Outsourced Payroll Specialists

How to Calculate Overtime?

One of the most common causes for disputes between companies and their staff is over the payment of overtime.  From how much has been worked to when it should be paid, overtime can be a complicated area. So how do you calculate overtime and ensure it is paid in the right pay period?

Overtime basics

Overtime is defined as any work that is over and above basic working hours for an employee based on what is in their contract.  Employers don’t have to pay overtime pay, but there should be a clear policy on what the situation is.  Each employee’s contract will normally include if they are asked to work overtime, what the situation is around being paid for it.

The Working Time Regulations 1998 says that employees cannot be made to work more than 48 hours a week.  However, the workers can agree to work longer than this, but this must be done in writing with the employee’s signature.

Overtime pay

Because there is no legal requirement to pay overtime, there is also no standard rate that must be paid when employees work it, so how much should the employers pay staff for working overtime is non defined.  However, employers do need to be aware that they cannot allow their workers to be paid less than minimum wage so take this into account when deciding if to pay overtime.

Some employers decide it is easier to offer time off in lieu rather than to pay their staff.  Therefore, if a member of staff was to work one day extra in one week, then it would be agreed that they would work one day less another week.  This can be an easy way to handle overtime, but it still needs to be tracked to ensure the right time off is given.

Paid overtime issues

If you are an employer who has elected to pay your staff for overtime, it is important that this is paid accurately and on time.  There is a potential breach of contract and claims for costs if incurred if the overtime isn’t paid at the correct point and for an accurate amount.

This means it is key to have systems in place to monitor how much overtime an employee has worked and incorporate this information into the payroll so that the payment is never late.  The second part of this system is something that Trace Payroll can assist with as part of their payroll services.  As a specialist in payroll services, Trace can ensure that you pay your staff on time and don’t incur extra costs for late payments.

Another factor to consider is PAYE for overtime payments – tax and national insurance will need to be accurately factored into these as well.  Trace can ensure that your employee is paying what needs to be paid from their overtime payments.

Collecting overtime information

The final part of the process is to have a system which can accurately collect information about overtime worked.  There are many different options, including a clocking system where employees clock on and clock off, showing extra hours worked.  Whatever system you use to monitor over time, make sure it can work with your payroll software to ensure the information is easily passed between the two and accurate payments can be made.

For help from a professional payroll provider, get in touch with Trace Payroll, by using the contact details below.

Get in touch

To find out more about fully managed payroll outsourcing with a personal touch, contact Trace Payroll Services today.

Call Trace Payroll Services on 0845 873 5619