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Kemper CPA Group LLP E-News Release

Payroll E-News

Overtime Calculations

Even though a company pays employees on a semi-monthly or a monthly pay period, the employer must identify a standard calendar workweek (for example; Sunday through Saturday) for the calculation of overtime. Note: check on your state's pay day requirements before committing to a pay frequency.

The following example provides an overview of a semi-monthly pay frequency with a pay period of March 1st – March 15th. The calendar appearing below outlines the hours worked during the pay period. The employer has established a workweek of Sunday through Saturday:

pay period calendar

Workweek 1: Feb. 26 – Mar. 4 44 hours – 4 hours overtime
Workweek 2: Mar. 5 – Mar. 11 41 hours – 1 hour overtime
Workweek 3: Mar. 12 – Mar. 18 43 hours – 25 hours paid

Explanation of Workweek 1:

This week includes 20 hours worked for which the employee was paid in the previous pay period. Although the employee’s earnings for the earlier pay period included straight-time pay for these 20 hours, the hours must be included in the calculation of total hours for Workweek 1 of this pay period to determine if overtime is due. The employee worked a total of 44 hours for the workweek and should be paid 4 hours overtime within this pay period.

Explanation of Workweek 2:

The employee will be paid 40 hours of straight pay with 1 hour of overtime due.

Explanation of Workweek 3:

Hours worked on March 13, 14, 15 will be paid at a straight-time rate in Pay Period One. However, the employee will be due the additional overtime pay with receipt of his or her regular earnings for the Pay Period Two, March 16th – March 31st.

Summary for Semi-Monthly or Monthly Pay Frequency

Workweeks must be determined and hours worked totaled for each workweek. Overtime pay is calculated based on the total number of hours worked in each workweek, even when they cut across pay periods.

For further information, check out www.dol.gov.

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Please be advised that, based upon current Internal Revenue Service (IRS) rules and standards, the advice herein is not intended to be used, nor can it be used, as the sole basis for decisions. Additional issues may exist that could affect the treatment of the individual transactions, and this narrative does not provide a conclusion with respect to all such issues.