not paid an hourly rate.

There are calculations for workers paid on a piece-rate basis; paid day rates or by the job; on a weekly salary basis; a salary for a period other than a workweek; a fixed salary for work hours that fluctuate from week to week; in a single workweek is paid two or more different rates; receives payments other than cash; or works on a commission. Each of these different compensation methods has its method for calculating overtime. In Illinois, if you pay any of your employees in one or more of these ways, you should look at the Illinois Administrative Code, Title 56, Chapter I(b) Part 210.430, Methods of Computing Overtime.

The workweek is defined as a fixed and regularly occurring period. It consists of seven consecutive 24-hour periods. Once you determine the beginning day and time of the workweek for your business, it remains fixed. You can’t change it week to week, or month to month, to attempt to avoid paying overtime. The calculation of overtime hours starts from the beginning day and time of your workweek. Most business’s work weeks start on Monday, however, if your business doesn’t open until Tuesday or Wednesday, you may prefer to start the week on one of those days. If you do not establish a defined workweek, the Illinois Department of Labor will consider a calendar week as your workweek. It is the seven-day period beginning at 12:01 a.m. Sunday morning until the following Saturday night at midnight.


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