Overtime & overtime calculator per country

Overtime can be confusing, and when you’re already punching the numbers to complete payroll on time, who needs further complexities?

You’re certainly not alone in your confusion, hence our guide.

It will provide all you need to know about paying time and a half per country, and we’ll give you overtime calculator methods with examples, to simplify your life.

What is overtime?

Overtime – also known as premium time, extra hours, and so on – is time that is worked over and above a person’s normal working hours.

For example, let’s say someone is required to work 40 hours a week. If they work 40 hours a week, plus 2 hours over and above the 40 hours, the company is required to pay the person for the 40 hours, plus the 2 hours worked over and above the 40 hours.

However, overtime pay can get confusing, because:

• Some staff are exempt from overtime pay, and
• The extra hours are billed at a different rate to the normal working hours rate, and
• Extra hours may be billed at different rates in different countries, and 
• Extra hours may be billed at different rates on special days like public holidays, and
• Overtime laws are different in every country, and
• Overtime pay is dependent on the agreement between company and employee.

Because the subject can get overwhelming, we’ve created a guide to simplify things.

For the sake of simplicity, in this guide, we’ll focus on providing information around these four main markets:

• USA
• Canada
• Australia 
• South Africa 

Note! If your company is located in a country other than the ones we’ve stipulated, we encourage you to do your own research, so that you don’t get any nasty surprises down the line, like penalty fees or needing to hire expensive lawyers for court cases due to incorrect overtime payments, and so on.

What is time and a half?

Time and a half is the term used to refer to the rate typically paid for hours worked overtime. In addition to an employee being paid their standard hourly rate for normal working hours, they will get paid an additional one half of that rate for each hour worked in the period exceeding normal working hours.

Overtime calculator guide

For example, the overtime calculator works as follows:

1. First calculate the employee’s regular earnings. For example, Pat works 40 hours a week at $15 an hour, making Pat’s normal weekly take-home pay $600.
2. Now, how to calculate time and a half? Use the overtime calculator method, which is to calculate the overtime wages by time and a half (1.5). For example, $15 X 1.5 = $22.5, which is the overtime hourly rate for Pat.
3. Next is to simply multiply the overtime rate by the amount of overtime hours. For example, $22.5 is the overtime rate, and Pat worked 7 overtime hours in the space of a week, so the total time and a half pay works out to $157.50.
4. To get a total amount due to Pat for this particular week, the company would need to pay Pat the normal wage amount of $600, plus the overtime amount of $157.50, which totals a week’s pay of $757.50.

How is overtime calculated in USA?

Employees in the USA are paid 1.5 times their normal rate, so use the overtime calculator method to work out hourly time and a half:

1. Calculate the employee’s normal earnings for the week. 
2. Calculate overtime wages by time and a half (1.5). 
3. Multiply the overtime rate by the amount of overtime hours. 
4. Work out the total amount of pay (normal hours + time and a half hours). 

USA businesses are not by law required to pay time and a half rates on weekends or public holidays, unless overtime hours are worked on such days when the staff member is also scheduled to work their usual hours, then the overtime amount will be 1.5 times the normal rate. 

The employer and employee must agree that the company will pay extra for work on public holidays, weekends or nights.

How is overtime calculated in Canada?

Pay 1.5 times the normal rate for every hour worked after the mandatory 44 hours work week. 

Use the overtime calculator method:

1. Calculate the employee’s normal earnings for the week. 
2. Calculate overtime wages by time and a half (1.5). 
3. Multiply the overtime rate by the amount of overtime hours. 
4. Work out the total amount of pay (normal hours + time and a half hours). 

Just as with the USA, Canada’s law states that overtime pay entitlements for public holidays is dependent on the employee working normal hours, plus overtime. In other words, Canadians can’t get paid overtime on public holidays if they do not first work their usual scheduled time, public holiday or not.  

How is overtime calculated in Australia?

Just as in the USA and Canada, employees cannot claim overtime if they do not first work their ordinary hours on a public holiday or weekend.

Australian law defines overtime work as more than 38 hours per week, and in most cases – but not all, employees are paid 1.5 times the usual rate, for the first three hours (or in some industries, 2 hours) and double time thereafter. 

If your company pays 1.5 times the normal rate for overtime, you would use the overtime calculator method:

1. Calculate the employee’s normal earnings for the week. 
2. Calculate overtime wages by time and a half (1.5). 
3. Multiply the overtime rate by the amount of overtime hours. 
4. Work out the total amount of pay (normal hours + time and a half hours). 

How are wages calculated in South Africa?

In South Africa, employees should be paid a basic wage on a monthly basis. This basic wage should be based on 48 normal hours being worked per week. The normal hours should exclude hours worked on a Sunday but include hours worked on a public holiday. If these normal hours exceed 48 hours in any week, then those excess hours should be paid on top of the basic wage at an overtime rate of 1.5 times the employees hourly rate.

Use the following method:

1. Calculate the employee’s normal hours for the weeks during the pay cycle.
2. Calculate the number of overtime hours per week and sum them up for the whole cycle. These hours should be paid on top of the basic wage at an overtime rate of 1.5 times the employee’s hourly rate.
3. Sunday hours should be paid on top of the basic wage at a rate of 1.5 times the employee’s hourly rate.
4. Public holiday hours should be paid on top of the basic wage at a rate of 1.0 times the employee’s hourly rate because the other 1.0 times the employee’s hourly rate for those hours is already paid as part of the basic wage.
5. Any unpaid hours recorded for a person (e.g. AWOL, unpaid leave, unpaid sick) should be subtracted from the total wages at 1.0 times the employee’s hourly rate.

Who is exempt from overtime pay?

Workers who are exempt from overtime pay will usually have it in writing in a contractual agreement between the company and themselves.

Generally speaking though, it is usually the more senior staff who are exempt from overtime pay:

• Administrative staff
• Executives
• Professionals

This is because employees who earn more than a stipulated amount are usually exempt.

In the USA, an exempt employee is paid more than $684 a week. In Canada, employees who work as executives, professionals or administrative positions and who earn a regular annual income of at least two times the Manitoba average industrial wage are exempt from overtime.

___________________
https://www.thebalancesmb.com/exempt-vs-non-exempt-employees-overtime-rules-397359
https://www.gov.mb.ca/labour/standards/doc,overtime-hours-control,factsheet.html

Australian law says that employees who are exempt from overtime pay need to pass two criteria: firstly, their position is that of an executive, administrative or professional person, and secondly, that they earn a minimum of $455 a week or $23,660 a year.

In South Africa, employees must earn less than R205 433.30 per year to be exempt from overtime pay.

In addition, staff who don’t work a certain number of hours may also be exempt, and those who control their own hours, like sales people.

Only staff who are considered full-time staff are required to be paid overtime where necessary.

How many hours is full time?

Staff who are paid overtime for extra hours need to be considered full time employees.

So the next question is, how many hours are considered to be full-time?

Well, it varies per country, but in general, full-time typically ranges between 32 and 40 hours per week, but this is up to the employer, and these hours should be stipulated in the agreement between employee and company.

To be considered a full-time employee in the USA, it is the norm for employees to average around 30 hours per week, or 130 hours per month. However, it is the company who needs to define the exact hours because the Department of Labor does not define the number of hours considered to be full-time employment.

In Canada, employees need to work a minimum of 30 hours a week to be considered full-time staff. 

Australia says that a full-time employee works on average, 38 hours a week, but this is ultimately up to the employer and the agreement between company and employee.

___________________
https://businesstech.co.za/news/business/331409/what-employees-need-to-know-about-overtime-pay-in-south-africa/
https://webapps.dol.gov/elaws/faq/esa/flsa/014.htm?_ga=2.135714801.1750890772.1582209729-1739417474.1582209729
http://www.ccsd.ca/factsheets/labour_market/employment/index.htm
https://www.michaelpage.com.au/advice/career-advice/starting-out/how-many-hours-full-time-part-time-contracting

In South Africa, staff must work more than 24 hours a month to be able to earn overtime pay, but still need to meet the other criteria, i.e., not be senior managerial staff, or a sales member who regulates their own hours and travel to client premises.

In South Africa, staff must work more than 24 hours a month to be able to earn overtime pay, but still need to meet the other criteria, i.e., not be senior managerial staff, or a sales member who regulates their own hours and travel to client premises.

Overtime laws by country

Each country has their own overtime laws that all companies must abide by. However, when the country does not stipulate terms, the company must do so.

It goes without saying that every employee must be given contracts with clear agreements around overtime.

We’ve removed any jibber-jabber and included only what you need to know around overtime laws by country:

Overtime laws in the USA: What you need to know

• Overtime laws are included in the Fair Labor Standards Act (FLSA). 
• Employees who are not exempt, are to receive overtime pay for working more than 40 hours in a workweek.
• The rate of overtime must not be less than time and a half their regular pay rate.
• There is no limit to how many hours a week employees may work in a workweek. 
• Overtime pay is only required on Saturdays, Sundays, holidays, or regular days of rest, when the employee’s normal hours are worked.
• The Act applies on a one workweek basis; a fixed, regularly recurring period of 168 hours; in other words, seven consecutive 24-hour periods. The week may begin on any day and any hour of the day. 
• Averaging of hours over two or more weeks is not allowed. It’s the norm to pay overtime for a particular workweek on the normal pay day for the period that the wages were earned.

Get more info from the US Department of Labor.

Overtime laws in Canada: What you need to know

• Overtime payments may be lower or higher than time and a half, depending on any mutual agreements between employer and employee.

• Additional hours worked that are over 8 hours a day or 44 hours a week is considered overtime.
• An employer may choose to give an employee time off work in lieu of paying overtime. In this scenario, the vacation days would be worked out 1.5 times the days of normal work hours. 
• Banked overtime hours must be used within 6 months after the day they’re granted, but may be changed by mutual agreement between employer and employee
• Staff in certain sectors are not eligible to receive overtime. These include:
• Farm employees
• Managers and supervisors 
• Sales people for automobiles, trucks, buses, farm machinery, road construction equipment, heavy-duty equipment, manufactured homes or residential homes
• Licensed real estate agents, licensed land agents and security personnel
• Sales people who are over 16 years of age and are direct sellers for licensed direct sellers
• Licensed insurance salespeople who only work on commission
• Sales people who solicit orders primarily outside of the employer’s place of business, and/ or are fully or partly paid by commission (excludes route salespersons)
• Professionals
• Extras in a film or video production
• Counselors or instructors of charitable or not-for-profit organisations working on behalf of children, the disabled, or religion
• Domestic employees

Find more information from the Government of Canada.

Overtime laws in Australia: What you need to know

• An employer can request that an employee works reasonable overtime, but the request is dependent on certain conditions, such as personal risk, family responsibilities, and so on. An employee may decline to work overtime if the request is unreasonable.
• Australia’s overtime laws are very dependent on industry, and you can find tailored information per industry on the Fairwork website.

Overtime laws in South Africa: What you need to know

• Employees may work a maximum of 45 hours a week at the normal pay rate. This excludes the lunch hour which is not paid for by the business. 
• The normal pay rate is 9 hours of work per day over a 5-day work week, and 8 hours a day for a work week of more than 5 days.
• Overtime applies when an employee works more than their normal contracted hours, or more than 45 hours per week. 

• Employees are only allowed to work a maximum of 3 hours overtime per day, or 10 hours in any given week.
• Overtime is paid at 1.5 times the normal rate, and double for Sundays and public holidays.
• Time and a half is subject to an annual earnings threshold of R205,433.30.
• All overtime is voluntary and must be agreed upon by both employer and employee.
• Senior management are exempt from overtime pay, as well as employees who work less than 24 hours a month, or employees who regulate their own hours, like sales people.
• Working overtime is voluntary and by agreement.

Get more information on the Employment and Labour website.

The cost of non-productive time

Your employee is giving you his time in exchange for money. 

But being human, with tea breaks, checking Facebook for 10 minutes a few times a day, sending a couple of WhatsApp messages to a buddy, and chatting to a colleague in the kitchen about the weekend, is it really a fair exchange?

How much work is really getting done for the time employees are paid for, and is it possible that the work an employee claims overtime pay for, could in fact be done in normal working hours, but for time theft?

It’s not that an employee means to steal time from their employer; the same employee who spends 45 minutes a day taking smoke breaks, 15 minutes making coffee, 30 minutes chatting to colleagues, and 20 minutes checking Instagram, would never consider stealing tangible assets from the company.

It would be common, but a mistake, to just think that an employee is being paid to work by the hour. Instead, companies need to put systems and processes in place to ensure they’re getting a fair exchange.

Accelo reports that a company with 15 employees is prone to losing $1.6 million in yearly revenue just due to lack of time tracking for email, meetings, and forgetfulness. That excludes employees accessing social media accounts, making and taking calls, breaks, and so on.

Blue Water Credit states that 89% of USA employees admit to wasting time at work, and more than one out of ten admit to wasting a “few hours” every day. Out of that number, the biggest time wasters include:

• Using their own mobile phones (this could be on making calls, using apps, checking social media accounts and so on).
• Browsing the web for personal reasons.
• Gossiping.
• Chatting with co-workers.

The point is this: it is essential to put measures in place to avoid time theft as much as possible, so that you don’t need to fork out paying time and a half for work that could have been done during normal hours.

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For example, EasyRoster is workforce management software that companies use to improve the efficiency of workers at multiple sites. The software helps businesses decrease overtime and non-productive hours to ensure profitability at each location.

The real cost of paying overtime

Overtime is expensive; it’s premium time. But over and above time and a half, how much does overtime really cost?

Well, let’s say you pay your staff member $16 per hour.

One hour of overtime pay will cost the business $24 per hour. That equates to $1,248 per year. 

But that’s not all…you also need to add on to that annual amount, payroll taxes and worker’s compensation, which is 15% the normal hourly rate for employees that work in the office.

So if you pay that office worker just one hour of overtime, the real cost of overtime for that one person will total $1,435.20. One hour of overtime does not cost you $24; it costs you $187.20.

That in itself is expensive, but how much revenue does the business need to generate to justify that one hour of overtime?

Bonus! Tips to decrease overtime costs

• Watch your payroll each week to see who is consistently getting paid overtime, even one or two hours here and there. Overtime pay is a nice way of getting extra money and you’ll want to nip that in the bud so you don’t keep forking out. Make them justify the additional hours. 
• Are your employees getting the work done that you’re paying for in normal hours, or are they wasting time and then needing to work overtime to compensate? How much time are your employees wasting, and what are they wasting it on? If your staff waste their time during the hours they should be working, they are stealing from you. The easiest way to circumvent this is to make sure you have a workforce management system in place to account for every hour, because you are paying staff for their time.
• If you don’t have a system in place, find out if your employees are productive by dividing the total payroll plus payroll taxes for the month by the total revenue for that month. This will be your business’s monthly productivity ratio. (Take note that service businesses have higher productivity ratios which are usually more than 50% than do other businesses like manufacturing for example, which is usually less than 30%.) Now monitor your ratio over a period of months to get an average, then track it monthly and report the results to your staff. That will show employees that you are on top of things and productivity is likely to increase by lowering your productivity ratio. 
• Try cutting hours! The same amount of work may be completed in less time, because you are essentially cutting out unproductive time. 

Bonus! Tip to decrease non-productive time costs

• Ensure that you roster a worker that is being paid a basic wage for working a specified number of hours, for the number of hours that he is being paid.