AdviceTime and Attendance

How to Calculate Overtime Pay6 min read

By April 27, 2022 May 10th, 2022 No Comments

When managing a large number of employees across different shifts, it is often difficult to keep track of overtime and overtime pay. When not managed efficiently, this can significantly impact employee morale, productivity and compliance with labour regulations. With so much importance placed on getting this process right, it is no wonder that many businesses are turning to workforce management software to assist in effectively managing and tracking overtime hours and overtime calculations.

How to Calculate Overtime

What Is overtime?

To understand how a workforce management system can assist in the correct payment of overtime, we first need to define what overtime and overtime pay is.

In simple terms, overtime refers to the number of hours worked by an employee which exceed their regular scheduled work hours. Overtime also refers to the employee’s remuneration for the extra hours worked. Overtime rates often vary between companies, as do the number of overtime hours worked, but standard overtime rates include time and a half and double time for specific overtime stipulations.  

In South Africa, overtime regulations are set in the Basic Conditions of Employment Act (BCEA). Under this act, employees can work a maximum of 45 hours a week (excluding lunch hours) at their standard rate of pay, which is 9 hours per day for a 5-day work week and 8 hours a day for a workweek longer than five days. Overtime only applies when an employee works over 45 hours per week.

Overtime is implemented under the following conditions:

  • Employees can work a maximum of 3 hours of overtime per day or 10 hours over a week.
  • Overtime rates are paid at 1.5x normal rate and 2x normal rate for Sundays and public holidays.
  • Overtime pay is subject to an annual earnings threshold of R224 080.48.
  • All overtime is voluntary and can only be worked under an agreement between the employer and employee. Employers cannot force their employees to work overtime.
  • Senior management employees do not receive overtime pay, nor do employees who work less than 24 hours a month for their employer or employees who regulate their hours (travelling salespeople, for example). 

How to calculate overtime pay?

As mentioned above, the legal requirement for calculating overtime pay is 1.5 times the normal wage rate. To calculate overtime pay, you need to take the employee’s hourly wage and times it by 150%, giving you the hourly overtime wage. For example, if an employee receives R10000 a month and works 220 hours, their hourly wage is R55.55; in this way, their overtime rate will be R83.33.

 The overtime rate for weekends and holidays is slightly different. On these specific days, employees are paid twice their normal wage. For example, if an employee is paid R10 000 a month for 220 hours worked, the hourly wage rate is R55.55. If overtime occurs on weekends or holidays, this employee will need to be paid R111.10 per hour for each hour of overtime worked.

excel-timesheet-template-free-download

How can EasyRoster Workforce Manager Software help you with calculating overtime?

One of the biggest challenges that many businesses today have is managing overtime hours and calculating overtime pay for many shift employees. Tracking and managing this with hundreds of employees often adds to payroll complexities, especially when done manually. This is where workforce management software, like EasyRoster, comes in. This software solution assists with:

  • Contract management – details regarding each job site or location are captured and maintained in EasyRoster. This includes information about the wage to revenue target percentages, shift hours, site allowances, etc.
  • Staff scheduling per location – scheduling (rostering) of personnel shifts are done per location and may be done manually or automatically. This rostering feature allows you to pull reports to check overtime and non-productive hours and identify and manage this.
  • Time and attendance per location – capturing actual attendance details is done per location and may be done manually or automatically. With attendance tracking and reporting, management can gain insight into where overtime hours are occurring and make adjustments to job sites to reduce these labour costs.
  • Reporting and analytics – one of the most important functions provided by EasyRoster is the power of the management information and reports provided by this system.  Reports can be used by operations, finance, sales, human resources, and logistics departments. These reports highlight incorrect rostering and attendance regarding the number and grades of personnel rostered or posted at a site, projected and actual wage costs, overtime, non-productive time, site profitability etc.   In short, these reports enable an operations manager to maintain day-to-day operational control to ensure that costs are kept to a minimum and personnel requirements are precisely met. These reports are then used for payroll and automatically work out time and a half, saving the business time and resources.

With this software, you can effectively and efficiently calculate and manage overtime hours and overtime pay and ensure that your business remains compliant with all overtime related regulations.

How to Calculate Overtime

Conclusion

Ensuring that you calculate overtime pay correctly is essential to your business, its operations, and employee morale. But managing this process, especially if you have many employees, can often be complex and challenging. Workforce management systems have been developed to address this need, by tracking and managing overtime hours and linking this with the payroll system to streamline processes. Book a demo today for more on how EasyRoster can help you manage and calculate overtime.

Customised Demo

Book a customised demo of the EasyRoster Software and see how it can work for your unique business. It’s never been this easy or convenient to test drive software.

Daniel Brits

Daniel Brits

I am the Business Development Manager of a division within Adapt IT that focuses on providing companies who use or require Workforce Management Software to assist them in running their operations as efficiently as possible. I have worked with clients in over 15 countries and have provided training sessions to groups of people for the past 10 years.