Overtime refers to any hours worked by an employee that exceed their usual working schedule. The term also refers to the pay received for this time.
Overtime laws, attitudes toward overtime work, and hours of work vary significantly between countries, states, and sectors.
What are overtime hours?
Overtime hours are the extra hours worked beyond an employee’s standard working hours.
Jurisdictions determine standard working hours in several ways:
By custom (what is considered healthy or reasonable by society)
By practices of a given trade or profession
By agreement between employers and workers or their representatives
Most national countries and states have overtime labor laws designed to dissuade or prevent employers from forcing their employees to work excessively long hours. These laws help preserve workers’ health so that they continue to be productive during the workday or increase the overall level of employment in the economy.
A common approach to regulating overtime is for governments to require employers to pay workers at a higher hourly rate for overtime work.
Who is eligible for overtime?
In most countries and jurisdictions, workers, whether full-time, part-time, temporary, or casual, are entitled to overtime if they exceed a set amount of working time in a work week.
Governments often cap overtime once a worker exceeds a certain number of hours.
In China, employees who work more than eight hours a day or 40 hours a week are eligible for overtime. However, employees are only allowed to work 36 hours of overtime a month, which is about nine hours of overtime a week.
In Canada, overtime regulations differ by jurisdiction. Some jurisdictions have work weeks that are 40 hours, and others are 44 hours long. On Prince Edward Island, an employee’s total hours must exceed 48 hours a week before qualifying for overtime.
In the UK, employers have no legal requirement to pay for hours beyond a worker’s contract. Instead, employers may give their employees additional time off to compensate for long hours, called time off in lieu (TOIL).
In the US, the U.S. Department of Labor’s Fair Labor Standards Act (FLSA) enforces overtime requirements that depend on whether a worker is exempt or non-exempt.
Exempt employees earn at least $684 a week or $35,568 annually, their roles include specific job duties, and they do not qualify for overtime pay.
Non-exempt employees earn less than $684 a week or $35,568 annually and qualify for overtime pay.
What is overtime pay?
Overtime pay, also known as overtime compensation or overtime wages, is the amount of money a worker receives for working over their regular working hours.
Overtime pay rates vary depending on company policy, local jurisdiction, and specifics of overtime, such as the number of overtime hours worked.
Overtime rates are often higher than the regular rate of pay. Standard overtime rates include time and a half and double time.
Some companies choose to pay workers higher overtime pay even if it is not obliged to do so by law.
In France, any hours worked over 35 a week have to be paid at an overtime rate. Employers must pay employees for the first eight hours of overtime at 1.25 times a worker’s regular wage and 1.5 times the usual wage after that.
In China, workers receive double their regular wage for working on a weekend and three times their regular wage if they work on a statutory holiday.
In most jurisdictions, the employer pays all overtime pay accrued during a given workweek on the employee’s regular payday for their usual pay period.
How do you calculate overtime pay?
Calculating overtime payments depends on many factors. An employer must consider the overtime rules in an employee’s local jurisdiction, any overtime provisions included in the company policy, and the unique arrangements agreed upon with the employee.
The calculation must consider the following factors:
Whether the worker is an hourly employee with an hourly wage
Whether the worker is a salaried employee paid on salary bases
Whether the worker has a fixed or fluctuating schedule
Whether the worker has multiple rates of pay
Whether the worker receives any bonuses or tips
In the US, FLSA overtime requirements state that non-exempt employees who work over the 40-hour workweek should receive at least one and one-half times their regular pay rate.
Therefore, the formula to calculate a non-exempt employee’s overtime pay is the employee’s regular rate of pay x 1.5 x the number of overtime hours.
The calculation may also differ depending on state law. For example, in California, eligible workers are entitled to double-time pay if they meet certain conditions.