HOW TO CALCULATE YOUR OVERTIME WAGES

CALCULATE YOUR OVERTIME WAGE

Overtime is paid either for any hours worked over 8 on any given day during a week, or for all hours worked over 40 in one workweek which is defined as any consecutive 7 day period. You can receive overtime which is calculated per week for work in excess of 8 hours in any or all of the 7 days in a week, or the total number of hours worked over 40 in any 7 day period. It is usually to your advantage to calculate on a per day rather than a per week basis but not always. The following is how to calculate your overtime.

1. First, determine your hourly rate. If you are an hourly employee, that is obviously your hourly wage. If you are a salaried employee or are paid a combination of salary, commission, or piecework, Labor Code Section 515 provides a simple formula. Take your total pre-tax annual wages, divide that by 52 and divide again by 40. Because a workweek is by law 40 hours, the product of that equation is the hourly rate.

Example 1. Jack made a straight salary of $52,647.00 a year as an internet technician. Dividing by 52 gives a weekly salary of $1012.44. Divide again by 40 to get an hourly rate of $ 25.41. This is the baseline to use when multiplying for overtime.

Example 2. Jack is now working at inside sales. His total compensation is $59,563, $40,000 of this is his base draw, and $19,563 is the commission he earned selling internet services. Again, this figure is divided by 52 producing a weekly rate of $1145.44. Divided by 40, Jack’s hourly rate is now $28.63.

2. Next, calculate the total hours worked over the course of one work week which is defined by statute as 40 hours over any period of seven consecutive days regardless of the starting day. (Labor Code Section 515(d)). Subtract 40 from this amount and you have the overtime worked. Labor Code Section 510 requires that any hour worked over 40 in a week be compensated at a rate of not less than 1.5 times the ordinary hourly rate.

Example 1: Bob works 5 days in one week, putting in three 8 hour days and two 10 hour days. Bob has worked 44 hours and so is entitled to 4 hours of overtime at 1.5 times his hourly rate.

Example 2: Bob works 6 days in one week, putting in 7 hours each day. His total hours worked are 42. Although he did not work more than 8 hours in one day, Bob is still entitled to 2 hours of overtime.

If the number of hours left after subtracting 40 is greater than 0 then the only step left is to ensure that you have the proper hourly overtime multiplier. The first 4 hours of overtime per day (8-12 hours) must be paid at 1.5 times the hourly rate. After 12 hours, they are computed at 2 times the hourly rate.

Example 1: Jack puts in a 60 hour week. Subtract 40 hours to find Jack’s overtime of 20 hours. Jack’s hourly rate is $25.00 an hour. If Jack worked three 14 hour days and three 9 hour days he would be entitled to 6 hours at $50 an hour (double time) and 14 hours at $37.50 (time and a half). Jack’s base pay is $1,000. His overtime is $825. However, if Jack’s overtime were calculated on a weekly rather than a daily basis he would only have 20 hours of overtime for a total of $750.

3. If the number of hours worked in a workweek is less than 40 (> 0) you are still entitled to overtime on a daily basis.

Example 1: Work is slow for Sheila with the recession and she is only able to work one day during the week. Business is good that day and Sheila works 14 hours at $30.00 an hour. She has no work for the rest of the week. Sheila is entitled to 4 hours at $45 and 2 hours at $60 for a weekly total of $300.

Example 2 : Jeff earns $10 an hour and works 16 hours a day for 5 days for 80 hours total during the week. Jeff is entitled to 20 hours at 1.5 times his hourly rate and 20 hours at 2 times his hourly rate, $700. If Jeff’s overtime were computed on a weekly basis he would earn only $600.
If you have not been paid overtime you can demand payment according to either method. You cannot however add the two (this is called pyramiding and is effectively double counting). It is usually, but not always more profitable to add your time on a daily basis. Because the unit of calculation is the week you can choose the most profitable method for each week that you are owed overtime.

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